Chapter 1 1 Tax Research (Day 2) Dr. Richard Ott ACCTG 833, Fall 2007.

ChapterChapter11

Tax Research(Day 2)

Dr. Richard Ott

ACCTG 833, Fall 2007

Tax Research(Day 2)

Dr. Richard Ott

ACCTG 833, Fall 2007

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Sources of Tax LawSources of Tax Law

Statutory authoritiesAdministrative authoritiesJudicial authorities

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Administrative AuthoritiesAdministrative Authorities

Treasury RegulationsRevenue RulingsRevenue ProceduresPrivate Letter RulingsTechnical Advice MemorandumOther IRS pronouncements

Administrative AuthoritiesAdministrative Authorities

Treasury Regulations

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Treasury RegulationsTreasury Regulations

Official interpretations of the IRC by the IRSand the Treasury Department

Authority to issue: General - Issued under the general authority

granted under IRC §7805(a) Legislative - Issued under authority granted in a

specific Code section to fulfill law-making function and specify substantive requirements of a tax provision (Example: IRC §385)

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Treasury RegulationsTreasury Regulations

Supreme Court has held that these regulations have the full force and effect of law unless they conflict with the statuteTaxpayers challenging a regulation must show

an improper exercise of power or an overly broad application of a rule

Under IRC §6662, a 20% penalty can be assessed for “negligence or disregard of rules or regulations”

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Treasury RegulationsTreasury Regulations

Regulations often contain helpful examplesof the application of the law

Regulations are filed in IRC section orderCode sections correspond but paragraphs and

other subdivisions do not correspond

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Treasury RegulationsTreasury Regulations

For IRC changes enacted after July 29, 1996, Treasury is precluded from issuing regulations with retroactive effect unless issued within 18 months of the date of the change in the statute

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Treasury RegulationsTreasury Regulations

Types of RegulationsProposedFinal Temporary

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Treasury RegulationsTreasury Regulations

Acceptable citations for final regulations: Reg. §1.164-1(a)(4)

Reg. Sec. 1.164-1(a)(4)

Treas. Reg. §1.164-1(a)(4)

Treas. Reg. Sec. 1.164-1(a)(4)

26 CFR §1.164-1(a)(4)

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Treasury RegulationsTreasury Regulations

Acceptable citations for proposed regulations: Prop. Reg. §1.1362-8(b)(1)

Prop. Reg. Sec. 1.1362-8(b)(1)

Prop. Treas. Reg. §1.1362-8(b)(1)

Prop. Treas. Reg. Sec. 1.1362-8(b)(1)

T.D. 8869

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Treasury RegulationsTreasury Regulations

Acceptable citations for temporary regulations: Reg. §1.274-5T(c)(1)

Reg. Sec. 1.274-5T(c)(1)

Temp. Reg. §1.274-5(c)(1)

Temp. Reg. Sec. 1.274-5(c)(1)

26 CFR § 1.274-5T(c)(1)

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Treasury RegulationsTreasury Regulations

Number to left of the period indicates the category of issues addressed by the regulation 1. Income Tax 20. Estate Tax 25. Gift Tax 301. Administrative and Procedural 601. Procedural Rules

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Treasury RegulationsTreasury Regulations

Number to the right of the period indicates the IRC section regulation relates to

Number to the right of the dash indicates the regulation number

Capital T to the right of the dash indicates it is a temporary regulation

Letters and numbers to the right of the regulation number indicate paragraphs, subparagraphs, etc.

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Caution About RegulationsCaution About Regulations

The Treasury Department / IRS is very slow about issuing regulations

Many regulations are obsolete and/or not consistent with the current IRC (still have effect of law to the extent not inconsistent with the current IRC)Example: IRC §542 and Reg. §1.542-2

(60% versus 80% test)

Administrative AuthoritiesAdministrative Authorities

Revenue Rulings, Revenue Procedures, Private Letter Rulings and Technical Advice Memoranda

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Revenue RulingsRevenue Rulings

Issued by the National Office of the IRSDeals with the application of the IRC and

Regulations to a specific factual situationAlways check for subsequent legislation,

regulations, rulings or court decisionsPermanent Revenue Ruling citation:

Rev. Rul. 96-58, 1996-2 C.B. 6 or Rev. Rul. 2000-10, 2000-1 C.B. 643

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Revenue ProceduresRevenue Procedures

Issued by the National Office of the IRSDeals with the IRS’s internal practice and

procedures in administering the tax lawsDo not deal with substantive issues of law

Permanent Revenue Procedure citation: Rev. Proc. 95-3, 1995-1 C.B. 10 or Rev. Proc. 2000-15, 2000-1 C.B. 447

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Private Letter RulingsPrivate Letter Rulings

Issued by the National Office of the IRSResponse to a taxpayer’s request for the

IRS’s position on a specified tax issue(usually a proposed transaction)

PLR apply only to the taxpayer to whom it is issued (but can be helpful in determining IRS’s potential position)

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Private Letter RulingsPrivate Letter Rulings

Citations pre-2000: P.L.R. 8652012 P.L.R. 86-52-012 Ltr. Rul. 8652012 Ltr. Rul. 86-52-012

Citations post-1999: P.L.R. 200130019 P.L.R. 2001-20-019 Ltr. Rul. 200130019 Ltr. Rul. 2001-30-019

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Technical Advice MemorandumTechnical Advice Memorandum

Issued by the National Office of the IRSResponse to an IRS agent’s request for

IRS’s position on a completed transactionApplies strictly to the taxpayer for whose audit it

was requested and cannot be relied on by other taxpayers (but useful for gaining insight into IRS’s thinking about a particular transaction)

Citation similar to PLRs:T.A.M. 8548005T.A.M. 85-48-005

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Other PronouncementsOther Pronouncements

Information ReleasesAnnouncementsNoticesTax Return Forms and Instructions