Chapter 1 1 Tax Research (Day 3) Dr. Richard Ott ACCTG 833, Fall 2007

ChapterChapter11

Tax Research(Day 3)

Dr. Richard Ott

ACCTG 833, Fall 2007

Tax Research(Day 3)

Dr. Richard Ott

ACCTG 833, Fall 2007

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Sources of Tax LawSources of Tax Law

Statutory authoritiesAdministrative authoritiesJudicial authorities

Judicial AuthoritiesJudicial Authorities

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Lower CourtsU.S. Tax Court

(formerly Board of Tax Appeals)U.S. District CourtsU.S. Court of Federal Claims

(formerly U.S. Claims Court)

Appellate CourtsU.S. Courts of Appeal

U.S. Supreme Court

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Citations of Court CasesCitations of Court Cases

See examples of proper citations for court cases in the Prentice Hall textbookCheck for appeals (possibly reversals)Check changes in underlying IRC sectionsCheck for an IRS acquiescence or nonacquiescence for the case


Lower Courts

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U.S. Tax CourtU.S. Tax Court

Court hears only federal tax casesJudges are tax specialistsGenerally, best court for technical tax issuesNo jury trials allowed

Jurisdiction is not limited to residents of any specific geographical region

Taxpayer does not have to pay the disputed amount before going to court

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U.S. Tax CourtU.S. Tax Court

Precedents the Court follows:Supreme Court decisionsCourt of Appeals decisions (Golsen Rule)U.S. Tax Court decisions

Golsen RuleFollows the decisions of the Court of Appeals

having jurisdiction over the taxpayerMay reach opposite conclusions for taxpayers

with identical facts from different jurisdictions

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U.S. District CourtsU.S. District Courts

Courts hear all types of federal casesJudges are generalists, not tax specialistsTaxpayer can request a jury trial Many decisions are poorly structured or poorly

conceived from a technical standpoint

Jurisdiction is geographically limitedTaxpayer must pay the disputed amount

and then sue the government for a refund (taxpayer is petitioner, IRS is respondent)

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U.S. District CourtsU.S. District Courts

Precedents the Court follows:Supreme CourtCourt of Appeals for that DistrictOwn District Court

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U.S. Court of Federal ClaimsU.S. Court of Federal Claims

Court hears all cases involving monetary claims against the federal governmentJudges are generalists (not tax specialists)No jury trials allowed

Jurisdiction is not limited to residents of a any specific geographical region

Taxpayer must pay the disputed amount and then sue the government for a refund (taxpayer is petitioner, IRS is respondent)

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U.S. Court of Federal ClaimsU.S. Court of Federal Claims

Precedents Court must follow:Supreme CourtCourt of Appeals for the Federal CircuitU.S. Court of Federal Claims

Taxpayers usually pursue cases in this court when applicable District Court and/or Tax Court decisions are adverse


Appellate Courts

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Federal Appellate CourtsFederal Appellate Courts

First levelU.S. Court of Appeals

Final levelU.S. Supreme Court

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U.S. Court of AppealsU.S. Court of Appeals

13 Courts of Appeal11 geographic courts assigned to states

(Kansas is 10th and Missouri is 8th)1 court assigned to Washington, D.C.1 court assigned to cases coming from the

U.S. Court of Federal Claims

Precedents the Court follows:Supreme CourtU.S. Court of Appeal for that circuit

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U.S. Supreme CourtU.S. Supreme Court

Final level of appeal and sovereign legalauthority for all federal casesPermission to present case must be requested

by writ of certiorari (may or may not be granted)Only hear about a dozen tax cases annuallyTax cases generally involve an issue at conflict

among the U.S. Circuit Courts of Appeal or an issue of major importance

Evaluating AuthoritiesEvaluating Authorities

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Statutory AuthorityStatutory Authority

The Internal Revenue Code is the law as enacted by Congress and signed by the President, therefore, carries the highest weight of authority

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Treasury RegulationsTreasury Regulations

Treasury Regulations carry the second highest weight of authoritySupreme Court has held that regulations issued

under general authority of IRC §7805(a) have full force and effect of law unless they conflict with the current statute

Supreme Court has held that regulations issued under specific legislative authority have the full force and effect of law (unless in conflict with Congressional intent)

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Other Administrative AuthorityOther Administrative Authority

In general, these provide good indications of the IRS’s position but they are frequently revised and/or superceded and can be overturned by court decisionsIf there is a supporting court case with a high

weight of authority, taxpayer can take a position contrary to an administrative pronouncement

PLRs and TAMs carry a lower weight of authority than Revenue Rulings or Procedures

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Judicial AuthorityJudicial Authority

Supreme Court cases carry the highest weight next to the Internal Revenue Code, their decisions can only be changed if: Congress amends the underlying statutes orThe Court decides to reverse itself

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Court of Appeals cases carry a high weight of authority but less than Supreme CourtIf court decisions are in conflict across circuits,

decisions in taxpayer’s own circuit have higher value as precedent than those of other circuits

2nd, 9th and D.C. circuit decisions are important due to numerous innovative, unusual and/or controversial judicial interpretations of law

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Tax Court cases also carry a high weight of authority (but less than the Supreme Court), particularly when the issue has not been addressed by a Court of Appeals

U.S. Federal Court of Claims cases carry a significant weight of authority

U.S. District Court decisions carry a very low weight of authority (especially if the taxpayer is not in that district)

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Review Question 1Review Question 1

A taxpayer need not pay the disputed tax in advance when the suit is initiated in which lower court?a. U.S. Court of Federal Claimsb. U.S. Tax Courtc. U.S. District Court

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A jury trial is permitted in which court?a. U.S. District Courtb. U.S. Tax Courtc. U.S. Court of Federal Claims

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The Tax Court departs from its general policy of ruling uniformly for all taxpayers in what situation?a. a U.S. District Court in the taxpayer’s

jurisdiction has ruled differently on the issueb. the IRS has issued a nonacquiescence to a

previous court decision on the issue in the taxpayer’s jurisdiction

c. the Court of Appeals for the circuit to which the decision may be appealed has ruled differently on the issue

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When the Tax Court follows the opinion of the Circuit Court of Appeals to which the taxpayer may appeal, the court is following what rule?a. Goldberg Ruleb. Greenspan Rulec. Golsen Rule

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The IRS may issue an acquiescence or nonacquiescence to which of the following court decisions?a. U.S. Tax Courtb. U.S. Courts of Appealc. U.S. Supreme Courtd. All of the abovee. a. and b. only

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In researching a tax position to be taken by a Kansas taxpayer, you find the following sources for and against the position:

Do you take the position?

For the taxpayer:

Against the taxpayer:

9th Circuit Court of Appeals decision

8th Circuit Court of Appeals decision

Tax Court decision (California taxpayer)

Tax Court decision (Missouri taxpayer)

Private letter ruling Revenue Ruling

Documents

Chapter 1 1 Tax Research (Day 3) Dr. Richard Ott ACCTG 833, Fall 2007