Midterm Flashcards
What is Circular 230
Law governing who may practice before the IRS
What are the elements of a tax practice
planning, research, litigation
What is the difference between tax avoidance and tax evasion
Tax avoidance is legal,evasion is illegal because its the illegal nonpayment of taxes
Who may practice before the IRS?
Attorneys, enrolled agents, CPAs, enrolled actuaries
What is a tax preparer?
Unenrolled person who signs a tax return as having prepared it for a taxpayer is authorized to conduct “limited practice” before the IRS
What is an open transaction?
transaction where tax practitioner maintains some degree of control over the tax liability
What is a closed transaction?
transaction where all pertinent actions have been completed
What is the concept of due diligence?
means tax practitioners in preparing tax returns in their practice before the IRS involve more than a simple error but less than willful and reckless misconduct
What are covered opinions?
strict standards imposed by IRS as it relates to transactions that are the same or similar to a transaction at the time the advice is rendered. Any partnership or entity investment plan or arrangement for which the principal purpose was avoidance or evasion
What is mean of SSTS 4: use of estimates
A member may prepare tax returns that use estimates if they cannot locate exact amounts
What is the meaning of SSTS 1: return position
Must have a good faith belief that position has a realistic possibility of being sustained administratively or judicially
What are the effect of Sarbanes Oxley?
Firms must rely on its own estimates not the firm they’re auditing. Same firm that audits cannot do tax work
What are the steps in the tax research process
- establish facts, identify issues, locate authority, evaluate authority, develop conclusion, communicate recommendation
Why is tax an iterative process?
Once you find an answer a new issue may cause additional research
What is primary authority?
statutory, administrative, judicial
What are statutory sources of law?
US Constitution, tax treaties, laws passed by congress
What are administative sources of law?
Treasury rulings, IRS regs, revenue rulings
What is secondary authority?
Tax services, journals, textbooks, treatises, newsletters
How does tax provisions affect tax research and planning
It may cause a company to change the manner in which they compute tax liability
When was the federal income tax law passed
During the civil war - August 5, 1861
What the statutory sources of federal law?
Constitution, tax treaties, internal revenue code
What are the administrative sources of law?
Treasury regs, revenue rulings, revenue procedures
How are tax protestors handled?
Subject to $5,000 fine for frivolous tax return, $25,000 by tax court for frivolous matter
What is the source of federal tax law?
The constitution
What are tax treaties?
Agreements negotiated between countries concerning the treatment of entities subject to tax in both countries – primary authority. President can enter with advice / consent of senate
What cause a treaty to terminate
expire, mutual decision to terminate, new treaty between two countries
How does a tax bill progress?
House of Reps - Ways Means Committee - joint conference committee - revisions - signed by president
What is a committee report
explanations of elements of the proposed changes for each tax proposal
PL 99-514 mean
99 - session of congress, 514- bill number
How is tax code organized
subtitle, chapter, subchapter, part, section, subsection
What is Section 1 of the Internal Revenue Code
Income tax
What is the principle of effective date?
Researcher needs to be aware of effective date of a regulation. Provision could be after or before changes
Do proposed regulations have the effect of full law?
No
When do temporary regulations expire?
3 years after issuance
When is a regulation effective?
When filed with Federal Register
What does 1.162-21(a)(2) signify
1 - regulation type, 162- code section 21 - regulation number, a - paragraph 2 - subparagraph
Do revenue rulings have same effect of regulations?
No
Rev Rul 2010-5, 2010-4, IRB 312 means
2010-5 is 5th ruling of 2010, 2010-4 is 4th week of 2010, IRB 312 - 312th page of IRB
What is a TAM?
Technical advice memo - issued by national office after an agent ask for advice when issue arises during audit that cant be answered. Cannot be relied upon by other tax payers
What is a private letter ruling?
Response to taxpayer’s request for IRS position on specific tax issue
What does acquiescence mean?
When a ruling while adverse to the IRS, the IRS chooses to follow it
What does nonacquience mean?
When the IRS chooses to follow an adverse decision but only for the one tax payer
What does AOD mean?
Actions on Decisions. published by IRS to describe their acquiescence or nonacquiescence to decision
What is the Internal Revenue Bulletin?
Official publication for pronouncements of the IRS
What is the importance of announcements and notices?
Provide immediate or short term value for approaching deadline
Describe vertical flow of federal tax system?
supreme court - us court of appeals - us district court - tax court
How does burden of proof work?
The taxpayer always has a burden of proof in a case
What does adhoc mean?
For one purpose
Who is the appeallant?
Person who appeals a decision
What is a writ of certiorari?
Process by which the supreme court hears a case
Who is a defendant?
Party responsible for responding to compliant
What does enbanc mean?
Decision where the entire court is involved instead of single judge
What does vacate mean?
A complete reversal or abandonment of prior decision
Describe the structure of tax court
Tax court is a national traveling court, with 19 judges, no jury,. The plantiff doesnt pay the tax. Each judge is appointed for a 15 year term by the President
Describe structure of district court
Jury optional, must pay tax, judges are generalists, one judge hears case
What is AFTR
American Federal Tax reports
What is USTC?
US tax cases used by CCH
Describe the structure of Court of Federal claims
16 judges, must pay tax, no jury, generalists, national, periodic travel
What is a regular decision?
Unique or new point of law
What is a memorandum?
When a chief judge concerns application of existing law
What is a summary opinion?
Decision made in small case courts, they are not precedent and cannot be used in other cases
Where are tax court decisions published?
GPO
What is the golsen rule?
Tax court may reach different/ opposite decisions based on identical facts in different geographical areas
Small claim court rule?
Overpayment cannot exceed $50,000 per year
What is tax court rule 155?
Tax court is not responsible for computing the tax owed to the government or refund due to the taxpayer
