1 What are the 15 steps to research as suggested by Professor Nellen What does each step entail Identify the Purpose Stage of Your Research Ask yourself planning questions Why are you doing this How the transactions might be structure and what the tax consequences are 1 Gather all facts and background data dates of transactions parties involved and whether related location of transaction any non tax concerns of client 2 Identify tax issues if not yet done 3 Ask yourself how much you know about the topic and issue It helps you determine where to begin your research Very little knowledge start with topical service or treatise to get background information 4 Frame issue in broad terms to gain a better perspective Consider the general rule relevant to the topic 5 Think of what IRC section applies Often the Code is the starting point and may be the only place you need to look but that isn t usually the case o It s also good to ck regs too even if IRC seems to answer your question 6 Consider exceptions and special rules Be sure to read entire IRC section that deals with your issue there may be special rules and exceptions towards the end Also check regulations and look for guidance Identify key words and search in a tax service 7 Usually best way to enter a tax research tool is via key words Most online services have a thesaurus feature which can broaden your Use the secondary authority from your research provider RIA CCH Will also lead you to primary authority and give you background on the search etc topic 8 Consult primary authority you found in the service Read full text not just the annotation Is it on point How similar are facts with your situation Was there something unique in the case which you don t have Check to be sure IRS rulings are current If IRS lost court case look for whether there was an acq or nonacq an AOD 9 Search on IRS website www irs gov 10 Search the Web IRS might have an industry directive audit guideline FAQ or other information pertinent to your question that was not in your commercial tax research tool Conduct your IRS search on the Internet Look for other items o Likely will only find secondary authority o Be very critical of what you find 11 If don t find anything on point check letter rulings Sometimes PLR TAM FSA or CCA exists even though no regs or cases While not binding no precedential value can give you an idea of IRS yet thinking 12 If still can t find answer 1 Search using the research tool s T of C 2 Re read legislative history 3 Re check cases 4 Think of another area of law related to your issue where there is guidance that may be helpful in structuring an argument 5 Ask a colleague 6 New areas look at comment letters 7 Call IRS technical specialist 8 Consider requesting PLR if appropriate 9 Once conclusion reached consider 6662 6694 A Is the answer for state or international ppurposes different B Are there non tax factors to consider C Any special reporting requirements D Do any elections need to be made E Does answer involve an acctg method F Is pertinent legislation pending G Any planning opportunities The above might also be viewed as value added services offered to clients 13 Consider related tax issues 14 Communicate results Research memo for file Letter to client Ruling request o Be sure it is complete you won t remember details a few months later so write them down 2 What is the history of the Federal income tax Why was it necessary to add the 16th Amendment to the U S Constitution in order to have an income tax Aizhan The Constitution states two types of tax direct and indirect Direct tax includes income tax tax on real estate property personal property and poll tax This tax is imposed on the ability to pay and implement progressive tax rates Indirect tax includes consumption tax and tariffs on imported goods Article I Section 2 of the Constitution mandates direct taxes apportioned among the states by the population In the history of the U S the apportionment rule proved itself to be ineffective due to unequal distribution Congress initially utilized direct tax only to fund wars in the 1800s Changes in the U S foreign policy raised the necessity of tax reform advocating for lower tariffs and introduction of income tax The 16th Amendment was enacted on February 25 1913 It secured Congress in its power to lay and collect taxes on income from whatever source derived without apportionment among the several states and without regard to any census or enumeration U S Constitution amendment XVI The timing of the bill was apt due to the emerging threat of World War I that had secured the income tax as a main source of revenue for the U S Treasury 3 What are the primary and secondary sources of the tax laws Hong Primary Sources From the Government binding the law This includes a Legislative sources IRC 1 2 public laws 3 b Administrative sources 1 Treasury Department legislative histories such as house report senate report blue book conference report tax treaty and sometime court cases 1 Assistant Secretary for Tax Policy lawyers economists IRS 2 3 Administer the US tax laws 4 Secretary of the Treasury 2 Sources binding 1 Regulation Final temporary proposed not 1 Legislative specific statutory grant of authority from Congress Greater weight Interpretive General authority 2 2 Revenue Rulings official interpretation by IRS such as IRB CB Not binding on tax court 3 Revenue Procedures issued by IRS 1 official statements of a procedure plush in the Bulletin that either affects the rights or duties of taxpayers 4 Notices 1 Use when expeditious guidance needed 2 Equal in weight to RR RP 5 Announcements 1 Issued by IRS National Office provide info relevant just for the year such as new tax form 6 Letter Rulings 1 Private Letter Rulings PLR 1 Only that T P user fee 2 Technical Advice memorandum TAM Issued per request of agent 1 2 No user fee 3 Not binding to other T P 3 Use in research 7 Determination letters 1 Guidance on issuance also in first revenue procedure issued at local IRS level 2 3 Deal with completed transactions and clear areas of the law 8 Chief Counsel rulings not binding 9 Actions on decision AOD issued when IRS loses case not required 1 Let public know if they will follow acq or not follow nonacq 10 Service Center Advice from IRS Chief COunsel 1 Not binding c Judicial sources Court Cases Secondary Sources summarize and explanations of the law This includes articles from the CPA firm publishers Aim to help you understand but you should go