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Chapter 15

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.

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Chapter 15

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  1. Chapter 15 Tax Research

  2. 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

  3. 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

  4. 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

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

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

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

  8. The Sources Of Tax Law • Statutory • Judicial • Administrative

  9. 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

  10. 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

  11. 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

  12. 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

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

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

  15. 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

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

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

  18. 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

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

  20. 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 • specific issue in case • referenced cases whether favorable, unfavorable, distinguished

  21. Computers As A Research Tool • Data Bases • CCH Internet Tax Research Network • RIA CHECKPOINT • WESTLAW

  22. Statements on Standards for Tax Services (SSTSs) • Provide grounds for the termination and suspension of one’s professional licenses • SSTSs are professionally enforced • See appendix for SSTSs

  23. 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

  24. 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

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