Chapter 15
Tax Research

Learning Objectives
• Describe the steps in the tax research process
• Explain how the facts affect the tax results
• Identify the sources of tax law and understand the authoritative value of each
• Consult the tax services to research an issue

Learning Objectives
• Use a citator to assess authorities
• Grasp the basics of computerized tax research
• Understand guidelines to which CPAs in tax practice should follow
• Prepare work papers and communications to clients

Client-oriented Tax
Research
• Closed fact or tax compliance situations
– Least amount of flexibility
– Facts established
– Best solution within predetermined constraints
• Open-fact or tax planning situations
– help client structure transaction to reach his/her objective

Steps In Tax Research
Process
DETERMINE THE FACTS ANALYZE THE FACTS IN TERMS OF
THE APPLICABLE AUTHORITIES
IDENTIFY THE ISSUES
LOCATE THE
APPLICABLE
AUTHORITIES
COMMUNICATE YOUR
CONCLUSIONS &
RECOMMENDATIONS
TO INTERESTED PARTY
ASSESS & EVALUATE THE
AUTHORITIES

How Do Facts Affect Tax
Results?
• Facts guide the issues and questions
• In order to answer questions, must consult many sources
• Interpretations

Typical Misconception
• Many taxpayers think tax law is all black and white; most tax research deals with gray areas, previous findings, & interpretation

The Sources Of Tax Law
• Statutory
• Judicial
• Administrative

Authoritative Value Of Tax
Law Sources
• The Internal Revenue Code which constitutes Title 26 of the Federal Statutes is the foundation of all tax law

Organizational Scheme Of The
Internal Revenue Code
• Title 26. All matters concerned with taxation
– Subtitle A. Income taxes
• Chapter 1. Normal taxes and surtaxes
– Subchapter A. Determination of tax liability
» Part 1. Tax on individuals
 Sec. 1. Tax imposed
• Scheme for sections, subsections, etc
Sec. 165 (h) (2) (A) (i) (ii)
Section
Paragraph clauses
Subparagraph
Subsection

Authoritative Value Of Tax
Law Sources
• Treasury Regulations
– Proposed regulations
– Temporary regulations
– Final regulations
• Treasury Regulations
– The Treasury Dept. issues regulations as interpretations of the statute

Authoritative Value Of Tax
Law Sources
• Interpretative and statutory regulations
– Interpretative regulations are issued under the general authority of Sec. 7805
– Statutory regulations are written in situations where congress delegates its rule-making duties to the treasury. Usually this happens when congress feels it lacks the expertise to deal with a highly technical matter

Authoritative Value Of Tax
Law Sources
• Regulations (continued)
– Citations
Number
1
20
25
301
601
General Subject Matter
Income tax
Estate tax
Gift tax
Administrative &
Procedural matters
Procedural rules

Example Of Citation
• Regulation Sec. 1.165 - 5
• Income tax code section
Fifth regulation

Authoritative Value Of Tax
Law Sources
• Authoritative weight
– The presumption is that final regulations have the same authoritative weight as statutes
– In addressing the validity of regulations, courts often apply the legislative reenactment doctrine

Administrative
Interpretations
• Revenue Rulings
• Revenue Procedures
• Letter Rulings
• Other Interpretations
– Technical advice memoranda
– Information releases
– Announcements and notices

Judicial Decisions
Overview of the court system
US COURT OF
FEDERAL CLAIMS
TAX
COURT
US DISTRICT COURT
FOR THE TAXPAYER’S
DISTRICT
Trial
Courts
COURT OF APPEALS
FOR FEDERAL CIRCUIT
COURT OF APPEALS FOR
TAXPAYER’S GEOGRAPHICAL
JURISDICTION
Appellate
Courts
US SUPREME COURT

Tax Services
• United States Tax Reporter
• Standard Federal Tax Reporter
• Federal Tax Coordinator 2d
• Law of Federal Income Taxation
• Tax Management Portfolios
• CCH Federal Tax Service
• CCH Citator

Citators Purpose
• Give history of a case
• List other authorities that have cited the case in question

Types Of Citators
• Commerce Clearinghouse Citator
– History of case may be easier to find
– Citator of judicial decisions included at no extra charge
• Research Institute of America Citator 2nd Series
– conveys more information u specific issue in case u referenced cases whether favorable, unfavorable, distinguished

Computers As A Research
Tool
• Legal Data Bases
– ACCESS by
Commerce
Clearinghouse
– LEXIS by Mead
Data Central
– WESTLAW by
West Publishing

Statements on Standards for
Tax Services (SSTSs)
• Issued by AICPA :
– Recommend appropriate standards......And promote uniform application by CPAs
– To encourage the development of increased understanding of the responsibilities of CPAs by the Treasury Department and IRS
– Foster increased public understanding of, compliance with, and confidence in our tax system

Other SSTSs From AICPA
• Use client’s estimates, when reasonable
• Inform the client of errors
• Do not inform the
IRS of errors without client’s permission, except when required by law

Work Papers And Communication
With Clients
• Written communication and documentation recommended in important, unusual, or complicated transactions
• Format in terms of process - steps of tax research
• Each firm has it’s way of doing things