TABLE OF CONTENTS
KEY CONCEPTS AND PRACTICAL APPLICATIONS
CHAPTER 1 - OVERVIEW OF TAX RESEARCH 1
CHAPTER 2 – THE INTERNAL REVENUE CODE 8
CHAPTER 3 – TREASURY INTERPRETATIONS 24
CHAPTER 4 - JUDICIAL INTERPRETATIONS 56
CHAPTER 5 - USING REFERENCE SERVICES AND OTHER SECONDARY
SOURCES 97
CHAPTER 6 - CULMINATION OF THE TAX RESEARCH PROCESS 114
CHAPTER 7 - COMMUNICATING RESEARCH RESULTS 127
CHAPTER 8 - OVERVIEW OF TAX PROCEDURE 130
CHAPTER 9 - OVERVIEW OF STATE TAX RESEARCH 139
INTEGRATED CASE STUDIES
Case Study A 143
Case Study B 146
Case Study C 154
Case Study D 159
Case Study E 165
Case Study F 169
Case Study G 173
Case Study H 178
Case Study I 184
Case Study J 189
Case Study K 192
Case Study L 196
, Case Study M 199
Case Study N 204
Case Study O 207
Case Study P 210
Test Problem Bank 215
Test Problem Answers 236
, 1
KEY CONCEPTS
AND
PRACTICAL APPLICATIONS
CHAPTER 1 - OVERVIEW OF TAX RESEARCH
KEY CONCEPTS (1-21)
1. Definitions:
a. Tax planning occurs when a tax question arises before all the facts are
established. In this case, research results may play a significant role in planning a
future transaction. In a tax planning situation, it is important for the researcher to
determine precisely what the taxpayer wishes to accomplish. The researcher can
then examine the law and provide the taxpayer with useful information about
whether it is possible to attain these goals, and if possible, how they might be
achieved.
b. A fact is something that is real or actual. A fact is different from an opinion. (See
pages 7-9)
c. A conclusion is an opinion. A conclusion may result from reviewing facts or the
law. It is important to distinguish a conclusion from a fact. (See pages 7-9)
d. A fact is relevant when it affects the application of the tax laws. An irrelevant
fact is one that, even if altered, would have no impact on the application of the tax
laws. (See pages 7-9)
e. A primary source is the most authoritative form of tax resource. Usually,
researchers should base their conclusions only on primary sources. Only
authorized governmental bodies such as Congress (the Internal Revenue Code),
the Treasury Department and the judiciary generate primary sources. (See pages
11-13)
f. A secondary source may be very useful in the research process, but it is not
authoritative. Examples of secondary sources include reference services,
treatises, textbooks and journal articles.
g. IRC stands for the Internal Revenue Code. It is the central primary source in tax
research. Most of the tax laws are found in the Internal Revenue Code.
h. A reference service is a type of secondary source of information for the tax
researcher. A reference service, among other things, provides references to
potentially relevant primary authority.
, 2 Chapter 1
i. Employers often use time budgets to indicate the approximate amount of time the
researcher should expect to spend on a research project. Unfortunately, because
they are guesstimates, they are often not as accurate as one would like. However,
they may provide a helpful guide regarding how exhaustive the research effort
should be. If the researcher finds she will likely exceed the allotted time budget,
it is advisable to consult with the person who prepared the budget before
performing more research.
2. The purpose of tax research is to determine the tax implications of a certain set of facts,
or to answer a tax question.
3. The four basic steps in the tax research process are:
Step One - Gathering Relevant Facts
*determine the relevant tax question
*identify all the material facts
Step Two -Researching
*identify and read the pertinent resources
*define the question if necessary and/or obtain additional facts
Step Three - Analyzing
*synthesize the information gathered
*ponder what you have learned
*determine whether there is enough information and authority to render a
conclusion
*conclude
Step Four - Communicating
*determine the appropriate form of communication
*communicate your conclusions.
4. It is important to determine and remain focused on the research question throughout the
research process. Because there is so much information available to the researcher, it is
easy to go astray and waste time material irrelevant to the research question. When the
researcher determines the initial research question, he can review the material efficiently
with an eye towards information that may help answer the question. By staying focused,
the researcher can carefully eliminate that material not useful to the question. The
researcher must also recognize the potential to amend the initial research question as he
gains more information through the research process.
5. It is important to determine whether you have been asked to act in a planning role when
gathering facts and determining the research question for a variety of reasons. The
expectations placed upon the researcher in a planning role may substantially differ from
those expected of the researcher when asked to react to an established set of facts. In the
Key Concepts and Practical Applications
KEY CONCEPTS AND PRACTICAL APPLICATIONS
CHAPTER 1 - OVERVIEW OF TAX RESEARCH 1
CHAPTER 2 – THE INTERNAL REVENUE CODE 8
CHAPTER 3 – TREASURY INTERPRETATIONS 24
CHAPTER 4 - JUDICIAL INTERPRETATIONS 56
CHAPTER 5 - USING REFERENCE SERVICES AND OTHER SECONDARY
SOURCES 97
CHAPTER 6 - CULMINATION OF THE TAX RESEARCH PROCESS 114
CHAPTER 7 - COMMUNICATING RESEARCH RESULTS 127
CHAPTER 8 - OVERVIEW OF TAX PROCEDURE 130
CHAPTER 9 - OVERVIEW OF STATE TAX RESEARCH 139
INTEGRATED CASE STUDIES
Case Study A 143
Case Study B 146
Case Study C 154
Case Study D 159
Case Study E 165
Case Study F 169
Case Study G 173
Case Study H 178
Case Study I 184
Case Study J 189
Case Study K 192
Case Study L 196
, Case Study M 199
Case Study N 204
Case Study O 207
Case Study P 210
Test Problem Bank 215
Test Problem Answers 236
, 1
KEY CONCEPTS
AND
PRACTICAL APPLICATIONS
CHAPTER 1 - OVERVIEW OF TAX RESEARCH
KEY CONCEPTS (1-21)
1. Definitions:
a. Tax planning occurs when a tax question arises before all the facts are
established. In this case, research results may play a significant role in planning a
future transaction. In a tax planning situation, it is important for the researcher to
determine precisely what the taxpayer wishes to accomplish. The researcher can
then examine the law and provide the taxpayer with useful information about
whether it is possible to attain these goals, and if possible, how they might be
achieved.
b. A fact is something that is real or actual. A fact is different from an opinion. (See
pages 7-9)
c. A conclusion is an opinion. A conclusion may result from reviewing facts or the
law. It is important to distinguish a conclusion from a fact. (See pages 7-9)
d. A fact is relevant when it affects the application of the tax laws. An irrelevant
fact is one that, even if altered, would have no impact on the application of the tax
laws. (See pages 7-9)
e. A primary source is the most authoritative form of tax resource. Usually,
researchers should base their conclusions only on primary sources. Only
authorized governmental bodies such as Congress (the Internal Revenue Code),
the Treasury Department and the judiciary generate primary sources. (See pages
11-13)
f. A secondary source may be very useful in the research process, but it is not
authoritative. Examples of secondary sources include reference services,
treatises, textbooks and journal articles.
g. IRC stands for the Internal Revenue Code. It is the central primary source in tax
research. Most of the tax laws are found in the Internal Revenue Code.
h. A reference service is a type of secondary source of information for the tax
researcher. A reference service, among other things, provides references to
potentially relevant primary authority.
, 2 Chapter 1
i. Employers often use time budgets to indicate the approximate amount of time the
researcher should expect to spend on a research project. Unfortunately, because
they are guesstimates, they are often not as accurate as one would like. However,
they may provide a helpful guide regarding how exhaustive the research effort
should be. If the researcher finds she will likely exceed the allotted time budget,
it is advisable to consult with the person who prepared the budget before
performing more research.
2. The purpose of tax research is to determine the tax implications of a certain set of facts,
or to answer a tax question.
3. The four basic steps in the tax research process are:
Step One - Gathering Relevant Facts
*determine the relevant tax question
*identify all the material facts
Step Two -Researching
*identify and read the pertinent resources
*define the question if necessary and/or obtain additional facts
Step Three - Analyzing
*synthesize the information gathered
*ponder what you have learned
*determine whether there is enough information and authority to render a
conclusion
*conclude
Step Four - Communicating
*determine the appropriate form of communication
*communicate your conclusions.
4. It is important to determine and remain focused on the research question throughout the
research process. Because there is so much information available to the researcher, it is
easy to go astray and waste time material irrelevant to the research question. When the
researcher determines the initial research question, he can review the material efficiently
with an eye towards information that may help answer the question. By staying focused,
the researcher can carefully eliminate that material not useful to the question. The
researcher must also recognize the potential to amend the initial research question as he
gains more information through the research process.
5. It is important to determine whether you have been asked to act in a planning role when
gathering facts and determining the research question for a variety of reasons. The
expectations placed upon the researcher in a planning role may substantially differ from
those expected of the researcher when asked to react to an established set of facts. In the
Key Concepts and Practical Applications
