Federal Income Taxes I - Chapter 2

Info to study from chapter 2 of the Federal Income Taxes I course

statutory source

Includes committee reports from the House Ways and Means Committee or the Senate Finance Committee

stare decisis

A court will rule consistently with its previous rulings and rulings of higher courts with appellate jurisdiction

primary authorities

Official sources of the tax law generated by one of the government’s branches (e.g., revenue rulings, revenue procedures)

secondary authorities

Unofficial tax authorities that help explain the law

Joint Conference Committee

Attempts to reconcile House and Senate versions of a tax bill

Information Matching Program

Compares a tax return to information submitted to the IRS from third parties

Discriminant Function (DIF) System

Assigns a score representing the probability the tax liabilities on a tax return have been underreported

Document Perfection Program

Checks mathematical and tax calculation errors

open facts

provide opportunities for tax planning

closed facts

deal with tax compliance

letter rulings

less authoritative and more specific than revenue rulings and regulations

topical tax services

tax services that are arranged by topic, such as types of taxable income

question of law

could involve the interpretation of a particular Code section

question of fact

hinges upon the circumstances of the taxpayer’s transaction

annotated tax services

tax services arranged by Internal Revenune Code Services; often used in tax research

basic parts of a client letter

research question and limitations, facts, analysis, and closing

basic parts of an internal research memo

facts, issues, authority list, conclusion, and analysis

Circular 230

provides regulations governing tax practice that apply to all persons practicing before the IRS

civil penalties

most common; generally comes in the form of monetary penalties

House Ways and Means Committee

initiates tax legislation

90-day letter

explains the taxpayer has 90 days to either pay the proposed deficiency or file a petition in the U.S. Tax Court to hear the case (aka statutory notice of deficiency)

30-day letter

explains the taxpayer has 30 days to either request a conference with an appeals officer or agree to the proposed adjustment

statute of limitations (SOL)

ends three (3) years from the later of either the date the tax return was filed or the tax return’s original due date (normally)

National Research Program

randomly selects returns for audit to provide the necessary input into the DIF system

regulations

Treasury Department’s official interpretation of the Internal Revenue Code (IRC); highest authority issued by the IRS

final regulations

regulations that have been issued in final form

temporary regulations

have a limited life (3 years if issued after November 20, 1988); carry the same authoritative weight as final regulations

proposed regulations

allow the public to comment on them; have the lowest authority

Treasury Department

charged with administering and interpreting tax laws

interpretative regulations

most common regulations; represent the Treasury’s interpretation of the Code

procedural regulations

explain Treasury Department procedures as they relate to administering the Code

legislative regulations

rarest type of regulation; represent tax law; issued with Congress specifically directs the Treasury Department to create regulations to address an issue in an area of law

determination letters

rulings requested by the taxpayer and issued by local IRS directors

technical advice memorandum

ruling issued by the IRS national office, requested by an IRS agent, and generated for a completed transaction

nonacquiescence

issued after the IRS loses a trial-level or circuit court case when the IRS has decided to continue to litigate this issue

acquiescence

issued after the IRS loses a trial-level or circuit court case when the IRS has decided to follow the court’s adverse ruling in the future

actions on decision

IRS pronouncement that explains the background reasoning behind an IRS acquiescence or nonacquiescence

March 15

when partnership and S corporation returns are due

Golsen rule

states that the U.S. Tax Court will abide by rulings of the circuit court that has appellate jurisdiction for a case

citator

a research tool that allows you to check the status of several types of tax authorities, including court cases

committee reports

aids in understanding a new code section