, SOLUTION MANUAL FOR Pearson's Federal
Taxation 2025 Corporations, Partnerships, Estates,
& Trusts 38th Edition Luke E. Richardson
Notes
1- The file is chapter after chapter.
2- We have shown you few pages sample.
3- The file contains all Appendix and Excel sheet
if it exists.
4- We have all what you need, we make update
at every time. There are many new editions
waiting you.
5- If you think you purchased the wrong file You
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, Chapter C:1
Tax Research
Note: To complete the online research problems for this chapter, textbook users must have
access to an Internet-based tax service at their institution. Solutions are provided using
CHECKPOINT, when applicable. In some cases, solutions using other tax services may differ.
Discussion Questions
C:1-1 In a closed-fact situation, the facts have occurred, and the tax advisor’s task is to analyze
them to determine the appropriate tax treatment. In an open-fact situation, by contrast, the facts
have not yet occurred, and the tax advisor’s task is to plan for them or shape them so as to
produce a favorable tax result. p. C:1-2.
C:1-2 According to the AICPA’s Statement on Standards for Tax Services No. 1, the tax
advisor must promptly inform the taxpayer of the error and advise on corrective measures that
should be taken. If the taxpayer refuses to take such recommended actions, the advisor should
consider resigning from the engagement. pp. C:1-31 through C:1-33.
C:1-3 When tax advisors speak about “tax law,” they refer to the IRC as elaborated by Treasury
Regulations and administrative pronouncements and as interpreted by federal courts. The term
also includes the meaning conveyed by committee reports. p. C:1-7.
C:1-4 Committee reports concerning tax legislation explain the purpose behind Congress’
proposing the legislation. Transcripts of hearings reproduce the testimonies of the persons who
spoke for or against the proposed legislation before the Congressional committees. Committee
reports are sometimes used to interpret the statute. p. C:1-7.
C:1-5 Committee reports can help resolve ambiguities in statutory language by revealing
Congressional intent. They are indicative of this intent. pp. C:1-7 and C:1-8.
C:1-6 The Internal Revenue Code of 1986 is updated for every statutory change to Title 26
subsequent to 1986. Therefore, it includes the post-1986 tax law changes enacted by Congress
and today reflects the current state of the law. p. C:1-8.
C:1-7 No. Title 26 deals with all taxation matters, not just income taxation. It covers estate tax,
gift tax, employment tax, alcohol and tobacco tax, and excise tax matters. p. C:1-8.
C:1-8 a. Subsection (c). It discusses the tax treatment of property distributions in general
(e.g., amount taxable, amount applied against basis, and amount exceeding basis).
Copyright © 2025 Pearson Education, Inc.
C:1-1
, b. Because Sec. 301 applies to the entire chapter, one should look throughout that
entire chapter (Chapter 1 of the IRC – which covers Sec. 1 through Sec. 1400U-3) for any
exceptions. One special rule – Sec. 301(e) – is found in Sec. 301. This special rule explains the
tax treatment of dividends received by a 20% corporate taxpayer. Section 301(f) indicates some
of the important special rules found in other IRC sections.
c. Legislative. Section 301(e)(4) authorizes the issuance of Treasury Regulations as
may be necessary to carry out the purposes of the subsection. pp. C:1-9 through C:1-10.
C:1-9 Researchers should note the date on which a Treasury Regulation was adopted because
the IRC may have been revised subsequent to that date. That is, the regulation may not interpret
the current version of the IRC. Discrepancies between the IRC and the regulation occur when the
Treasury Department has not updated the regulation to reflect the statute as amended. p. C:1-9.
C:1-10 a. Proposed regulations are not authoritative, but they do provide guidance
concerning how the Treasury Department interprets the IRC. Temporary regulations, which are
binding on the taxpayer, often are issued after recent revisions to the IRC so that taxpayers and
tax advisors will have guidance concerning procedural and/or computational matters. Final
regulations, which are issued after the public has had time to comment on proposed regulations,
are considered to be somewhat more authoritative than temporary regulations. pp. C:1-9 and C:1-
10.
b. Interpretative regulations make the IRC’s statutory language easier to understand
and apply. They also often provide computational illustrations. In the case of legislative
regulations, Congress has delegated the rulemaking on a specific topic (either narrow or broad)
to the Treasury Department. However, after the Mayo Foundation case, both types of regulations
will have the same authoritative weight. p. C:1-10.
C:1-11 Prior to 2011, courts gave more authority to legislative regulations than to interpretive
regulations. However, after the Supreme Court decision in Mayo Foundation, courts will hold
both interpretive and legislative regulations to the same standard and will overturn them only in
very limited cases. p. C:1-10.
C:1-12 Under the legislative reenactment doctrine, a Treasury Regulation is deemed to have been
endorsed by Congress if the regulation was finalized before a related IRC provision was
amended by Congress and in the interim, Congress did not amend the statutory provision to
which the regulation relates. p. C:1-10.
C:1-13 a. Revenue rulings are not as authoritative as court opinions, Treasury Regulations,
or the IRC. They represent interpretations by an interested party, the IRS. p. C:1-12.
b. If the IRS audits the taxpayer’s return, the IRS likely will contend that the
taxpayer should have followed the ruling and, therefore, owes a deficiency. p. C:1-12.
C:1-14 a. The Tax Court, the U.S. Court of Federal Claims, or the U.S. district court for the
taxpayer’s jurisdiction. p. C:1-14.
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C:1-2
, b. The taxpayer might consider the precedent, if any, existing within each
jurisdiction. The taxpayer might prefer to avoid expending cash to pay the proposed deficiency.
If so, the taxpayer would want to litigate in the Tax Court. If the taxpayer would like to have a
jury trial address questions of fact, he or she should opt for the U.S. district court. pp. C:1-14 through
C:1-19, p. C:1-21, and p. C:1-23.
c. Appeals from Tax Court and U.S. district court decisions are made to the circuit
court of appeals for the taxpayer’s geographical jurisdiction. U.S. Court of Federal Claims
decisions are appealable to the Court of Appeals for the Federal Circuit. Appeals from any of the
circuit courts of appeals may be brought to the U. S. Supreme Court. pp. C:1-20 through C:1-21.
C:1-15 No. A taxpayer may not appeal a case litigated under the Tax Court’s Small Cases
Procedure. p. C:1-17.
C:1-16 Tax Court regular and memo decisions have about the same precedential value. Decisions
issued under the Small Cases Procedure of the Tax Court have little or no precedential value.
pp. C:1-15 and C:1-17.
C:1-17 Yes. The IRS can acquiesce (or nonacquiesce) in any federal court decision that is
adverse to the IRS if the IRS decides to do so. In many cases the IRS does not acquiesce or
nonacquiesce. p. C:1-17.
C:1-18 In both the AFTR and USTC: decisions of U.S. district courts, U.S. bankruptcy courts,
U.S. Court of Federal Claims, circuit courts of appeal, and the U.S. Supreme Court. Tax Court
decisions are reported in neither of the two reporters. pp. C:1-16 and C:1-17 through C:1-22.
C:1-19 Prior to 2009, revenue rulings appeared in the weekly Internal Revenue Bulletin (I.R.B.),
and twice each year the decisions published in the I.R.B. were bound together and published in
the Cumulative Bulletin (C.B.). For pre-2009 rulings, the I.R.B citation was temporary and was
replaced by a citation to the C.B. After 2008, the IRS no longer publishes the Cumulative
Bulletin. Therefore for current rulings, the initial I.R.B. citation is final. p. C:1-12.
C:1-20 According to the Golsen Rule, the Tax Court will not follow a decision it made earlier,
but rather will follow a decision of the circuit court of appeals to which the case under
consideration is appealable. As an example, assume that the Tax Court, in a case involving a
First Circuit taxpayer, ruled for the taxpayer. The issue had not been litigated earlier. Then, a
U.S. district court in Georgia decided a case involving the same issue in favor of another
taxpayer. The Eleventh Circuit, however, reversed the decision. Now a taxpayer from the
Eleventh Circuit litigates the same issue in the Tax Court. Under the Golsen Rule, the Tax Court
will follow the Eleventh Circuit’s decision favoring the government. The Tax Court need not
follow an appeals court decision if a case was litigated by a taxpayer whose appeal would have
been made to any circuit other than the Eleventh. p. C:1-21.
C:1-21 a. The precedent binding upon a California taxpayer would be the Tax Court case.
The Tax Court has national jurisdiction. pp. C:1-21 and C:1-23.
b. Under the Golsen Rule, the Tax Court will depart from its earlier decision and
follow the Fifth Circuit’s decision favoring the government. p. C:1-21.
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C:1-3
,C:1-22 a. Congressional Record
b. Internal Revenue Bulletin
c. Tax Court of the United States Reports
d. Federal Register, Internal Revenue Bulletin, and/or Cumulative Bulletin
e. Federal Supplement, American Federal Tax Reports (only tax-related), United
States Tax Cases (only tax-related).
f. Not found in an “official” publication; published by tax services
pp. C:1-7, C:1-12 through C:1-14, and C:1-17 through C:1-19.
C:1-23 A tax advisor might find the provisions of a tax treaty useful where a U.S. taxpayer
engages in transactions in a foreign country. The United States has tax treaties with many
countries. p. C:1-24.
C:1-24 Citators (1) trace the history of the case in question and (2) list other authorities that have
cited such case. p. C:1-30.
C:1-25 Revenue rulings, revenue procedures, and judicial decisions. p. C:1-29.
C:1-26 Keyword, index, or citation are the three ways to search in tax service databases. p. C:1-
26.
C:1-27 a. The principal primary sources found in CHECKPOINT are as follows:
• IRC
• Treasury Regulations
• Court opinions
• Revenue rulings and procedures
• Letter rulings
• Committee reports
• Tax treaties
b. The principal secondary sources found in CHECKPOINT are as follows:
• Federal Tax Coordinator
• United States Tax Reporter
• Warren, Gorham & Lamont journals and treatises
Secondary sources will differ among the tax services. pp. C:1-26 through C:1-29.
C:1-28 The features (i.e., icons, templates, and command buttons) will vary depending upon the
particular tax service/Internet site accessed. Just about all commercial tax databases can be
searched by keyword and citation. Some can be searched by table of contents and topic. Most
noncommercial tax databases can be searched by keyword. Some can be searched by citation and
table of contents.
The advantages of using a commercial tax service (as opposed to a noncommercial
service) are broader database scope, greater historical coverage, and more efficient search
engines. The principal disadvantage is cost.
Copyright © 2025 Pearson Education, Inc.
C:1-4
, Because of their relative disadvantages, the noncommercial sites should not be regarded
as a substitute for a commercial tax service. Access is non-uniform. The scope and breadth of
their databases are limited. pp. C:1-26 through C:1-28.
C:1-29 The member should have a good faith belief that his or her position has a realistic
possibility of being sustained administratively or judicially on its merits if challenged. p. C:1-31.
C:1-30 Under the AICPA’s Statements on Standards for Tax Services (SSTSs), a tax preparer is not
obligated to (1) verify client provided information if the information is not suspicious on its face, or (2)
update professional advice based on developments following its original conveyance. p. C:1-31.
C:1-31 This answer lists six requirements. Under Circular 230, the practitioner is expected to: (1)
base the advice on reasonable assumptions, (2) consider relevant facts and circumstances, (3)
identify the facts relevant to the advice, (4) be properly skeptical of representations by the
taxpayer and others, (5) relate applicable law and authority to the facts, and (6) not base an
opinion on the chances that a transaction will be identified by IRS and subject to audit. p. C:1-30.
C:1-32 Circular 230 is a government issued document that dictates rules for practicing before the
IRS. The AICPA's Statements on Standards for Tax Services (SSTSs) are ethical standards
issued by the AICPA aimed at tax practitioners. Circular 230 applies only to federal tax issues,
and the SSTSs apply to both federal and state issues. Circular 230 only applies to income taxes,
and the SSTSs apply to all types of taxes. Finally, Circular 230 does not provide the same depth
of ethical guidance found in the SSTSs. p. C:1-30.
Problems
C:1-33 a. Yes. According to Secs. 71(a) and (b), the wife includes $25,000 per year. Also,
the divorce agreement must explicitly state that the husband has no liability to make payments
after the wife’s death. See Sec. 71(b)(1)(D) and Temp. Reg. Sec. 1.71-1T(b), Q-11.
b. Yes. The husband deducts $25,000 per year according to Secs. 215(a) and (b).
According to Sec. 62(a)(10), the alimony is deductible for AGI.
c. For alimony agreements after December 31, 2018, Secs. 71 and 215 are repealed.
pp. C:1-8 and C:1-26 through C:1-29.
C:1-34 a. Legislative. According to Sec. 385(a), “The Secretary is authorized to prescribe
such regulations as may be necessary or appropriate. . . .”
b. Yes. Section 385(a) states that the regulations will be applicable “for purposes of
this title.” “This title” is Title 26 of the federal statutes. Because Title 26 encompasses all tax
statutes, the regulations would be relevant for estate tax purposes. pp. C:1-8 through C:1-10 and
C:1-26 through C:1-29.
C:1-35 a. Both rulings hold that contributions to a fund formed to acquire a portrait of a
former judge and donated to a governmental agency are deductible under Sec. 170. pp. C:1-12 and
C:1-13.
b. Private letter rulings cannot be cited as precedence and apply only to the taxpayer
for whom the IRS issued the ruling. pp. C:1-12 and C:1-13.
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C:1-5
, c. Revenue rulings can be cited as precedence, and they are relied on by both
taxpayers and the IRS for guidance in particular factual situations. pp. C:1-12 and C:1-13.
C:1-36 Sections 355 and 856. The official IRS publication is the Internal Revenue Bulletin,
which eventually is incorporated into the Cumulative Bulletin. pp. C:1-12 and C:1-29.
C:1-37 Results might vary as the online service adds or deletes documents, but as of this writing:
a. 443.
b. 203.
c. 87.
C:1-38 The following results were obtained using CHECKPOINT. Results using other tax
services may vary.
a. 14.
b. 8 using ‘home office’ without quotations, 4 with quotes around the term.
c. The results after refining for “home office” are more relevant primarily because
280A also covers issues related to rental and vacation homes and refining the results omits these
references. The search within results output produced revenue rulings related to home office
issues, and the first result is to a revenue ruling explaining how the IRS would interpret an
important Supreme Court case addressing home office deductions. pp. C:1-26 through C:1-28.
C:1-39 a. Acquiescence. See AOD 1986-030, 1986-1 C.B. 1.
b. No. The acquiescence was only with respect to whether a transfer to the
taxpayer’s spouse is a taxable disposition. pp. C:1-17 and C:1-29.
C:1-40 a. Acquiescence. See AOD 2016-02.
b. The AOD addressed whether the limitation on home mortgage deductions applied
on a per property or per taxpayer business. pp. C:1-17 and C:1-29.
C:1-41 a. Nonacquiescence. See AOD 1988-014, 1988-2 C.B.1.
b. Yes. In 2003, the Commissioner withdrew the 1988 AOD and acquiesced. See
AOD 2003-001, 2003-2 I.R.B. pp. C:1-17 and C:1-29.
C:1-42 a. Yes. The case was reviewed by the court. No. It was not a unanimous decision.
Judges Korner, Swift, and Gerber did not participate. Judge Simpson dissented. pp. C:1-26
through C:1-29.
b. Yes. The decision was entered under Rule 155. p. C:1-17.
c. Yes. The case was reviewed by the Sixth Circuit Court of Appeals. pp. C:1-26
through C:1-29.
C:1-43 a. Yes. The case was reviewed by the court. The decision was not unanimous.
Judge Quealy dissented. Judge Tannenwald issued a concurring opinion with which five judges
agreed. Judge Chabot issued a dissenting opinion with which three judges agreed, and Judge
Nims issued a dissenting opinion with which three judges agreed. pp. C:1-26 through C:1-29.
b. No. The decision was not entered under Rule 155. p. C:1-17.
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C:1-6
, c. Yes. The case was reviewed by the Sixth Circuit Court of Appeals in 1982. pp. C:1-
26 through C:1-29.
C:1-44 a. National Cash Register Co. v. U.S., 400 F.2d 820, 22 AFTR 2d 5562, 68-2 USTC
¶9576 (6th Cir., 1968).
b. Thomas M. Dragoun, 1984 RIA T.C. Memo ¶84,094 (T.C. Memo 1984-94), 47
TCM 1176.
c. U.S. v. John M. Grabinski, 558 F. Supp. 1324, 52 AFTR 2d 83-5169, 83-2 USTC
¶9460 (DC MN, 1983).
d. U.S. v. John M. Grabinski, 727 F.2d 681, 53 AFTR 2d 84-710, 84-1 USTC ¶9201
(8th Cir., 1984).
e. Rebekah Harkness v. U.S., 469 F.2d 310, 30 AFTR 2d 72-5754, 72-2 USTC
¶9740 (Ct. Cl., 1972). Note that during this period, Court of Claims decisions were published in
the Federal Reporter, Second Series. Alternatively, you could give the citation 199 Ct. Cls. 721,
which references the Court of Claims Reporter. In the CHECKPOINT citator the name of the
case is simply Harkness.
f. Hillsboro National Bank v. CIR, 460 U.S. 370, 51 AFTR 2d 83-874, 83-1 USTC
¶9229 (USSC, 1983).
g. Rev. Rul. 78-129, 1978-1 C.B. 67. pp. C:1-17 through C:1-22.
C:1-45 a. Rev. Rul. 99-7, 1999-1 C.B. 361.
b. Frank H. Sullivan, 1 B.T.A. 93 (1924).
c. Tate & Lyle, Inc., 103 T.C. 656 (1994).
d. Ralph L. Rogers v. U.S., 539 F. Supp. 104, 49 AFTR 2d 82-1160, 82-1 USTC
¶9246 (DC OH, 1982).
e. Norman Rodman v. CIR, 542 F.2d 845, 38 AFTR 2d 76-5840, 76-2 USTC ¶9710
(2nd Cir., 1976). pp. C:1-17 through C:1-22.
C:1-46 a. Circuit Court of Appeals for the Ninth Circuit; page 1198 of Volume 648 of the
Federal Reporter, Second Series and page 81-5353 of Volume 48 of the American Federal Tax
Reports, Second Series.
b. U. S. Court of Federal Claims; page 455 of Volume 14 of the Claims Court
Reporter and paragraph (not page) 9231 of Volume 1 of the 1988 U. S. Tax Cases.
c. Supreme Court; page 13 of Volume 309 of the United States Supreme Court
Reports and page 816 of Volume 23 of the American Federal Tax Reports.
d. A U.S. District Court in Texas; page 76 of Volume 441 of the Federal Supplement
and page 78-335 of Volume 41 of the American Federal Tax Reports, Second Series.
e. Not a court decision; page 72 of Volume 1 of the 1983 Cumulative Bulletin.
f. Circuit Court of Appeals for Sixth Circuit; page 474 of Volume 568 of the Federal
Reporter, Second Series and paragraph (not page) 9199 of Volume 1 of the 1978 U.S. Tax Cases.
pp. C:1-16 and C:1-22.
C:1-47 a. A facelift as a deductible medical expense is discussed in ¶K-2109 of the Federal
Tax Coordinator. Solutions using other tax services will differ.
b. Section 213.
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C:1-7
, c. Generally no. Section 213(d)(9) (effective for tax years beginning after 1990)
provides that the cost of cosmetic surgery is not deductible except in certain narrow
circumstances. pp. C:1-28 and C:1-29.
C:1-48 No. The regulation does not reflect the amendments to Sec. 302 made by P.L. 96-589,
P.L. 97-248, P.L. 98-369, and P.L. 111-325. A caution to this effect appears at the beginning of
the regulation. pp. C:1-26 through C:1-29.
C:1-49 a. Casualty losses from termite damage are discussed in ¶M-1743 (Federal Tax
Coordinator) and Ann ¶1655.3020 (U.S. Tax Reporter).
b. Authorities include: Rev. Rul. 63-232, 1963-2 C.B. 97; Henry L. Sutherland, 1966
PH T.C. Memo ¶66,155, 25 TCM 822; and Martin A. Rosenberg v. CIR, 42 AFTR 2d 303, 52-2
USTC ¶9377 (8th Cir., 1952). The first two authorities denied a deduction and the third allowed
a deduction. Textbook users may find additional authority. pp. C:1-28 and C:1-29.
C:1-50 a. More than 35% of the excess of the value of the decedent’s gross estate over the
sum of allowable Sec. 2053 and 2054 deductions.
b. No. The regulation indicates the test is more than (1) 35% of the gross estate or
(2) 50% of the taxable estate. It does not reflect the P.L. 94-455 or P.L. 97-34 amendments to the
IRC. A caution to this effect appears before the beginning of the reprint of the regulations. pp. C:1-
26 through C:1-29.
C:1-51 a. 645.
b. 572-3rd - Accounting Methods – Adoptions and Changes.
570- 2nd - Accounting Methods – General Principles.
c. 568-4th.
d. 367.
e. 523-2nd.
p. C:1-25.
C:1-52 “Fireman, Allowed; uniform” is discussed at ¶L-3806. Note: The CHECKPOINT source
document does not use the gender neutral phrase “firefighter.” The revenue ruling dealing with
this topic is Rev. Rul. 70-474, 1970-2 C.B. 34. pp. C:1-27 and C:1-28.
C:1-53 a. 13.
b. 12 issues are listed in the findings of fact.
c. Yes. The Fourth Circuit reviewed the case. pp. C:1-28 and C:1-29.
C:1-54 a. 27.
b. No. According to the headnote to the opinion, the decision dealt with one issue,
deductions.
c. No. The decision has not been cited unfavorably. pp. C:1-28 and C:1-29.
C:1-55 a. 1972.
b. The deductibility of the cost of a customer list under Sec. 162.
c. The government. The cost was not currently deductible.
Copyright © 2025 Pearson Education, Inc.
C:1-8
Taxation 2025 Corporations, Partnerships, Estates,
& Trusts 38th Edition Luke E. Richardson
Notes
1- The file is chapter after chapter.
2- We have shown you few pages sample.
3- The file contains all Appendix and Excel sheet
if it exists.
4- We have all what you need, we make update
at every time. There are many new editions
waiting you.
5- If you think you purchased the wrong file You
can contact us at every time, we can replace it
with true one.
Our email:
, Chapter C:1
Tax Research
Note: To complete the online research problems for this chapter, textbook users must have
access to an Internet-based tax service at their institution. Solutions are provided using
CHECKPOINT, when applicable. In some cases, solutions using other tax services may differ.
Discussion Questions
C:1-1 In a closed-fact situation, the facts have occurred, and the tax advisor’s task is to analyze
them to determine the appropriate tax treatment. In an open-fact situation, by contrast, the facts
have not yet occurred, and the tax advisor’s task is to plan for them or shape them so as to
produce a favorable tax result. p. C:1-2.
C:1-2 According to the AICPA’s Statement on Standards for Tax Services No. 1, the tax
advisor must promptly inform the taxpayer of the error and advise on corrective measures that
should be taken. If the taxpayer refuses to take such recommended actions, the advisor should
consider resigning from the engagement. pp. C:1-31 through C:1-33.
C:1-3 When tax advisors speak about “tax law,” they refer to the IRC as elaborated by Treasury
Regulations and administrative pronouncements and as interpreted by federal courts. The term
also includes the meaning conveyed by committee reports. p. C:1-7.
C:1-4 Committee reports concerning tax legislation explain the purpose behind Congress’
proposing the legislation. Transcripts of hearings reproduce the testimonies of the persons who
spoke for or against the proposed legislation before the Congressional committees. Committee
reports are sometimes used to interpret the statute. p. C:1-7.
C:1-5 Committee reports can help resolve ambiguities in statutory language by revealing
Congressional intent. They are indicative of this intent. pp. C:1-7 and C:1-8.
C:1-6 The Internal Revenue Code of 1986 is updated for every statutory change to Title 26
subsequent to 1986. Therefore, it includes the post-1986 tax law changes enacted by Congress
and today reflects the current state of the law. p. C:1-8.
C:1-7 No. Title 26 deals with all taxation matters, not just income taxation. It covers estate tax,
gift tax, employment tax, alcohol and tobacco tax, and excise tax matters. p. C:1-8.
C:1-8 a. Subsection (c). It discusses the tax treatment of property distributions in general
(e.g., amount taxable, amount applied against basis, and amount exceeding basis).
Copyright © 2025 Pearson Education, Inc.
C:1-1
, b. Because Sec. 301 applies to the entire chapter, one should look throughout that
entire chapter (Chapter 1 of the IRC – which covers Sec. 1 through Sec. 1400U-3) for any
exceptions. One special rule – Sec. 301(e) – is found in Sec. 301. This special rule explains the
tax treatment of dividends received by a 20% corporate taxpayer. Section 301(f) indicates some
of the important special rules found in other IRC sections.
c. Legislative. Section 301(e)(4) authorizes the issuance of Treasury Regulations as
may be necessary to carry out the purposes of the subsection. pp. C:1-9 through C:1-10.
C:1-9 Researchers should note the date on which a Treasury Regulation was adopted because
the IRC may have been revised subsequent to that date. That is, the regulation may not interpret
the current version of the IRC. Discrepancies between the IRC and the regulation occur when the
Treasury Department has not updated the regulation to reflect the statute as amended. p. C:1-9.
C:1-10 a. Proposed regulations are not authoritative, but they do provide guidance
concerning how the Treasury Department interprets the IRC. Temporary regulations, which are
binding on the taxpayer, often are issued after recent revisions to the IRC so that taxpayers and
tax advisors will have guidance concerning procedural and/or computational matters. Final
regulations, which are issued after the public has had time to comment on proposed regulations,
are considered to be somewhat more authoritative than temporary regulations. pp. C:1-9 and C:1-
10.
b. Interpretative regulations make the IRC’s statutory language easier to understand
and apply. They also often provide computational illustrations. In the case of legislative
regulations, Congress has delegated the rulemaking on a specific topic (either narrow or broad)
to the Treasury Department. However, after the Mayo Foundation case, both types of regulations
will have the same authoritative weight. p. C:1-10.
C:1-11 Prior to 2011, courts gave more authority to legislative regulations than to interpretive
regulations. However, after the Supreme Court decision in Mayo Foundation, courts will hold
both interpretive and legislative regulations to the same standard and will overturn them only in
very limited cases. p. C:1-10.
C:1-12 Under the legislative reenactment doctrine, a Treasury Regulation is deemed to have been
endorsed by Congress if the regulation was finalized before a related IRC provision was
amended by Congress and in the interim, Congress did not amend the statutory provision to
which the regulation relates. p. C:1-10.
C:1-13 a. Revenue rulings are not as authoritative as court opinions, Treasury Regulations,
or the IRC. They represent interpretations by an interested party, the IRS. p. C:1-12.
b. If the IRS audits the taxpayer’s return, the IRS likely will contend that the
taxpayer should have followed the ruling and, therefore, owes a deficiency. p. C:1-12.
C:1-14 a. The Tax Court, the U.S. Court of Federal Claims, or the U.S. district court for the
taxpayer’s jurisdiction. p. C:1-14.
Copyright © 2025 Pearson Education, Inc.
C:1-2
, b. The taxpayer might consider the precedent, if any, existing within each
jurisdiction. The taxpayer might prefer to avoid expending cash to pay the proposed deficiency.
If so, the taxpayer would want to litigate in the Tax Court. If the taxpayer would like to have a
jury trial address questions of fact, he or she should opt for the U.S. district court. pp. C:1-14 through
C:1-19, p. C:1-21, and p. C:1-23.
c. Appeals from Tax Court and U.S. district court decisions are made to the circuit
court of appeals for the taxpayer’s geographical jurisdiction. U.S. Court of Federal Claims
decisions are appealable to the Court of Appeals for the Federal Circuit. Appeals from any of the
circuit courts of appeals may be brought to the U. S. Supreme Court. pp. C:1-20 through C:1-21.
C:1-15 No. A taxpayer may not appeal a case litigated under the Tax Court’s Small Cases
Procedure. p. C:1-17.
C:1-16 Tax Court regular and memo decisions have about the same precedential value. Decisions
issued under the Small Cases Procedure of the Tax Court have little or no precedential value.
pp. C:1-15 and C:1-17.
C:1-17 Yes. The IRS can acquiesce (or nonacquiesce) in any federal court decision that is
adverse to the IRS if the IRS decides to do so. In many cases the IRS does not acquiesce or
nonacquiesce. p. C:1-17.
C:1-18 In both the AFTR and USTC: decisions of U.S. district courts, U.S. bankruptcy courts,
U.S. Court of Federal Claims, circuit courts of appeal, and the U.S. Supreme Court. Tax Court
decisions are reported in neither of the two reporters. pp. C:1-16 and C:1-17 through C:1-22.
C:1-19 Prior to 2009, revenue rulings appeared in the weekly Internal Revenue Bulletin (I.R.B.),
and twice each year the decisions published in the I.R.B. were bound together and published in
the Cumulative Bulletin (C.B.). For pre-2009 rulings, the I.R.B citation was temporary and was
replaced by a citation to the C.B. After 2008, the IRS no longer publishes the Cumulative
Bulletin. Therefore for current rulings, the initial I.R.B. citation is final. p. C:1-12.
C:1-20 According to the Golsen Rule, the Tax Court will not follow a decision it made earlier,
but rather will follow a decision of the circuit court of appeals to which the case under
consideration is appealable. As an example, assume that the Tax Court, in a case involving a
First Circuit taxpayer, ruled for the taxpayer. The issue had not been litigated earlier. Then, a
U.S. district court in Georgia decided a case involving the same issue in favor of another
taxpayer. The Eleventh Circuit, however, reversed the decision. Now a taxpayer from the
Eleventh Circuit litigates the same issue in the Tax Court. Under the Golsen Rule, the Tax Court
will follow the Eleventh Circuit’s decision favoring the government. The Tax Court need not
follow an appeals court decision if a case was litigated by a taxpayer whose appeal would have
been made to any circuit other than the Eleventh. p. C:1-21.
C:1-21 a. The precedent binding upon a California taxpayer would be the Tax Court case.
The Tax Court has national jurisdiction. pp. C:1-21 and C:1-23.
b. Under the Golsen Rule, the Tax Court will depart from its earlier decision and
follow the Fifth Circuit’s decision favoring the government. p. C:1-21.
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,C:1-22 a. Congressional Record
b. Internal Revenue Bulletin
c. Tax Court of the United States Reports
d. Federal Register, Internal Revenue Bulletin, and/or Cumulative Bulletin
e. Federal Supplement, American Federal Tax Reports (only tax-related), United
States Tax Cases (only tax-related).
f. Not found in an “official” publication; published by tax services
pp. C:1-7, C:1-12 through C:1-14, and C:1-17 through C:1-19.
C:1-23 A tax advisor might find the provisions of a tax treaty useful where a U.S. taxpayer
engages in transactions in a foreign country. The United States has tax treaties with many
countries. p. C:1-24.
C:1-24 Citators (1) trace the history of the case in question and (2) list other authorities that have
cited such case. p. C:1-30.
C:1-25 Revenue rulings, revenue procedures, and judicial decisions. p. C:1-29.
C:1-26 Keyword, index, or citation are the three ways to search in tax service databases. p. C:1-
26.
C:1-27 a. The principal primary sources found in CHECKPOINT are as follows:
• IRC
• Treasury Regulations
• Court opinions
• Revenue rulings and procedures
• Letter rulings
• Committee reports
• Tax treaties
b. The principal secondary sources found in CHECKPOINT are as follows:
• Federal Tax Coordinator
• United States Tax Reporter
• Warren, Gorham & Lamont journals and treatises
Secondary sources will differ among the tax services. pp. C:1-26 through C:1-29.
C:1-28 The features (i.e., icons, templates, and command buttons) will vary depending upon the
particular tax service/Internet site accessed. Just about all commercial tax databases can be
searched by keyword and citation. Some can be searched by table of contents and topic. Most
noncommercial tax databases can be searched by keyword. Some can be searched by citation and
table of contents.
The advantages of using a commercial tax service (as opposed to a noncommercial
service) are broader database scope, greater historical coverage, and more efficient search
engines. The principal disadvantage is cost.
Copyright © 2025 Pearson Education, Inc.
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, Because of their relative disadvantages, the noncommercial sites should not be regarded
as a substitute for a commercial tax service. Access is non-uniform. The scope and breadth of
their databases are limited. pp. C:1-26 through C:1-28.
C:1-29 The member should have a good faith belief that his or her position has a realistic
possibility of being sustained administratively or judicially on its merits if challenged. p. C:1-31.
C:1-30 Under the AICPA’s Statements on Standards for Tax Services (SSTSs), a tax preparer is not
obligated to (1) verify client provided information if the information is not suspicious on its face, or (2)
update professional advice based on developments following its original conveyance. p. C:1-31.
C:1-31 This answer lists six requirements. Under Circular 230, the practitioner is expected to: (1)
base the advice on reasonable assumptions, (2) consider relevant facts and circumstances, (3)
identify the facts relevant to the advice, (4) be properly skeptical of representations by the
taxpayer and others, (5) relate applicable law and authority to the facts, and (6) not base an
opinion on the chances that a transaction will be identified by IRS and subject to audit. p. C:1-30.
C:1-32 Circular 230 is a government issued document that dictates rules for practicing before the
IRS. The AICPA's Statements on Standards for Tax Services (SSTSs) are ethical standards
issued by the AICPA aimed at tax practitioners. Circular 230 applies only to federal tax issues,
and the SSTSs apply to both federal and state issues. Circular 230 only applies to income taxes,
and the SSTSs apply to all types of taxes. Finally, Circular 230 does not provide the same depth
of ethical guidance found in the SSTSs. p. C:1-30.
Problems
C:1-33 a. Yes. According to Secs. 71(a) and (b), the wife includes $25,000 per year. Also,
the divorce agreement must explicitly state that the husband has no liability to make payments
after the wife’s death. See Sec. 71(b)(1)(D) and Temp. Reg. Sec. 1.71-1T(b), Q-11.
b. Yes. The husband deducts $25,000 per year according to Secs. 215(a) and (b).
According to Sec. 62(a)(10), the alimony is deductible for AGI.
c. For alimony agreements after December 31, 2018, Secs. 71 and 215 are repealed.
pp. C:1-8 and C:1-26 through C:1-29.
C:1-34 a. Legislative. According to Sec. 385(a), “The Secretary is authorized to prescribe
such regulations as may be necessary or appropriate. . . .”
b. Yes. Section 385(a) states that the regulations will be applicable “for purposes of
this title.” “This title” is Title 26 of the federal statutes. Because Title 26 encompasses all tax
statutes, the regulations would be relevant for estate tax purposes. pp. C:1-8 through C:1-10 and
C:1-26 through C:1-29.
C:1-35 a. Both rulings hold that contributions to a fund formed to acquire a portrait of a
former judge and donated to a governmental agency are deductible under Sec. 170. pp. C:1-12 and
C:1-13.
b. Private letter rulings cannot be cited as precedence and apply only to the taxpayer
for whom the IRS issued the ruling. pp. C:1-12 and C:1-13.
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, c. Revenue rulings can be cited as precedence, and they are relied on by both
taxpayers and the IRS for guidance in particular factual situations. pp. C:1-12 and C:1-13.
C:1-36 Sections 355 and 856. The official IRS publication is the Internal Revenue Bulletin,
which eventually is incorporated into the Cumulative Bulletin. pp. C:1-12 and C:1-29.
C:1-37 Results might vary as the online service adds or deletes documents, but as of this writing:
a. 443.
b. 203.
c. 87.
C:1-38 The following results were obtained using CHECKPOINT. Results using other tax
services may vary.
a. 14.
b. 8 using ‘home office’ without quotations, 4 with quotes around the term.
c. The results after refining for “home office” are more relevant primarily because
280A also covers issues related to rental and vacation homes and refining the results omits these
references. The search within results output produced revenue rulings related to home office
issues, and the first result is to a revenue ruling explaining how the IRS would interpret an
important Supreme Court case addressing home office deductions. pp. C:1-26 through C:1-28.
C:1-39 a. Acquiescence. See AOD 1986-030, 1986-1 C.B. 1.
b. No. The acquiescence was only with respect to whether a transfer to the
taxpayer’s spouse is a taxable disposition. pp. C:1-17 and C:1-29.
C:1-40 a. Acquiescence. See AOD 2016-02.
b. The AOD addressed whether the limitation on home mortgage deductions applied
on a per property or per taxpayer business. pp. C:1-17 and C:1-29.
C:1-41 a. Nonacquiescence. See AOD 1988-014, 1988-2 C.B.1.
b. Yes. In 2003, the Commissioner withdrew the 1988 AOD and acquiesced. See
AOD 2003-001, 2003-2 I.R.B. pp. C:1-17 and C:1-29.
C:1-42 a. Yes. The case was reviewed by the court. No. It was not a unanimous decision.
Judges Korner, Swift, and Gerber did not participate. Judge Simpson dissented. pp. C:1-26
through C:1-29.
b. Yes. The decision was entered under Rule 155. p. C:1-17.
c. Yes. The case was reviewed by the Sixth Circuit Court of Appeals. pp. C:1-26
through C:1-29.
C:1-43 a. Yes. The case was reviewed by the court. The decision was not unanimous.
Judge Quealy dissented. Judge Tannenwald issued a concurring opinion with which five judges
agreed. Judge Chabot issued a dissenting opinion with which three judges agreed, and Judge
Nims issued a dissenting opinion with which three judges agreed. pp. C:1-26 through C:1-29.
b. No. The decision was not entered under Rule 155. p. C:1-17.
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, c. Yes. The case was reviewed by the Sixth Circuit Court of Appeals in 1982. pp. C:1-
26 through C:1-29.
C:1-44 a. National Cash Register Co. v. U.S., 400 F.2d 820, 22 AFTR 2d 5562, 68-2 USTC
¶9576 (6th Cir., 1968).
b. Thomas M. Dragoun, 1984 RIA T.C. Memo ¶84,094 (T.C. Memo 1984-94), 47
TCM 1176.
c. U.S. v. John M. Grabinski, 558 F. Supp. 1324, 52 AFTR 2d 83-5169, 83-2 USTC
¶9460 (DC MN, 1983).
d. U.S. v. John M. Grabinski, 727 F.2d 681, 53 AFTR 2d 84-710, 84-1 USTC ¶9201
(8th Cir., 1984).
e. Rebekah Harkness v. U.S., 469 F.2d 310, 30 AFTR 2d 72-5754, 72-2 USTC
¶9740 (Ct. Cl., 1972). Note that during this period, Court of Claims decisions were published in
the Federal Reporter, Second Series. Alternatively, you could give the citation 199 Ct. Cls. 721,
which references the Court of Claims Reporter. In the CHECKPOINT citator the name of the
case is simply Harkness.
f. Hillsboro National Bank v. CIR, 460 U.S. 370, 51 AFTR 2d 83-874, 83-1 USTC
¶9229 (USSC, 1983).
g. Rev. Rul. 78-129, 1978-1 C.B. 67. pp. C:1-17 through C:1-22.
C:1-45 a. Rev. Rul. 99-7, 1999-1 C.B. 361.
b. Frank H. Sullivan, 1 B.T.A. 93 (1924).
c. Tate & Lyle, Inc., 103 T.C. 656 (1994).
d. Ralph L. Rogers v. U.S., 539 F. Supp. 104, 49 AFTR 2d 82-1160, 82-1 USTC
¶9246 (DC OH, 1982).
e. Norman Rodman v. CIR, 542 F.2d 845, 38 AFTR 2d 76-5840, 76-2 USTC ¶9710
(2nd Cir., 1976). pp. C:1-17 through C:1-22.
C:1-46 a. Circuit Court of Appeals for the Ninth Circuit; page 1198 of Volume 648 of the
Federal Reporter, Second Series and page 81-5353 of Volume 48 of the American Federal Tax
Reports, Second Series.
b. U. S. Court of Federal Claims; page 455 of Volume 14 of the Claims Court
Reporter and paragraph (not page) 9231 of Volume 1 of the 1988 U. S. Tax Cases.
c. Supreme Court; page 13 of Volume 309 of the United States Supreme Court
Reports and page 816 of Volume 23 of the American Federal Tax Reports.
d. A U.S. District Court in Texas; page 76 of Volume 441 of the Federal Supplement
and page 78-335 of Volume 41 of the American Federal Tax Reports, Second Series.
e. Not a court decision; page 72 of Volume 1 of the 1983 Cumulative Bulletin.
f. Circuit Court of Appeals for Sixth Circuit; page 474 of Volume 568 of the Federal
Reporter, Second Series and paragraph (not page) 9199 of Volume 1 of the 1978 U.S. Tax Cases.
pp. C:1-16 and C:1-22.
C:1-47 a. A facelift as a deductible medical expense is discussed in ¶K-2109 of the Federal
Tax Coordinator. Solutions using other tax services will differ.
b. Section 213.
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, c. Generally no. Section 213(d)(9) (effective for tax years beginning after 1990)
provides that the cost of cosmetic surgery is not deductible except in certain narrow
circumstances. pp. C:1-28 and C:1-29.
C:1-48 No. The regulation does not reflect the amendments to Sec. 302 made by P.L. 96-589,
P.L. 97-248, P.L. 98-369, and P.L. 111-325. A caution to this effect appears at the beginning of
the regulation. pp. C:1-26 through C:1-29.
C:1-49 a. Casualty losses from termite damage are discussed in ¶M-1743 (Federal Tax
Coordinator) and Ann ¶1655.3020 (U.S. Tax Reporter).
b. Authorities include: Rev. Rul. 63-232, 1963-2 C.B. 97; Henry L. Sutherland, 1966
PH T.C. Memo ¶66,155, 25 TCM 822; and Martin A. Rosenberg v. CIR, 42 AFTR 2d 303, 52-2
USTC ¶9377 (8th Cir., 1952). The first two authorities denied a deduction and the third allowed
a deduction. Textbook users may find additional authority. pp. C:1-28 and C:1-29.
C:1-50 a. More than 35% of the excess of the value of the decedent’s gross estate over the
sum of allowable Sec. 2053 and 2054 deductions.
b. No. The regulation indicates the test is more than (1) 35% of the gross estate or
(2) 50% of the taxable estate. It does not reflect the P.L. 94-455 or P.L. 97-34 amendments to the
IRC. A caution to this effect appears before the beginning of the reprint of the regulations. pp. C:1-
26 through C:1-29.
C:1-51 a. 645.
b. 572-3rd - Accounting Methods – Adoptions and Changes.
570- 2nd - Accounting Methods – General Principles.
c. 568-4th.
d. 367.
e. 523-2nd.
p. C:1-25.
C:1-52 “Fireman, Allowed; uniform” is discussed at ¶L-3806. Note: The CHECKPOINT source
document does not use the gender neutral phrase “firefighter.” The revenue ruling dealing with
this topic is Rev. Rul. 70-474, 1970-2 C.B. 34. pp. C:1-27 and C:1-28.
C:1-53 a. 13.
b. 12 issues are listed in the findings of fact.
c. Yes. The Fourth Circuit reviewed the case. pp. C:1-28 and C:1-29.
C:1-54 a. 27.
b. No. According to the headnote to the opinion, the decision dealt with one issue,
deductions.
c. No. The decision has not been cited unfavorably. pp. C:1-28 and C:1-29.
C:1-55 a. 1972.
b. The deductibility of the cost of a customer list under Sec. 162.
c. The government. The cost was not currently deductible.
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