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Tax research involves determining the tax consequences of transactions through an analysis of relevant tax authorities. There are two classes of tax authorities: primary (authoritative sources such as legislative, executive, and judicial) and secondary (interpretative materials). Primary authorities include the U.S. Constitution, Internal Revenue Code, and Treasury Regulations. Secondary authorities comprise various tax services and periodicals. Tax research can be divided into compliance and planning research, requiring a systematic approach to gather facts, evaluate authorities, and reach conclusions.
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Chapter 16 Tax Research Kevin Murphy Mark Higgins ©2007 South-Western
Introduction Tax research is the process by which the tax consequences of a completed or proposed transaction are determined.
Tax Authorities • There are two classes of tax authorities • Primary • Authoritative law and writings of the three branches of the federal government: legislative, executive, and judicial • Secondary • Supporting materials which provide interpretation of the primary authorities
Primary Authorities: Legislative • U.S. Constitution • Article 1, Section 7 • Sixteenth Amendment • Internal Revenue Code of 1986 (the Code) • Statutory language • Legislative intent • Tax treaties
How a Bill Becomes Law Senate Finance Committee House of Representatives Senate House Ways & Means Committee Joint Conference Committee President
Primary Authorities: Executive/Administrative • Treasury Regulations • Interpretive versus Legislative • Proposed, temporary, and final • Revenue Rulings and Procedures • Acquiescence and Non-acquiescence • Letter Rulings • Before or after the action • Other IRS Pronouncements • Memorandums • Notices, announcements, publications, instructions
Primary Authorities: Judicial U.S. Supreme Court Appellate level U.S. Court of Appeals for the Federal Circuit U.S. Courts of Appeals U.S. Tax Court U.S. District Court U.S. Court of Federal Claims Trial level Small claims division of U.S. Tax Court
Citations to Primary Authorities • References made to a primary authority should include a full citation • Examples are Internal Revenue Code Sec. 108 Treasury Regulation Reg. Sec. 1.61-12 Revenue Ruling Rev. Rul. 54-56, 1954-2 C.B. 108 U.S. Tax Court Case Julian S. Danenberg, 73 T.C. 370 (1979)
Secondary Authorities: Tax Services • Tax services fall into two categories • Services with limited editorial discussion but many short interpretive comments • CCH’s Standard Federal Tax Reporter • RIA’s United States Tax Reporter • Services with extensive editorial discussion and interpretation of the law • RIA’s Federal Tax Coordinator 2d • BNA’s Tax Management Portfolios • Merten’s Law of Federal Income Taxation
Secondary Authorities: Others • Computer assistance tools are used to speed research • LEXIS & WESTLAW • Internet access • CD-ROM • Citators are used to determine the history of a judicial decision • Tax Periodicals are used to keep up with current developments
Types of Research • Tax Compliance Research • Facts are known • Goal is to determine the consequence of a completed transaction • Tax Planning Research • Facts are open-ended • Goal is to structure a future transaction for taxpayer’s advantage • Non-tax factors must be considered
Tax Research Process • Determine the facts and establish relevance • Determine the issue(s) • Locate and evaluate the relevant authorities • Assess the importance of each • Understand the hierarchy of weight • Reach a conclusion and communicate the results
