Chapter 2: Working with the Tax Law

Question 1

Acquiescence

Answer 1

Agreement by the IRS on the results reached in certain judicial decisions; sometimes abbreviated Acq. or A.

Question 2

Circuit Court of Appeals

Answer 2

Any of 13 Federal courts that consider tax matters appealed from the U.S. Tax Court, a U.S. District Court, or the U.S. Court of Federal Claims. Appeal from a U.S. Court of Appeals is to the U.S. Supreme Court by Certiorari.

Question 3

Citator

Answer 3

A tax research resource that presents the judicial history of a court case and traces the subsequent references to the case. When these references include the citating cases’ evaluations of the cited case’s precedents, the research can obtain some measure of the efficacy and reliability of the original holding.

Question 4

Court of original jurisdiction

Answer 4

The Federal courts are divided into courts of original jurisdiction and appellate courts. A dispute between a taxpayer and the IRS is first considered by a court of original jurisdiction (i.e., a trial court). The four Federal courts of original jurisdiction are the U.S. Tax Court, the U.S. District Court, the Court of Federal Claims, and the Small Cases Division of the U.S. Tax Court.

Question 5

Determination letter

Answer 5

Upon the request of a taxpayer, the IRS will comment on the tax status of a completed transaction. Determination letters frequently are used to determine whether a retirement or profit sharing plan qualifies under the Code, and to determine the tax-exempt status of certain nonprofit organizations.

Question 6

Federal District Court

Answer 6

A trial court for purposes of litigating Federal tax matters. It is the only trial court in which a jury trial can be obtained.

Question 7

Finalized Regulations

Answer 7

The U.S. Treasury Department Regulations (abbreviated Reg.) represent the position of the IRS as to how the Internal Revenue Code is to be interpreted. Their purpose is to provide taxpayers and IRS personnel with rules of general and specific application to the various provisions of the tax law. Regulations are published in the Federal Register and in all tax services.

Question 8

Interpretive Regulations

Answer 8

A Regulation issued by the Treasury Department that purports to explain the meaning of a particular Code Section. An interpretive Regulation is given less deference than a legislative Regulation.

Question 9

Legislative Regulations

Answer 9

Some Code Sections give the Secretary of the Treasury or his delegate the authority to prescribe Regulations to carry out the details of administration or to otherwise complete the operating rules. Regulations issued pursuant to this type of authority truly possess the force and effect of law. In effect, Congress is almost delegating its legislative powers to the Treasury Department.

Question 10

Letter ruling

Answer 10

The written response of the IRS to a taxpayer’s request for interpretation of the revenue laws with respect to a proposed transaction (e.g., concerning the tax-free status of a reorganization). Not to be relied on as precedent by other than the party who requested the ruling.

Question 11

Nonacquiescence

Answer 11

Disagreement by the IRS on the result reached in certain judicial decisions. Nonacq. or NA.

Question 12

Precedent

Answer 12

A previously decided court decision that is recognized as authority for the disposition of future decisions.

Question 13

Procedural Regulations

Answer 13

A Regulation issued by the Treasury Department that is a housekeeping-type instruction indicating information that taxpayers should provide the IRS as well as information about the internal management and conduct of the IRS itself.

Question 14

Proposed Regulations

Answer 14

A Regulation issued by the Treasury Department in proposed, rather than final, form. The interval between the proposal of a Regulation and its finalization permits taxpayers and other interested parties to comment on the propriety of the proposal.

Question 15

Revenue Procedures

Answer 15

A matter of procedural importance to both taxpayers and the IRS concerning the administration of the tax laws is issued as a Revenue Procedure (abbreviated Rev.Proc.). A Revenue Procedure is published in an Internal Revenue Bulletin (I.R.B.).

Question 16

Revenue Rulings

Answer 16

A Revenue Ruling (abbreviated Rev.Rul.) is issued by the National Office of the IRS to express an official interpretation of the tax law as applied to specific transactions. It is more limited in application than a Regulation. A Revenue Ruling is published in an Internal Revenue Bulletin (I.R.B.).

Question 17

Small Cases Division

Answer 17

A division within the U.S. Tax Court where jurisdiction is limited to claims of $50,000 or less. There is no appeal from this court.

Question 18

Tax avoidance

Answer 18

The minimization of one’s tax liability by taking advantage of legally available tax planning opportunities. Tax avoidance can be contrasted with tax evasion, which entails the reduction of tax liability by illegal means.

Question 19

Tax research

Answer 19

The method used to determine the best available solution to a situation that possesses tax consequences. Both tax and nontax factors are considered.

Question 20

Technical Advice Memoranda (TAM)

Answer 20

TAMs are issued by the IRS in response to questions raised by IRS field personnel during audits. They deal with completed rather than proposed transactions and are often requested for questions related to exempt organizations and employee plans.

Question 21

Temporary Regulations

Answer 21

A Regulation issued by the Treasury Department in temporary form. When speed is critical, the Treasury Department issues Temporary Regulations that take effect immediately. These Regulations have the same authoritative value as Final Regulations and may be cited as precedent for three years. Temporary Regulations are also issued as proposed Regulations.

Question 22

U.S. Court of Federal Claims

Answer 22

A trial court (court of original jurisdiction) that decides litigation involving Federal tax matters. Appeal from this court is to the Court of Appeals for the Federal Circuit.

Question 23

U.S. Supreme Court

Answer 23

The highest appellate court or the court of last resort in the Federal court system and in most states. Only a small number of tax decisions of the U.S. Courts of Appeal are reviewed by the U.S. Supreme Court under its certiorari procedure. The Supreme Court usually grants certiorari to resolve a conflict among the Courts of Appeal (e.g., two or more appellate courts have assumed opposing positions on a particular issue) or when the tax issue is extremely important (e.g., size of the revenue loss to the Federal government).

Question 24

U.S. Tax Court

Answer 24

One of four trial courts of original jurisdiction that decides litigation involving Federal income, death, or gift taxes. It is the only trial court where the taxpayer must not first pay the deficiency assessed by the IRS. The Tax Court will not have jurisdiction over a case unless a statutory notice of deficiency (90-day letter) has been issued by the IRS and the taxpayer files the petition for hearing within the time prescribed.

Question 25

Writ of Certiorari

Answer 25

Appeal from a U.S. Court of Appeals to the U.S. Supreme Court is by Writ of Certiorari. The Supreme Court need not accept the appeal, and it usually does not (cert. den.) unless a conflict exists among the lower courts that must be resolved or a constitutional issue is involved.