Tax final
Court of federal claims
*16 judges are generalist *no jury avaliable *taxpayer must pay first then sue for refund
Tax court
*19 tax specialist judges appointed by president *jury is not avaliable *taxpayer does not need to pay before trial *evaluate all return not limited
Court appeals
*generalist judges *jury trial no available *hears cases from court of federal claims
District Court
*judges are not specialist *jury availiable *tax payer must pay before trail, then sue for refund * decisions very on district
Federal circuit court of appeals
*jury not available *all judges hear cases *hears tax cases only when conflict or tax issues
fundamentals of tax planning
-Avoiding recognition of taxable income -changing timing of recognition of income, gains, deductions, losses and credits -changing tax jurisdiction -changing character of income
Territorial model
-Business are subject to the native country tax only on income earned within the country -since foreign income is not taxed in native country, no need for foreign tax credit
Worldwide models
-Business pay taxes to its native country on all income earned regardless of the income's source
Supremacy Clause
-Federal constitution supremacy provision confers superiority to the federal laws over state laws -this provision immunizes federal government for taxation by states
International overview of international taxation
-Hundreds of countries and each can have its own tax rules -ultimate planning goal for most companies is to reduce the company's overall effective tax rate -global business countries -two potential situations are international tax concerns
State Tax structure
-State tax structure modeled after federal tax system -each state's taxing ability is constrained by the us constitution and the state constitution -typically start with federal taxable income and make adjustments to reflect state law
Multistate Tax Commission
-created by multistate tax compact -used regulations interpreting the UDITPA in 1971 and 1973 -most states are members or participants
Due process clause
-found in 14th amendment -used to limit territorial scope of state taxing authorities in interstate commerce
Income sourcing
-geographical source of income has direct bearing on its tax treatment -us citizens are tax on their worldwide income -nonresident airlines taxed on income from us
Tax treaties
-international taxation is governed by irc and tax treaties -negotiated by the treasury department and signed by the president -help prevent double taxation has treaties with over 60 countries
The audit process
-prelim review -mathematical/clerical error -selected for review based on likely solar return
Checkpoint state and local tax services
-state tax are found in the state and local practice area -search techniques work similar to federal practice are discussed in chapter 6
Commerce clause
-the federal constitution commerce clause gives congress to power to regulate commerce -important cases: -auto transit inc v. Brady 430 us 274 (1977)= court developed criteria that controls whether a state may tax interstate commerce. -South Dakota vs. wayfair, 585 us (2018)=while dealing with sales tax, not income tax; held that the physical presence rule of the 1992 quill decision was unsound and not correct
Relief from joint and several liability
6015(b) innocent spouse Allocation of liability 6015(c)(d) equitable relief provision 6025(f)
Tax periodicals
Annual proceedings, scholarly reviews, professional journals, newsletterts
After tax cost of tax planning formula
BTC*(1-MTR) BTC= before tax cost MTR=marginal tax rate
Bloomberg tax
Best known for BNA portfolios organized: us income estate and gifts us international accounting for income tax
Tax Payer Penalties
Civil penalties: failure to pay failure to file accuracy related penalties failure to pay estimated taxes failure to deposit taxes giving false info filing frivolous return
Examinations
Correspondence examinations= Focus on simple documentation issues office examinations=focus on sensitive items
En banc
Decision by full court instead of single judge or selected judges
Client letter
Formal correspondence of tax research result to the client
Statutory agreement
Government uses closing agreement to bring to a close a dispute with taxpayer
IRS
IRS is broken down into four primary divisions; -wage and investment -the large business and international -small business and self employment division -tax exempt and government entities
Golden rule
If circuit court in taxpayer's jurisdiction has not come to agreement, tax court decides the case
Bona fide
In good faith and without fraud
Uniform Division of Income for tax purpose Act
Intended to provide a framework for states to apply a more uniform approach to multi state
Tax analysts
Known for tax notes and tax notes today
Lexisnexis
Largest full text information resource not just tax related
Westlaw
Legally printed electronic research service designed by attorneys for attorneys
Taxpayer is subject to a number of tax rate computation
Marginal tax rate average tax rates tax planning must be based on marginal tax rate
Research memo
Organize the facts, issues, and conclusions
Appellant(petitioner)
Party appealing a decision to higher court
Defendant
Party responding to the complaint
Writ of certiorari
Process by which us Supreme Court agrees to hear a case from a lower appellate court's decision
State and local taxes
SALT planning has become big business for tax professionals becoming more complex states use a number of different taxes
Avoiding tax traps
Statutory tax traps judicial tax traps
Other aspects of tax planning
Tax compliance tax research Tax litigation
economics of tax planning
Tax planning works because: -tax reductions do not constitute gross income -tax planning expenditures often are deductible
Blended model
The United States uses hybrid territorial
statues of limitation
Three years from the later of due date or filing date of return extended dates apply in case of fraud or understatement
How many trial courts are there in the federal court system?
Three- tax court, district court, court of federal claims
Rule 155
When decision reached without tax court calculating tax
International tax models
Worldwide model, territorial model, blended model
Legal perspective
federal and state constitutions important in state tax law validity federal constitutional clauses frequently provide basis for state taxation disputes
Tax planning includes all activites such as:
income tax planning cash planning risk planning education planing investment planning estate planning
the appeals process
irs appeals division next step of negotiation
Headnote
present summary to case
Tax systems ca employ various rate structures
progressive proportional regressive
Case brief
summarizes decision using: citation issues facts holdings analysis
Judicial system
tax litigation is costly, time consuming district court and federal claims court require
Transferring price
the price setting process between related parties. -in a international setting companies may attempt to manipulate transfer prices to reduce their overall tax liability
How many appellate courts are there in the federal court system?
two- us court appeals, federal circuit court of appeals