THE REVISION PROCESS
Revising, Editing and Proofreading for Accounting
Michelle Doss, 2006
Tax Research
Chapter #-Page 1
THE WRITING PROCESS
Prewriting
Writing
Revision
Tax Research
Chapter #-Page 2
WRITING THE TAX MEMO
The tax memo contains the following:
1. Client
2. Relevant facts
3. Specific issues
4. Conclusions
5. Support
6. Actions to be taken
7. Preparer
Tax Research
Chapter #-Page 3
REVISING, EDITING, AND PROOFREADING
1. Revising
a. Occurs at the level of ideas
b. Focuses on questions of purpose, audience and voice
c. May mean deleting entire sections and starting over
2. Editing
a. Occurs at the level of language
b. Sharpens your word choice and organization to make
it as precise and effective as possible
c. Follows revision for most effective use of time
d. May focus on grammar, usage, and mechanics
3. Proofreading
a. Checks for accuracy and correctness
b. Follows all other revision for most effective use of
time
c. Focuses on grammar, usage, and mechanics
Tax Research
Chapter #-Page 4
QUESTIONS OF PURPOSE
Why am I writing this?
To convey the results of the research to a
superior
Do all parts of the paper meet/advance this
purpose?
Have I stated the purpose clearly?
Tax Research
Chapter #-Page 5
QUESTIONS OF AUDIENCE
Have I provided the full context and background for
audience?
Usually fellow tax practitioners are well-versed in
federal tax law, understanding frequent and
complete references to primary and secondary
sources of the tax law, and needing no introduction
to the hierarchy of tax authority or to statutory
citation practices
Have I answered all questions and/or objections my
audience might have?
Will my tone and style most effectively communicate
my ideas to my audience so that I get the response
intended?
Tax Research
Chapter #-Page 6
10 REVISING STRATEGIES
1.
Let it sit.
2.
Reread as if for the first time.
3.
Test your claim.
4.
Evaluate your evidence.
5.
Evaluate your paragraphs.
6.
Dialogue with your paper.
7.
Eliminate extraneous material
8.
Add new details.
9.
Switch perspective.
10. Be willing to let it go and start over.
Tax Research
Chapter #-Page 7
EDITING SENTENCES
1. Are the issues, conclusions and supporting analysis
stated clearly and unambiguously?
2. Is each sentence in the correct form (statement,
question, etc.)?
3. Does each statement provide the appropriate amount
of detail?
4. Are the issues numbered and arranged in the most
logical order?
5. Does each word, phrase, clause make sense and have
purpose?
6. Do the punctuation marks guide the reader in
understanding how to read the sentence?
Tax Research
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STATING YOUR ISSUES: An Example
Not a question and vague:
A question arises as to how much the taxpayer can
deduct for the payment he made for the expense.
Question and specific:
Can part or all of the $13,000 payment be deducted
and, if so, what is the character of the deduction?
Tax Research
Chapter #-Page 9
STATING ISSUES: An Example
Unclear tax concept
What is the tax treatment for a company under
Reg. §1.162-5(c)(1) when it pays its employee’s
tuition?
Explicit tax concept
Can Borden Company deduct the $2,300 it pays to
Smith to cover his tuition?
Tax Research
Chapter #-Page 10
STATING ISSUES: An Example
Emphasize tax concepts rather than financial accounting
concepts:
Accounting concept
Can Bikes-R-Us, Inc. expense the rental payment
to its chief financial officer?
Tax concept
Can Bikes-R-Us, Inc. deduct the rental payment to
its chief financial officer?
Tax Research
Chapter #-Page 11
STATING YOUR
SUPPORTING ANALYSIS: An Example
Insufficient Detail:
The theft loss is deductible in 2006 according to IRC
§165(e).
Better:
IRC §165(e) indicates that theft losses are deductible in
the taxable year sustained. Thus, the theft loss is
deductible in 2006.
Tax Research
Chapter #-Page 12
EDITING FOR WORDINESS
Wordiness:
Using more words than necessary when making
one’s point; needlessly distracts the reader from the
main points.
Eliminating wordiness results in a concise writing
style that is easier to read and provides fewer
opportunities for misinterpretation.
Tax Research
Chapter #-Page 13
TAX-RELATED WORDINESS
Wordy
Better
1. Code Section 61
1. §61 (Sec. 61)
2. In Smith v. U.S., the court
held
2. In Smith, the court
held
3. Take a deduction for
3. Deduct
4. Tax deductible
4. Deductible
5. The Smith v. U.S. decision
6. United States
Tax Research
5. The Smith decision
6. U.S.
Chapter #-Page 14
REVISION SKILLS
Original:
Expenses incurred by a taxpayer during a given
year in regard to the conduct of a trade or
business can be deducted from net income
according to Internal Revenue Code Section 162
and Treasury Regulation Section 1.162.
Improved:
IRC §162 and Reg. §1.162-1 allow deductions
for ordinary and necessary expenses paid or
incurred in the year in connection with the
conduct of a trade or business.
Tax Research
Chapter #-Page 15
ACTIVE AND PASSIVE VOICE
Active Voice: the subject does the action of the verb
The committee is looking into the matter.
Passive: the subject does not do the action of the verb.
The matter is being looked into by the committee.
Tax Research
Chapter #-Page 16
When to use Active vs. Passive
Active
Passive
Most messages in
business and
technical writing
The doer is
Tax Research
unknown,
unimportant,
clear from the context,
or appropriate to hide.
Chapter #-Page 17
CONVEYING BAD NEWS
Active:
I think your farming activity is a hobby and,
thus, disallow your deduction.
Less Confrontational:
Passive: Since your farming activity is a hobby,
no deductible loss is allowed.
Active: The IRS considers your farming activity
to be a hobby and, thus, disallows your
deduction.
Tax Research
Chapter #-Page 18
REVISION SKILLS
Original:
In addition to the above mentioned Code Section in
the event that education expenses maintain or
improve skills required of the taxpayer in his
employment or education expenses are required in
order to retain his position or rate of compensation an
expense is allowed by Regulation §1.162-5.
Improved:
Additionally, Reg. §1.162-5(a) allows a deduction if
education expenses either (1) maintain or improve
skills required of the taxpayer in his/her employment
or (2) are required in order to retain his/her position
or rate of compensation.
Tax Research
Chapter #-Page 19
EDITING FOR PARALLEL STRUCTURES
Parallel structures: two or more phrases or sentences
that have the same grammatical structure and use the
same parts of speech
Make your sentences clearer and easier to read
Help your reader see the connections between ideas
in a series of consecutive sentences
Tax Research
Chapter #-Page 20
EDITING FOR PARALLELISM
Without parallelism:
Prepare letter to review with client
The client should obtain multiple appraisals of
building.
Appraisal should be attached to client’s tax return.
With parallelism:
Prepare letter to review with client.
Suggest client obtain multiple appraisals of building.
Attach appraisal to client’s tax return.
Tax Research
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EDITING PUNCTUATION
Commas
Act as Yield signs for the reader
Allow the reader to pause, digest the information,
and continue with the same main idea
Tax Research
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COMMON USAGE FOR COMMAS
1. Before coordinating conjunctions (independent clauses
and items in a series)
The client is entitled to deduct the appraisal of the
building, and the deduction should be treated as an
itemized deduction.
NOTE: You must have a coordinating conjunction with
a comma to separate two independent clauses.
Tax Research
Chapter #-Page 23
COMMON USAGE FOR COMMAS
2. To set off introductory elements
After the fire department finishes using the building,
Ross plans to demolish the building and leave the
lot vacant.
Tax Research
Chapter #-Page 24
COMMON USAGE FOR COMMAS
3. To set off nonrestrictive modifiers or appositives
The new ruling, which weakened our conclusion
considerably, is not the only applicable.
(nonrestrictive)
The new ruling that weakens our conclusion
considerably should be applied. (restrictive)
NOTE: Be careful that you do not separate your subject
and verb with a comma!
Incorrect: The hurricane heading our way, caused
some to panic.
Correct: The hurricane heading our way caused
some to panic.
Tax Research
Chapter #-Page 25
COMMON USAGE FOR COMMAS
4. Also use commas
To set off parenthetical expressions and elements of
contrast
To set off interjections, tag sentences, and direct
address
Between quotations and attributory phrases
With numbers, dates, names and addresses
Whenever necessary to prevent misreading
TIP: Use the search function to find all your commas.
Evaluate your use, and edit where necessary.
Tax Research
Chapter #-Page 26
EDITING PUNCTUATION
Semi-colons
Act as Stop Signs
Allow the reader to stop, digest the information, and
move to a closely-related idea
Tax Research
Chapter #-Page 27
COMMON USAGE FOR SEMI-COLONS
1. To separate two independent clauses
The hurricane, heading our way, caused many to
evacuate; the mass evacuation created gridlock on
the highways.
2. To separate items in a series containing commas
The forecasted intensity of the hurricane, which
came so soon after Katrina; the recent images of
damaged or destroyed property, lists of missing
people, and shelters full of people; and the
warnings coming from officials prompted many
people to leave as soon as possible.
Tax Research
Chapter #-Page 28
INCORRECT USAGE OF COLONS
1. Do not use a colon after an introductory phrase or
independent clause
Incorrect: As I learned this weekend: sometimes
anticipation is worse than the storm.
Correct: As I learned this weekend, sometimes
anticipation is worse than the storm.
Tax Research
Chapter #-Page 29
INCORRECT USAGE OF COLONS
2. Do not use a colon between a verb and its object or
complement
Incorrect: The materials used for the project
include: steel, wood, and wire.
Correct: The materials used for the project include
steel, wood, and wire.
Correct: The materials used for the project include
the following: steel, wood, and wire.
Tax Research
Chapter #-Page 30
INCORRECT USAGE OF COLONS
3. Do not use a colon between a preposition and its object
Incorrect: Evacuees went to: San Antonio, Dallas,
Fort Worth and Austin.
Correct: Evacuees went to San Antonio, Dallas, Fort
Worth and Austin.
4. Do not use a colon following an introductory expression
Incorrect: The stores were out of supplies including:
water, milk, and plywood.
Correct: The stores were out of supplies including
water, milk, and plywood.
5. Do not use more than one colon in a sentence
Tax Research
Chapter #-Page 31
PROOFREADING STRATEGIES
1. Read aloud.
2. Read with a cover.
3. Read as a reader rather than the writer.
4. Identify your common mistakes, and pay careful
attention to those.
5. Use the tools on your computer (but don’t assume the
suggestions are always correct).
Tax Research
Chapter #-Page 32
NOW LET’S PRACTICE . . . .
1. Pass out examples of tax memos
2. Allow time for groups to critique the memos
Tax Research
Chapter #-Page 33
GATHER THE FACTS
Ross Lambeth owns a corner lot on which a dilapidated
rental building is situated. The building, which has
been fully depreciated using the straight-line method,
has a tax basis of zero. Recent flooding in the area has
damaged the building to such an extent that it can no
longer be rented without renovation, and Ross believes
it is about to be condemned by municipal authorities as
unsafe.
Tax Research
Chapter #-Page 34
The lot is located in a prime area of
commercial development and, if it were
not for the building, would be worth a
considerable amount. As such, Ross is
considering donating the building to the
local fire department for use in the
testing of new fire equipment and
conducting fire drills and rescue
training. After the fire department
finishes using the building, Ross plans
to push over the chimney and remove
the charred foundation and debris,
leaving the lot vacant. Ross would like
to receive a tax deduction from the
donation.
Tax Research
Chapter #-Page 35
Currently, the lot and building are appraised at
$70,000 and $20,000, respectively. After removal of
the building, however, Ross estimates the lot will be
worth $110,000.
Donation = Tax savings
Land value = $40,000 increase
Tax Research
Chapter #-Page 36
RESEARCH THE SITUATION
Tax Research
Chapter #-Page 37
WRITE THE TAX MEMO
The tax memo contains:
1. Client
2. Relevant facts
3. Specific issues
4. Conclusions
5. Support
6. Actions to be taken
7. Preparer
Tax Research
Chapter #-Page 38
FILE MEMO 1
October 19, 2006
Client
Ross Lambeth, Deductibility of Contribution of The
Right To Use Property The Donor Owns To Local Fire
Department.
Focuses on contribution of
right to use property
rather than
contribution of property
Tax Research
Overuse of
capitalization
Chapter #-Page 39
Set means “to place something in position”
Sit means “to be situated or located”
Relevant Facts
sits
Ross Lambeth owns a rental building and the land it
sets on. The building is worth $20,000 and a formal
appraisal has been done. The building has a fully
depreciate, tax basis of zero. Ross wants to donate the
building to the fire department for use in the testing of
new fire equipment and training.
X
depreciated
Tax Research
Too brief; fails to
include all relevant facts.
Chapter #-Page 40
Specific Issue
Can Ross receive a tax deduction from the donation?
Does not clarify whether
the donation would be
for the building or lot
Tax Research
Does not address
the amount of
the deduction
Chapter #-Page 41
Conclusion
Ross’ contribution of the right to use his building is
nondeductible.
Reaches wrong conclusion
Tax Research
Chapter #-Page 42
Section,
§ or Sec.
Singular verb;
plural noun
Support
Awkward
Tax Research
IRC §170(a) and Reg. 1.170A-1 allows for a deduction
of any charitable donation given within the year of
contribution of an individual. Additionally, IRC §170(c)
defines qualified charitable contributions, including a
contribution to a subdivision of the government for
public use. Additionally, ¶K-305 of IRC §170(e) and Reg.
§1.170A-1(c) defines the deduction in the case of a
charitable contribution to include a capital asset’s
deduction which is the fair market value of that
property.
Cite to RIA,
Repetitious
not IRC
Chapter #-Page 43
Relevance is not
explained
Reg.
§1.170A-7
Reg. §170A-7 disallows the deduction of a partial
interest in property. A partial interest in property
includes the usage of the property free of rent. The rent
free contribution is not deductible.
In Ottawa Silica Co., 82-1 USTC, an individual donated
land for the use of a public school. The donation was
disallowed because the individual received some
economic benefit from the increase in the value of his
property by the construction of roads by the donee.
Italicize
case name
Tax Research
Incomplete
cite
Chapter #-Page 44
Actions To Be Taken
Prepare letter, review results with client.
Preparer
Incomplete
Student 1
Tax Research
Chapter #-Page 45
FILE MEMO 2
October 19, 2006
Client
Ross Lambeth, Deductibility of Building Donation
Sacrifices accuracy
and completeness
for conciseness
Tax Research
Chapter #-Page 46
Repetitious
and wordy
Relevant Facts
Ross Lambeth owns a lot on which a dilapidated rental
building is situated. They are appraised at $20,000 and
$70,000, respectively. The rental building has a zero tax
basis and is severely damaged. The land would increase
in economic value if the building was removed. Ross
wants to donate the the building to the fire department
that will destroy the building while in use.
X
Lot is appraised at
$70,000; building
at $20,000
Tax Research
Chapter #-Page 47
Specific Issues
Can the building be donated and a deduction taken for
the charitable contribution to the local fire department?
If the building alone can be donated, without the land
(fee simple) then technical issues arise as to how to
structure the title to the building such that the
ownership of the foundation and chimney remain with
Mr. Lambeth. Or is this more properly considered a use
of the building rather than a donation? Additionally, is
the building, having been severed from the land for the
purpose of the donation, now considered tangible
personal property?
Lacks focus;
too many minor issues identified
Tax Research
Chapter #-Page 48
According to the
facts, the building is
appraised for $20,000
Conclusions
Awkward
Ross Lambeth can deduct the $200,000 donation in the
nature is a long-term capital asset distribution, treated
as an itemized deduction and limited to the lesser of 30
percent of his adjusted gross income, or an amount
equal to 50 percent of adjusted gross income, reduced
by contributions qualifying for the 50 percent limitation.
No support for conclusions
What is a long-term capital asset distribution?
Can a donation qualify?
Tax Research
Chapter #-Page 49
Unnecessarily
long sentences
Support
IRC Section 170(b)(1) defines the contribution rules for
individuals. IRC Section 170(a)(3) defines the timing of
contribution of a future interest and the unwinding of all
rights to what, given the definition of “severability” in the
code, in this case becomes tangible personal property – the
building, having been severed from the foundation and
masonry of the structure. At the time of final resolution of
all the ownership interests and options of any conceivable
“fee simple” possible ownership transfer to and back from
the fire department of the building, the donation would
have a value of zero for the building, and a cost associated
with removing the foundation and Patronizing
the rubble. Though it is
not the question under discussion, there will be a tax
treatment for the cost to prepare the land for use, with
which we would be happy to assist our valued client.
Tax Research
Chapter #-Page 50
An alternative interpretation of the contribution would
be that the use of the building more closely fits the
definition of a rent-free use, which is not a deductible
charitable contribution under IRC Section 170.
IRC 170(f)(3) also would deny the deduction if the IRS
took the position that the building is an undivided
portion of the taxpayer’s entire interest in the property.
Section,
§ or Sec.
Tax Research
Should be
Reg. §1.170-2(b)(5)(ii)(c)(3),
not IRC §170
Chapter #-Page 51
Morris Scharf
In Morris, TC Memo 1973-265, petitioners were
permitted to deduct the fair market value of the
partially damaged building donated to a volunteer fire
Italicize
department for use in its fire drills because even though
case name the drills resulted in razing of building making property
more marketable, the primary benefit was to the
community. This case appears to be the most applicable
authority for Lambeth’s situation because even though
Lambeth would benefit from the increase in value of his
lot, the primary benefit of his donation was to the
community.
Awkward sentence
Tax Research
No support for conclusion
regarding 30% limitation
Chapter #-Page 52
Actions To Be Taken
Prepare letter and review results with client.
Suggest that client attach appraisal to his tax return
when he files for the deduction.
Preparer
Better
Student 2
Tax Research
Chapter #-Page 53
FILE MEMO 3
October 19, 2006
Client
Ross Lambeth, Deductibility of Charitable Donation of
Dilapidated Building to Fire Department
Accurate, complete,
and concise
Tax Research
Chapter #-Page 54
Relevant Facts
Includes all
relevant facts
Ross Lambeth owns a rental building in a state of
disrepair, as well as the lot on which it is located. The
building is fully depreciated and has a tax basis of zero.
To clear the lot of the building, and thereby to increase
the value of the lot, Ross plans to donate the building
to the local fire department for use in testing fire
equipment and conducting fire drills and rescue
training. After the building is destroyed by the fire
department, Ross plans to push in the chimney and
remove the remaining debris. The lot and building are
appraised at $70,000 and $20,000, respectively. After
removal of the building, the lot will be worth $110,000.
Tax Research
Chapter #-Page 55
Specific Issue
Can the donation of the building be deducted and if so,
what is the amount of the deduction?
Concisely identifies the major issues
Tax Research
Chapter #-Page 56
Conclusion
The donation of the building qualifies as a charitable
contribution, deductible if Ross itemizes his deductions.
The deduction is $20,000, the fair market value of the
building at the time of the donation. However, because
the building is capital gain property, the annual
deduction will be limited to 30 percent of AGI, with a
five year carryforward of excess amounts .
Complete,
yet concise
Tax Research
Chapter #-Page 57
Support
Supports conclusion with
relevant Code, regulations
and cases
IRC §170(c)(1) and Reg. §1.170A-1 allow a deduction
for a charitable contribution to or for the use of a
political subdivision of the State, but only if the
contribution is made for exclusively public purposes.
The local fire department is a political subdivision and,
hence, a qualifying charitable organization. As for the
use test, the taxpayer’s donation of a building in Morris
Scharf, T.C. Memo 1973-265, for use in conducting fire
drills was considered exclusively public purposes. As
such, Ross’ donation of the building appears to meet
Provides complete
cite
the requirements
of IRC §170(c)(1).
the first time
case is mentioned
Tax Research
Chapter #-Page 58
However, as determined in Karl Pettit, 61 T.C. 634
(1974) and Rev. Rul. 76-185, 1976-1 C.B. 60, a transfer
to a charitable organization is not deductible to the
extent the donor derives an economic benefit. Thus, a
taxpayer’s transfer to a university in Robert E. Signom,
T.C. Memo 2000-175, of a leasehold interest in and an
option to buy a parcel of real estate was not a
charitable contribution where the transfer was an
integral part of a larger exchange in which the taxpayer
received other real estate, cash and mortgage relief
worth
more
than the property surrendered.
Includes
related
cases,
distinguishing them
and highlighting their
relevance
Tax Research
Chapter #-Page 59
The primary benefit from the use of a building in
conducting fire drills, however, was determined in
Scharf to inure to the general public with only lesser or
incidental benefits flowing back to the donor. Thus, the
charitable deduction was allowed.
Omits citation when
mentioning case
the second time
Tax Research
Chapter #-Page 60
Provides sufficient
background information
for others to understand
In John G. Allen, 57 T.C. 12 (1971),
the Taxtax
Court
relevant
law held
that where a charitable contribution is made in property
other than money, the allowable deduction is measured
by the fair market value of the property at the time of
the contribution. This valuation rule was followed in
Scharf, a case very similar to that of Ross Lambert, in
which the taxpayer donated a building to a volunteer
fire department for the conduct of fire drills. The court
held in Scharf that the charitable donation was the fair
value of the building when donated. Accordingly, Ross
should be entitled to deduct the $20,000 appraised
value of the building before the donation to the fire
department. Moreover, under Reg. §1.170A-1(a), the
deduction would be treated as an itemized deduction.
Tax Research
Chapter #-Page 61
States the amount
of the deduction and
supports that amount
supporting
Reg. §1.170A-4(b)(4) states with
that for
purposesCode
of a
charitable deduction, property used in a trade or
business, as defined in IRC §1231(b), is treated as a
capital asset except for any depreciation recapture.
Since the tax basis of Ross’ donated building is zero, the
full $20,000 value would, therefore, be considered as
arising from the sale of a capital asset. IRC
§170(b)(1)(C), however, imposes an annual AGI ceiling
on the amount of a charitable deduction. In the case of
property that would result in the recognition of longterm capital gain if sold, that ceiling is 30 percent of
AGI if contributed to a public charity. Applying these
limitations to Ross’ situation, the $20,000 charitable
deduction would be limited to 30 percent of his AGI,
with any excess carried forward for five years under IRC
§170(d)(1)(A) and Reg. §1.170A-10(c).
Tax Research
Chapter #-Page 62
Actions To Be Taken
Prepare letter, review results with client.
Suggest client obtain multiple appraisals of building
prior to donation and adequate documentation from the
fire department regarding its intended use of the
building and benefit from the donation.
Attach appraisal to client’s tax return when he files for
the deduction.
Preparer
Complete
Student 3
Tax Research
Chapter #-Page 63
FINISHING STEPS
1. Once you think your memo is finished, put it away for a
few hours; then read it again.
2. Does it still make sense? Is it clear, concise, and
accurate?
3. If so, then you’re done. If not, then work on it more.
Tax Research
Chapter #-Page 64
THE END
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Chapter #-Page 65