ACC 4250 SINGAPORE - Flash (Large) - 20110514 06.04.00PM
Good evening, or afternoon.
This is chapter two in our course forty-two fifty tax practice in
research is the title of our lecture this afternoon.
and so if you open up the slides.
and begin with.
slide number two.
then basically there's a lot of material in this lecture so let's get right into it.
As we talked about earlier even though their simplicity ought to
be one of the aspects of ensuring an efficient tax that can be collected.
which also minimizes the degree of disagreement and litigation over tax law,
In spite of that the tax law is quite complex.
We showed how many different tax what changes have occurred.
over the last decade in chapter one's slides.
Major tax law changes occur virtually annually as we indicated.
There's always discussions about tax reform. There's always groups that are
lobbying the American legislature- the federal legislature in Washington D C to change various
rules in their favor or on behalf of taxpayers as a whole.
and there's a never ending flow of regulations, rulings, cases,
and other announcements.
And so one of the major goals of the tax practitioner is to be able to find the answers
within the law to be able to resolve questions.
because there are many cases transactions issues that occur on
a day to day basis in which the tax needs to be addressed.
in a case
in nineteen eighty one.
a taxpayer claims she relied on an interpretation of
the tax law- that little book from two thousand and three- US Master Tax Guide is being shown.
She contended that
she followed what was stated in the book.
the court held.
in this memo decision regardless of what such publication provides it's
clear that the law is the statutes as enacted by
Congress and decisions of courts interpreting those statutes.
not what publications interpret although many practitioners.
start with an analysis of the master tax guide or publication similar
in nature as a starting point for understanding where to get
the answers to questions. Another example was a 1973 case.
of Zimmerman vs. Commissioner in which
taxpayers had relied on publication seventeen- your federal income tax.
Even though it was a publication produced by the IRS.
the court held that
authoritative sources of federal tax law are in statutes, regulations and
judicial decisions and ruled that
although the publication has some guidance authority it's not ultimately the law,
it's an informal publication.
What is tax research?
the process of developing defensively correctly answers to tax questions.
It's the interpretation of the law as it applies to a particular set of
facts. Extremely important to get an understanding of this concept. It is a
seriously difficult process that
really honed over time through experience.
Through constant reiteration.
And tax research is just a subset of legal research. Lawyers in
general have the same operational aspects
of understanding and applying the law. And they go through this process.
in almost any kind of legal context.
We're focusing on the tax law.
In slide 6
you start with understanding the facts.
If you haven't got a good set of facts, the law will be irrelevant.
because the law is a function of applying it
to a set of facts. If the facts change the results will change.
The law generally.
malleable to the extent that it gets applied to the facts. The interpretation of the law
as it applies to the facts become the critical aspect once you decided on what the facts are.
for some like Diablo of all the law.
and still do art tax.
nearly tax co section two of statutory cool is that cover tax accounting.
we have all kinds of guidance that fall generally accepted accounting principles and a.
in the context of international accounting of the international financial reporting standards.
that generally have of our looked at as potentially a becoming adopted for the entire global below business world.
and though of.
it's understood that they're going to be serious differences between.
accounting methods and the gap and accounting methods of the tax law will.
though different in the to be fun to do it employee.
research is employed in the place a stomach complaint way.
planning transactions in advance.
all lawyers CPA tax council executive for practitioners to them with their clients to come up with play end of of proposed transaction.
current or future transactions that take into account the tax effect that these transactions complain story of to the back of the few transactions of already been consummated it didn't take the been the executed been completed.
the question is what the tax effect on the transactions that with that and that they have been.
that didn't choke.
this planning is more of an open ended process.
it's reported in slide nine.
I'm Heidi structure a transaction that you maximize the of the tax benefits from a planning of rejection type of year when nothing is said and so things may occur down the road that change and therefore um identification of the best way to achieve a particular objective.
um that takes into account the uncertainty of what those transactions.
up of may face in the state in two in the future when tax to tackle a change.
so we have the compliant again and.
transactions that have taken place.
there's also policy type research.
in slide eleven.
this kind of tax research weeks more to.
areas where economists and lawyers and of finance specialists.
when of course head.
trying to come up with before I came in and policies and programs to influence the government in modifying or correcting were changing tax laws because the results are producing negative consequences for unintended consequences or consequences on certain groups and neighboring.
of the quilt.
there's also research is done in the educational field.
where individuals stay current.
and that's to say that practitioners also.
must keep themselves current.
because tax mortgage deals every day.
again the research process determine the relevant facts identified the issue that is the second most critical aspect and to be part of one as well and wants to establish the facts.
your understanding of what is the particular problem or question that need to be we stopped at the date that you make day to a certain way that may actually do it.
that you can have two different results were two competing with snow.
depending on how you stated the problem.
the next process is researching the old fart a the tax law that keyword where we mean by authoritative tax law early we discussed publication seventeen and the tax guy tax Corbin said although they have some value in providing interpretation of the law they are not the final issue in terms of Howell tax was deployed.
you OIC authority having found you.
we engaged in defensively correct the ball conclusions.
and then you effectively communicate the results.
many times it can be oral.
but if it's a lot steel transaction that.
it's going to.
the new Kampala comprises of large amounts sums of money it probably makes sense to get a bit and communication if it's something that's already been challenged by a governmental authorities say the IRS or state agency.
then it's probably important to get a written memo on by the proposed resolution.
life is to give you the process the tax research once again.
in terms of reclaiming the problem.
the initial identification of a problem on the issue once more of research conducted in a we to the research are the tax expert.
coming up with another research issue or another sub issue of this aspect of taxation that I just mentioned earlier and that is the variance of doing this over many years is a fundamental aspect of tax research by the evil within a particular tax we search.
if we are ever to its circular.
he thought with understanding the facts.
you state the problem YouTube research you may go back and re examine the facts and we examine the issue.
to see if there are some facts that have been omitted or have been mis stated and whether the issue has been correctly identified and maybe some other issues have just developed through your research and you need to address those still.
still this is the process.
it is constant and it reiterated.
steps one and two.
loved about again in sixteen at the Gold upbringing of the developing those two factors.
in like seventeen example to display it slightly team.
it's further proof the line.
as it is in um.
nineteen eleven to skip along to twenty.
determine the facts identify the issue of pain was back in small question more research here is the process that I would prefer it to the circular reiterated process obtained still more facts and to walk question then two more weeks.
it's an interim process has indicated on slide twenty in areas need it.
circular you keep going keep we we be repeating the process.
and oh we keep repeating the lie than emphasizing um tax issue will it get to a party.
whiting field in like twenty two films he was sorry.
to the mortgage.
the high court issue of basalt opinion on a particular tax for of legally issue generally is lawful and the United States Supreme Court.
the strongest of the right.
second every authority is the week its secondary authority with the summer though.
publications research publication of articles.
these types of secondary or Oracle.
sorry abt some persuasive.
they are not.
the law and generally speaking.
court of Appeals opinion of the second to the right tax Court decision.
district Court decisions are have greater weight.
well for them.
just me or leave the cold the rakes or revenue.
and don't three.
areas of barf.
cover to a different aspect of the law though.
or would the door.
congressional statutory law.
everything to the right of the code is the judiciary.
annual rates and rulings on the administrative rules and regulations that are developed by the IRS and the executive branch or three branches aren't all.
a depiction of the the primary authority.
the internal revenue code contains the is the actual statute there are interpretations and they are basically administrative by the IRS on the right to serious.
regulations revenue ruling revenue to see his letter rulings announcements.
general council member random actions on decisions.
all kinds of serious.
terminology used by the IRS in developing the are of particular um interpretation the tax law the judiciary is all listed and the from the lower courts to the Pirates squad.
playing sport is a special court in washing the sea.
it handles special claims federal site claims.
and jurisdictions the little bit more limited although generally speaking it involves the guy read.
the taxman or it could be heard.
so we search a primary authority.
second there resort.
it's like twenty five ordering and prioritizing the types of authority you have of.
research and accumulated becomes of the primary objective.
and code section twenty the unknown.
coach section thirty.
thirteen seventy four.
up on the on flight twenty six.
um you have serious tax text of what is the primary star.
the code itself.
course the primary to our section.
an explanation of the treatment of contributions to into regional retirement account.
private letter ruling.
white section twenty seven.
Lloyd twenty seven.
talks about publications.
and you may be inconsistent decision.
hello quarters will get the liar estimate given matter.
and the opposition found in a publication normally not change until the IRS convinced that it's wrong so.
I was dead.
it's a little bit about confuse a bit of confusion in the area tax will we talked earlier about the fact that the publication was not due.
as a primary school by the cool wet.
it was secondary to us and yet even though it decisions come down the wire is continuing to stay in the disposition and its publication.
quizzes and acuity and uncertainty.
and efficient tax system.
other authorities are described and.
slide twenty eight.
R I a S publications primary secondary authority.
slide twenty nine this is one of the theory is that is great and of itself.
it's not a science.
it may well be that if nothing else is discussed in the tackle one of particular matter.
and if they didn't know IRS publication then by definition the IRS publication will be cited as primary authority on the issue.
I've seen that happen in practice myself.
of the and those like thirty one.
reliance on the club.
sorry seems to be justified.
we get through carefully.
and during their assumed to reason.
supporting primary authority that would support that.
while the Guardian has got to ride thirty two.
understanding the we.
of the heart.
which is Bharti which publication which lot what has what is the most influential.
that court look that up.
going back to that a regional of.
diagram showing the the to a tree.
construction company that and forty are helpful they were important but the day the equivalent of receiving the revenue procedure.
um that the mileage rate to two doubts and will increase to thirty two it is said to thirty two hits and a mile in items for.
obviously the revenue procedure that will were light to a generalized notion that he would point to the structure.
another of what aspect of attacks research.
of course you will be killed.
there are lawyers trained lawyers go to law school PTA does well in their tax courses.
um much study and understand the hierarchy and the weight of authority in order to be a practitioner to make it though.
give advice and care return in accordance with proper compliance.
question is though.
the two cases have greater oil at parties.
well the second one on slide thirty three is a court of Appeals ninth Circuit case.
the eight th nine.
in this case.
had to deal with though whether a table dancers the word independent contractors member I mention that any contract is being a critical question in the employee or employee in the contract of debate.
one the first case Adam first commissioner deal with is of.
payment of income taxes can be.
held on the religious conscience basis but as the United States tax Court decision.
and not a the appeals court decision.
the case in which the decision and it Delmar.
like circuit appeals would have greater weight.
then tax Court decision.
free area so I well what confuse you by indicating that one would have somehow we associate with another.
in other words in the same issue.
the higher court has the greater weight.
so analyzing of guardians what we've been doing slide thirty four slide thirty five.
it will describe.
the word synthesize information synthesize information critical putting together the area.
components of tax research.
analyzing the party sound.
as indicated light thirty six analyze the importance of each authority.
in other words what I just did I said well the ninth circuit has.
for of Appeals the federal appeals court has more influence than the tax court on a particular matter.
determine the significance of the party without the other.
you can have different rationales different results depending on.
we're the cases that were litigate it was the nature of the tax payers more.
Kampala the table consists comprise the same.
why the reasoning of the authority of fact reconcile possible conflict the position determined that the authorities current.
slide thirty seven.
you may need to go back and do additional research.
it may be of very complex grey area and you don't have the answer.
there's no unlike unlike what the answer here.
you may need to go back and reread the study research it from other angles research.
the process to different research materials into a two eyed at different aspects of the case.
it's a complex we enter a process.
as described in thirty eight and thirty nine.
and for each.
forty of the sample.
the importance of this is that.
this tax returns if repeated without any connection will relationship to the tax law.
the government imposes series penalties not only on the tax payer.
but on the appearance.
this is the way the process.
this is the way compliance is in to it.
if you would.
if a taxpayer and super parent.
or as a practitioner to present a extremely our way to the position of a tax return.
all the parties will suffer the negative.
you know penalties and a mighty been discussing criminal intent here are just disgusting frivolous symbol position.
reasonable grounds reasonable basis to describe it in.
like forty three.
there is been stated that taxpayers must meet in order to protect themselves against.
having returned repeated negligently and practitioners must do the same.
in discussing the return with their clients.
so tax return position on the flight forty four.
must have a realistic possibility of success.
there must be substantial parties to support that realistic possibility of success.
in the light forty five.
more likely than not test must be met.
definite destination the weight of fifty percent chance of success doesn't mean you have to be hotter percent profit.
but doesn't mean you took a position that there was a lot of really decent likelihood that you wouldn't take it.
and this again is the gray area.
other professional responsibility of guidelines for tax practitioners are found in of of the documents um published by the Treasury are we to thirty.
statement on its to tax services that we had of to avoid a supplementary of the materials to the ports and the attorney a be a pain in the issue by the American bar Association to attorneys.
of regarding the um proper tax practice.
circular to thirty applies to everyone.
you don't have to be a CTA to be practicing taxi to the attorney you can be a nun CTA nine the tourney practitioner.
the purveyor of penalties saw discussed in section sixty six ninety four.
it's like forty eight.
moving on to slide forty nine.
statutory force the federal tax lawyer.
basically our inactive for the rice by statute here is that with three primary sources of statutory tax law the Constitution of the United States.
actually it's an act of Congress.
in the act generally found in the federal taxes go.
um what about when coupled oh basically example.
I get George Bush.
the former president of was willing to work.
section sixty one the definition of gross income and section one sixty two.
the definition of trade the business expenses and we will be dealing with that extensively to of course.
there are only two.
well that was fifty one.
the sixteenth amendment to the Constitution.
it's a base oil.
I would tax law.
we're a nation born and tax protesters.
and in the of slide sixty two.
zero I have been many challenges to the income tax.
but generally most of those challenges.
are where it's been discriminatory in its application.
violating the to read to process that fact or of the process of collection for unequal protection aspect in which.
the tackle and then.
discriminatory we applied.
I'm important here is said to be the tax protester as was indicated by the earlier light of someone who on religious grounds.
believes that taxes should be.
yet state government would be insufficient.
as a constitutional challenge.
the obligations are extremely important.
and like this before.
and at this point.
which is going to look at the actual quote section and grab up to a lecture one.
lecture on chapter two.
and they'll be a part too.
I would just take a look at the statue itself this is what the nineteen thirty two code section twenty two quilts income.
this is an actual statement of the law will income includes gain profits and income derives salaries wages and compensation for personal service.
including personal service as an officer employee but they to any political subdivision to rub over the age the risk of a tally of eighty one or more before going.
whatever current in whatever form paid for from sessions vocations to the business and commerce deals with dealing in property with a really personal.
growing out of the ownership or use of or into such property.
also from interest and dividend security for the transaction to the business carried on to gain a profit.
what team so profit and income derives from whatever source.
and didn't like this.
it is further elaborated.
and it slide fifty seven.
the operation of the federal tax code.
statutory salvation of all parties prefer to see internal revenue code of nineteen eighty six as amended.
Gary's um then they will proposal to modify the tax law done officially the president.
members of Congress Treasury Department officials another.
the tax legislative process.
articulated unlikely displayed on it like sixty nine.
and we will end on this note.
the Lloyd J basically.
the period leading to various ingredients are developed in the house ways and means committee.
there are the kitchen takes place.
ultimately of the joint conference committee gets the basis of formal hearing.
congressional approval is required the joint Committee on taxation Committee report.
and the Finance Committee will participate.
once this congressional approval would go to the president's signature and the light is created.
on that note.
have a good day and we will.
Havel second lecture.
Adelaide appointed time.