The Tools & Techniques of Income Tax Planning, 5th Edition
eBook - ePub

The Tools & Techniques of Income Tax Planning, 5th Edition

Stephan R. Leimberg , Michael S. Jackson, Jay Katz

Share book
  1. 448 pages
  2. English
  3. ePUB (mobile friendly)
  4. Available on iOS & Android
eBook - ePub

The Tools & Techniques of Income Tax Planning, 5th Edition

Stephan R. Leimberg , Michael S. Jackson, Jay Katz

Book details
Book preview
Table of contents
Citations

About This Book

This single-volume reference takes you through all the income tax topics your clients may encounter, no matter where they originate, providing easy-to-understand, practical guidance for situations that are often confusing.

Frequently asked questions

How do I cancel my subscription?
Simply head over to the account section in settings and click on ā€œCancel Subscriptionā€ - itā€™s as simple as that. After you cancel, your membership will stay active for the remainder of the time youā€™ve paid for. Learn more here.
Can/how do I download books?
At the moment all of our mobile-responsive ePub books are available to download via the app. Most of our PDFs are also available to download and we're working on making the final remaining ones downloadable now. Learn more here.
What is the difference between the pricing plans?
Both plans give you full access to the library and all of Perlegoā€™s features. The only differences are the price and subscription period: With the annual plan youā€™ll save around 30% compared to 12 months on the monthly plan.
What is Perlego?
We are an online textbook subscription service, where you can get access to an entire online library for less than the price of a single book per month. With over 1 million books across 1000+ topics, weā€™ve got you covered! Learn more here.
Do you support text-to-speech?
Look out for the read-aloud symbol on your next book to see if you can listen to it. The read-aloud tool reads text aloud for you, highlighting the text as it is being read. You can pause it, speed it up and slow it down. Learn more here.
Is The Tools & Techniques of Income Tax Planning, 5th Edition an online PDF/ePUB?
Yes, you can access The Tools & Techniques of Income Tax Planning, 5th Edition by Stephan R. Leimberg , Michael S. Jackson, Jay Katz in PDF and/or ePUB format, as well as other popular books in Business & Finance. We have over one million books available in our catalogue for you to explore.

Information

Year
2016
ISBN
9781941627983
Subtopic
Finance
SOURCES OF INCOME TAX LAW FUNDAMENTALS
CHAPTER 1
Clearly anyone who has prepared a tax return or dealt with tax issues realizes that the federal income tax laws can be hard to comprehend and difficult to apply. The sheer number of tax provisions and their complexity can be somewhat daunting. Even the IRS, the nationā€™s tax collection agency, acknowledges that ā€œfor anyone not familiar with the inner workings of tax administration, the array of IRS guidance may seem, well, a little puzzling at first glance.ā€1 Since Albert Einstein expressed his concern that tax laws were among the most complex of all human tasks, this statement by the IRS could be one of the great understatements of all time!
Yet, all tax professionals as well as financial planners must have a good general working knowledge of the tax laws in order to effectively assist clients. This chapter identifies the sources of federal tax law, the relative importance of each federal tax law source, and how to identify a source by its citation.
Obviously, federal tax law begins with the Internal Revenue Code (Code), a codification of tax statutes enacted by Congress. As discussed later in the chapter, the IRS and the Treasury Department promulgate regulations interpreting the Code providing guidance to taxpayers who are required to comply with the tax law. Regulations generally have the force of law. Disputes between the IRS and taxpayers are often litigated. Although the binding effect of judicial decisions varies with the level of the court, judicial interpretation of tax law is often impactful. Finally, on a less formal basis, the IRS issues revenue ruling, revenue procedures and other pronouncements that provide additional guidance for taxpayers. Although this type of guidance lacks the force and effect of law, it provides useful help to taxpayers.
Additionally, legislative history and tax publications are also helpful secondary authorities that offer explanations and interpretations of the tax law. Although these sources are not binding, they are helpful tools to assist the taxpayer.
In addition to a working knowledge of the Code, regulations, IRS rulings (and other IRS authored guidance), and court decisions, tax professionals and financial planners should be tuned into potential changes in tax law. Pending legislation, newly issued regulations and pending tax litigation awaiting court resolution are key examples of potential ā€œgame changers.ā€ In recent years, most of the focus has been on whether Congress would enact ā€œextendersā€ of provisions scheduled to expire as opposed to substantive changes of tax law. However, in the evolving world of tax law, substantive changes are inevitable.
THE INTERNAL REVENUE CODE
Congress derives its power to tax from the United States Constitution. Congress exercises this power by enacting tax statutes that are codified in the Code. Currently, the Code is more formally referred to as the Internal Revenue Code of 1986. Thus, all new provisions, amendments or repeals of tax provisions are to the 1986 Code. More broadly, the Code in its entirety is codified as Title 26 of the United States Code.2
Because the Code is the law, the IRS and all courts are required to follow it. Keep in mind, however, that even though the Code is voluminous, the meaning of each provision is far from clear. Unanswered questions arise daily as taxpayers attempt to apply the general provisions of the Code to many different factual situations. Thus, the role of the IRS is to administer and interpret the Code provisions enacted by promulgating regulations and other forms of guidance.
The Code is divided into subtitles, chapters, parts, sections, subsections, paragraphs, and subparagraphs. However, citations to provisions of the Code refer only to sections, subsections, paragraphs, and subparagraphs.3 A Code section may be referred to generally as ā€œIRC Section 101.ā€ However, when referring to a more specific part, the section should be cited as ā€œIRC Ā§101(a)(2)(B).ā€ Separated into its essential components, this citation refers to:
ā€¢ Internal Revenue Code Section 101;
ā€¢ subsection (a);
ā€¢ paragraph (2);
ā€¢ subparagraph (B).
TREASURY REGULATIONS
Treasury regulations are issued by the IRS and the Treasury Department to: (1) provide guidance for new tax legislation (usually adding or amending provisions of the Code), and (2) address issues that arise with respect to existing Code sections. Through examples and exploratory material, the regulations reflect the IRS interpretation of the Code sections and direction to taxpayers as to how they must comply with those sections.
The Internal Revenue Regulations (Title 26) is one of 50 titles in the Code of Federal Regulations (CFR).4 Regulations are initially published in proposed form in the Federal Register5 in what is known as a ā€œNotice of Proposed Rule Makingā€ (NPRM). After public input has been fully considered by the IRS, through written comments and comments made in person at a public hearing, a final or temporary regulation is published as a ā€œTreasury Decisionā€ (TD) in the Federal Register.
Regulations are referred to by section numbers that roughly correspond to the sections of the Code. For example, the citation, ā€œ26 CFR Ā§1.170-1(a)(3)ā€ refers to a regulation that explains some aspect of Code Section 170.
Relative Weight of Regulations
There are two types of regulations, legislative and interpretative. Although both types are generally given the force and effect of law by the courts, legislative regulations carry the greater weight. In fact, they carry the same weight as the underlying Code. This is because, by specific mandate written into the text of the applicable Code section, Congress has authorized the Secretary of the Treasury to issue specific regulations.
For example, IRC section 469(l) (a legislative regulation dealing with the passive activity loss rules) provides: ā€œThe Secretary [of the Treasury] shall prescribe such regulations as may be necessary or appropriate to carry out provisions of this section ā€¦ā€ The courts have interpreted this to mean that legislative regulations are entitled to ā€œcontrolling weight unless they are arbitrary, capricious, or manifestly contrary to the statute.ā€6
Conversely, pursuant to IRC section 7805(a), interpretative regulations are issued under the general rule making authority of the Treasury Department. Because interpretative regulations are not promulgated with specific Congressional authority, they are subject to challenge if they do not implement the underlying Code section in a reasonable manner.7
A regulation (legislative or interpretative) promulgated by the Treasury may be in one of three forms: Proposed, Temporary or Final.
Proposed Regulation: As the name implies, a proposed regulation is simply insight provided by the IRS as to how it interprets (at least at that moment) a specific Code section(s). Similar to all regulations, they are published in the Federal Register. After the regulations are issued, the public is invited to submit comments and concerns. Based upon those comments, the IRS may or may not modify the regulations prior to their finalization. Although proposed regulations are not at the level of temporary or final regulations, according to the Interna...

Table of contents