Federal Income Tax Outline

Federal Income Taxation
Mark Ascher
Fall 2006
 
Introduction
In order of trumping power:
(1) Constitution
            art I sec. 2 à makes feds stay out of real estate taxes
            art I sec. 9 à said no capitation tax unless everyone pays the same
            – you can’t tax one state more than another.
            16th amendment allowed fed. to levy income taxes (pushed by progressives)
            Brushhaber: upholds constitutionality of income tax. 
(2) Internal Revenue Code (as modified by courts)
            if a ct misconstrues a statute, Cong can change. 
(3) Treasury Regulation
            the sec. of treasury can prescribe necessay rules and regulations.
            Regulations are intended to interpret, explain and clarify. Counts as law.
            Cts can but rarely will find a regulation invalid when it is contrary to the intent of
                        Cong. Usu. it is arbitrary and capricious. V. high standard of proof.
(4) Courts
Trial courts:            (1) US district cts: TP v. US. have gen. juris, but can take some tax cases. only ct w/ a jury, but you have to have paid gov entire amt in controversy first. You then sue for a refund.
(2) US ct of fed. claims: for K claims, has tax juris. (is one ct in DC, but has many judges.
(3) US tax ct: TP v. Commissioner. You sue for redetermination of deficiency so you don’t have to pay the amt in controversy first. Handles 90% of tax cases. 19 judges, mostly in DC.
Colson: appeals go to ct of appeals where TP resides. The tax ct will follow the precedent of the ct where the appeal wld go. After ct. of appeals, can go to S. Ct.
– if the tax ct says the IRS is wrong, IRS can either acquiesce or not. If it does, it won’t litigate the issue anymore. If it doesn’t, then it will continue to litigate the issue with future TPs. (IRS acquiesces more for tax ct than the other trial cts).
 
(5) Administrative Materials: revenue rulings, procedures (not law)
– oft prepared for the mass public if IRS sees a recurring fact pattern, but sometimes for private TPs if they write in and ask IRS for its opinion.
– Revenue Rulings are not law, just the opinion of a gov. lawyer, but they have gotten the approval of a lot of bureaucrats. Official IRS propaganda.
(6) Private Letter Rulings
– you can submit a ruling request to the IRS for a fee, but be specific otherwise IRS might not abide by its ruling. 
– These only bind IRS for the particular TP it is written to. (but cts will still cite)
– Bc of freedom of info act, these letters are now public info. 
(7) Treatises
(8) Law review articles
 
Theory/Policy
– progessive tax: richer ppl get taxed at higher rate.
some want progressive tax bc of (1) greater ability of rich ppl to pay and (2) relativ