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