FIT Outline
UNIT ONE: OVERVIEW OF THE TAX SYSTEM
I. Sources of Tax Law
Constitution – not a major source
· 16th Amend allows congress to impose a tax w/o apportionment for pop on all income, whatever source derived
o ratified in 1913
o from there modern IT system created, gives Congress BROAD power to impose a tax
· Revenue Act of 1913
o ancestor of modern tax code
o question of what is income? this question raised as income within meaning of 16th Amend; if not income could not impose a tax w/o apportionment
Legislative Branch – the most important
· Internal Revenue Code
Executive Branch – Administrative Law
· Treasury Department – IRS
o often the starting point of legislation b/c they propose changes and then Congress enacts them
o once legislation enacted, IRS/Treas issue regulations
· Regulations
o under Chevron Doctrine, regs upheld as long as reasonable interp of statute
o have force and effect of law
· IRS interps/opinions
o IRS will put out advance notices of changes of regs, say they can be relied on; these ARE binding
· revenue rulings
o an opinion of council, NOT binding but give a good idea of what IRS’s position is, will lead to litigation
· revenue procedure
o an interp by IRS of procedure, NOT binding but ”
· private letter rulings
o applying facts to a specific tax payer, NOT binding, not precedental, but are binding on IRS to that specific taxpayer if all facts given true and all relevant facts included;
o downsides: if IRS holds against you, you have put them on notice
Judicial Branch
· Judges aren’t very good at tax law, SC does not like tax cases, takes only about 1/yr
· 3 possible trial courts to try a tax case in:
o US tax court
§ judges know what they are doing and equity arguments don’t work
· an Art 1 Ct, meaning judges do not have life tenure and do not have equity jurisdiction
· judges appointed by Pres for 15 yr terms; these are specialist judges
§ Golsen Rule – tax ct has agreed to be bound by the precedent of the Fed CofA under which the tax payer resides
·
the deficiency
o If the Fed Ct of A of TP’s jurisdiction has held in opposition to client’s position, no other circuit has held on this:
§ if you want to be free of Fed CofA precedent, go to Ct of Fed Claims
§ Tax Ct is better than Dist Ct in this regard, but Ct of Fed Claims is best
PRELIMINARY TIMING ISSUES
I. In what period will we measure taxable events?
· TP’s events are measured over a finite 1 yr period called a taxable year
o this concept is called the integrity of the taxable year – measure events looking only at events that occur within the taxable year
o § 441 – Taxable Year
§ demands use of a taxable year
§ can be either:
· calendar year – 12 mo period ending end of Dec
o default – 441 b2 and 441g – use the calendar year if no books/records are kept
most individuals use calendar year
