Bryant - Course 4. Tax Planning. Module 1. Income Tax Law Fundamentals Flashcards
Which type of Treasury regulations exist to make statutory language easier to understand and apply?
- Proposed regulations
- Temporary regulations
- Legislative regulations
- Interpretive regulations
Interpretive regulations
Interpretive regulations exist to make statutory language easier to understand and apply.
Into which group are tax bills usually introduced?
- Senate
- President
- House Ways and Means Committe
- House of Representatives
House of Representatives
Tax bills are usually introduced in the House of Representatives and are referred to the House Ways and Means Committee.
What do the first two digits in a letter ruling indicate?
- The ruling number for the week
- Year the ruling was made public
- Week the ruling was made public
- Year the ruling was initiated
The numbering system for all letter rulings consists of seven digits. The first two digits indicate the year in which the ruling was made public.
Year the ruling was made public
The numbering system for all letter rulings consists of seven digits. The first two digits indicate the year in which the ruling was made public.
Identify the courts within the U.S. Court system for which you must pay the deficiency first: (Select all that apply)
- U.S. Supreme Court
- U.S. Tax Court
- U.S. District Court
- U.S. Court of Federal Claims
U.S. District Court
U.S. Court of Federal Claims
The U.S. District Court for the taxpayer’s district & U.S. Court of Federal Claims requires that tax deficiencies must be paid first.
A district court is the only forum in which the taxpayer may have this group decide questions of fact:
- Jury
- Judge
- Legal Counsel
- Mediator
Jury
A district court is the only forum in which a taxpayer may have a jury decide questions of fact. Depending on the taxpayer and the circumstances involved, a jury trial might not be beneficial.
Temporary regulations do NOT hold the same authoritative weight as the final regulations after three months.
- False
- True
False
Temporary regulations have the same authoritative weight as final regulations. According to the Technical Amendments and Miscellaneous Revenue Act of 1988, temporary regulations may remain effective for up to three years. Also, a temporary regulation must be issued as a proposed regulation.
One would have to substitute a revised dollar amount stated in the IRC for an out-of-date amount stated in the regulation, if which of the following were true? (Select all that apply)
The regulation was adopted just before the latest revision of the applicable IRC section.
The regulation is applied with the understanding that it does not reflect the latest revision.
The Treasury Department makes frequent statutory changes and always updates the regulations.
The regulation was adopted just before the latest revision of the applicable IRC section.
The regulation is applied with the understanding that it does not reflect the latest revision.
You have to substitute a revised dollar amount stated in the IRC for an out-of-date amount stated in the regulation because the Treasury Department does not always update the regulations in a timely manner. Thus if the regulation was adopted before the most recent revision of the applicable IRC section, the regulation should be applied with the understanding that it does not reflect this revision.
Match the following as Administrative, Legistlative or Judicial tax law source:
* IRS Rulings and Treasury Regulations
* Internal Revenue Code
* Judicial Doctrines and Judicial Interpretations
- IRS Rulings and Treasury Regulations = Administrative
- Internal Revenue Code = Legistlative
- Judicial Doctrines and Judicial Interpretations = Judicial
Section One Summary
Section One Summary
Tax law sources are generated from all three branches of the federal government: legislative, executive, and judicial. The solution to any tax question may only be resolved by reference to the tax law sources, also referred to as tax law authority.
In this lesson, we have covered the following:
Legislative
Administrative
Judicial
Summary of Legislative
Legislative: The Internal Revenue Code (IRC) contains provisions governing income, estate and gift, employment, alcohol, tobacco, and excise taxes. It serves as the highest legislative authority for tax research, planning, and compliance activities.
Summary of Administrative
Administrative: Treasury Regulations represent interpretations of the tax code by the Secretary of the Treasury. Regulations may be issued in proposed, temporary, and final form. These can be further categorized as** interpretive or legislative**. Legislative regulations have a higher degree of authority than interpretive regulations. Proposed regulations do not have authoritative weight.
IRS rulings: The IRS issues Revenue Rulings (letter rulings or published rulings), Revenue Procedures, Information Releases, and Technical Advice Memoranda. These pronouncements reflect the IRS’s interpretation of the law and do not have the same level of scope and authority as treasury regulations.
Summary of Judicial
Judicial: Judicial Doctrines are concepts that have evolved from Supreme Court cases that are used by the courts to decide tax issues.
Examples of Judicial Doctrines include substance over form, tax benefit rule, and constructive receipt.
Judicial doctrines that evolve from Supreme Court cases have a substantial weight of authority because such doctrines dictate the force and effect of law.
**Judicial Interpretations are tax cases initially considered by a trial court (Tax Court, a Federal District Court, or the U.S. Court of Federal Claims).
**
Either the taxpayer or the IRS may appeal to an appeals court.
A final court appeal is to the U.S. Supreme Court. A trial court must abide by the precedents set by the court of appeals of the same jurisdiction. An appeals court is not required to follow the decisions of another court of appeals.
A Supreme Court decision must be followed by the IRS, taxpayers, and the lower courts.
In addition to understanding taxes are but one cost of doing business, which of the following items should a tax professional keep in mind when conducting research in a tax-planning context?
- The time for tax planning is restricted to the beginning date of an investment, contract, or other arrangement.
- The objective is always to minimize taxes
- Tax ramifications for all parties to the transaction are relevant.
Tax ramifications for all parties to the transaction are relevant.
The tax professional should keep in mind that the objective is to maximize after-tax return; tax ramifications are but one cost of doing business; the time for tax planning is not restricted to the beginning date of an investment, contract, or other arrangement; the financial accounting implications of proposed transactions; and to consider non-tax objectives as well as tax objectives.
Tax research is the process of solving a tax-related problem by applying tax law to a specific set of facts.
- False
- True
True
Tax research is the process of solving a tax-related problem by applying tax law to a specific set of facts. Sometimes this activity involves researching several issues. In addition, tax research often is conducted to determine tax policy.
In an open-fact situation the tax advisor:
- Must consider tax policy issues
- Is usually restricted in tax planning
- Must consider the client’s non-tax and tax objectives
- Must always attempt to minimize taxes
Must consider the client’s non-tax and tax objectives
Open-fact or Tax-planning situations generally are more difficult and challenging because the tax advisor must keep in mind the client’s tax and non-tax objectives. Most clients will not engage in a transaction if it is inconsistent with their non-tax objectives even though it minimizes their taxes.
