1 / 52

Chapter 5

Chapter 5. Judicial Interpretations. William A. Raabe Gerald E. Whittenburg Debra L. Sanders. © 2009, South-Western, a part of Cengage Learning, Mason, Ohio. Chapter 5 - Overview. This chapter discusses the following aspects of judicial sources of tax law: Legal conventions

briar
Download Presentation

Chapter 5

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Chapter 5 Judicial Interpretations William A. Raabe Gerald E. Whittenburg Debra L. Sanders © 2009, South-Western, a part of Cengage Learning, Mason, Ohio

  2. Chapter 5 - Overview • This chapter discusses the following aspects of judicial sources of tax law: • Legal conventions • Tax Court • District Court • Court of Federal Claims • Courts of Appeals • Supreme Court

  3. Overview of the Federal Court System • Federal court cases • Third source of primary law • Court decisions generally concern controversial areas of taxation • Decisions answer questions regarding proper interpretation or intended application of tax law

  4. Overview of the Federal Court System • In a disagreement with the IRS during the administrative review process the: • Taxpayer may use the court system to • Recover an overpayment • Reverse a deficiency assessment • IRS may use the court system to • Assert a claim to a deficiency • Enforce collection • Impose civil or criminal penalties

  5. Federal Court System for Tax Cases

  6. Trial Courts • All litigation between taxpayer and IRS begins in a trial court • One of three venues is selected: • U.S. Tax Court • U.S. District Court • U.S. Court of Federal Claims

  7. Appellate Courts • A dissatisfied party may appeal a trial court decision • The appellate court will: • Review the trial court decision • Hear new evidence and arguments • Uphold, modify, or reverse (in whole or in part) the trial court decision

  8. Burden of Proof • In general, per the IRC, the burden of proof falls on the taxpayer • The burden of proof shifts to the IRS if the taxpayer: • Introduces credible factual evidence • Has proper records and substantiation • Cooperates with IRS requests for • Meetings, interviews, witnesses, and documents

  9. Burden of Proof • Additionally, the burden of proof shifts to the IRS where: • Partnership, trust or corporation has a net worth < $7M • The IRS uses statistics to reconstruct an individual’s income • The court proceeding against an individual taxpayer involves a penalty or addition to tax

  10. Tax Confidentiality - Privilege • Attorney-client privilege for non-attorneys practicing before IRS • Only in non-criminal tax proceedings before IRS or Federal courts • Not for written communications between tax practitioner and a corporation about tax shelters • Not for client’s workpapers used to determine tax expense for financial statements

  11. Tax Confidentiality - Privilege • Privilege generally does not apply to: • Tax return preparation • Giving accounting advice • Giving business advice • Limits of privilege follow state law

  12. U.S. Tax Court • Jurisdiction: Hears only Federal tax cases • Authorized by IRC §7741 • Jurisdiction limited to cases involving IRC and revenue acts • Pre 1943, known as the Board of Tax Appeals • Website: http://www.ustaxcourt.gov

  13. U.S. Tax Court • 19 Judges • Tax law specialists • 15-year term • Appointed by President and approved by Senate • Temporary special trial judges may be appointed • Cases are usually heard by one judge • Chief judge may have case reviewed by other Tax Court judges before release • Important cases may be heard en banc (by all the Tax Court judges)

  14. U.S. Tax Court • National court • Cased heard in D.C. and across the U.S. several times per year (see next slide for locations) • Jury trial is NOT available

  15. Types of Tax Court Decisions • Regular decision • Recently between 30 to 50 decisions per year • Cases that involve new or unusual points of law • Memorandum decision • Concern the application of existing law or an interpretation of facts

  16. U.S. Tax Court • Taxpayer does not have to pay tax deficiency before trial • Taxpayer must file petition with the Tax Court within 90 days of IRS mailing notice and demand for payment • Rule 155 - The court does not compute tax (or refund) due • Computation determined by IRS and taxpayer

  17. Precedents Tax Court Must Follow • Supreme Court decisions • Circuit Court decisions in taxpayer’s circuit (Golsen Rule) • Previous Tax Court decisions • Regular and Memorandum decisions

  18. Golsen Rule • Tax Court is a national court that hears cases that will be appealed to various Circuit Courts • As a result, the Tax Court may reach opposite decisions for taxpayers in different geographic areas (circuits) • Per the Golsen Rule, the Tax Court will follow the precedent in the Circuit to which the case will be appealed

  19. Tax Court Small Cases Division • Deficiency < $50,000 (including penalties) • Informal • No elaborate briefs or oral arguments • Decisions • Cannot be appealed • Not officially published (issued as Summary Opinions) • Not precedent for other taxpayers, but indicative of how TC may rule in a similar situation

  20. Citation Format: Regular Decisions Temporary Citation Permanent Citation

  21. Citation Format: Memorandum Decisions

  22. The Choice of Tax Court? • Good court to argue a technical tax issue • Tax Court may examine entire tax return (not just items in question) • Precedent in taxpayer’s favor • Tax deficiency does not have to be paid in advance

  23. U.S. District Courts • Website: http://www.uscourts.gov/districtcourts.html • Jurisdiction • Hears cases based on entire U.S. Code (not just IRC) • Judges • Generalists • Case heard before one judge

  24. U.S. District Courts • Numerous geographical districts located throughout U.S. • Based on population • Must request hearing in the District Court that has jurisdiction over taxpayer’s residence or where taxpayer conducts business

  25. U.S. District Courts • Jury trial is available • Taxpayer must pay deficiency before trial, then sue the Federal government for a refund of the disputed liability • Payment stops time-based penalties and interest from accruing on disputed deficiency

  26. Precedents District Courts Must Follow • Supreme Court decisions • Circuit Court decisions in taxpayer’s circuit • District Court decisions in taxpayer’s district • Note that: • Decisions may vary among districts and may vary over time • Many decisions are technically poorly structured • Not as reliable as precedent • May be overturned on appeal

  27. Citation Format: District Court F.Supp – Federal Supplement Series AFTR – American Federal Tax Reports USTC – United States Tax Cases Parallel citation example:

  28. The Choice of District Court? • Good court to argue emotional issue • Consider if taxpayer and associates are credible witnesses • Judges (generally) not tax law experts • Deficiency must be paid prior to trial • Might find a precedent in taxpayer’s favor

  29. U.S. Court of Federal Claims • Website: http://www.uscfc.uscourts.gov • Jurisdiction • Cases concern monetary claims against U.S. Government • Newest trial-level court • 1982 by Federal Courts Improvement Act • Renamed in 1992

  30. U.S. Court of Federal Claims • 16 judges • Generalists, but more tax knowledge than District Court judges • Case heard before 1-5 judges • National court • Cased heard in D.C. and major cities several times per year • Jury trial is NOT available

  31. U.S. Court of Federal Claims • Taxpayer must pay deficiency before trial, then sue government for refund of disputed liability • Payment stops time-based penalties and interest from accruing on disputed deficiency • Precedents court must follow • Supreme Court decisions • Federal Circuit Court decisions • Previous Court of Claims decisions

  32. Citation Format: Court of Claims

  33. The Choice of Court of Claims? • Good court if own District or Circuit Court of Appeals or Tax Court has ruled adversely on issue • Judges (generally) not tax law experts • Deficiency must be paid before trial • Has a reputation of being taxpayer friendly

  34. U.S. Courts of Appeal • Website: http://www.uscourts.gov/courtsofappeals.html • First-level Federal appellate court • Usually last appeal for tax cases because the Supreme Court does not hear many tax cases • Considers both tax and non-tax issues • Only hears cases that involve a question of law

  35. U.S. Courts of Appeal • Judges • Generalists • 20 judges (approx.) per circuit • Three-judge panel typical • Jury trial is NOT available

  36. U.S. Courts of Appeal • Domain: 13 Courts of Appeals • 11 geographical circuits (map on next slide) • Washington D.C. • Federal Court of Appeals • Hears cases from U.S. Federal Court of Claims • Precedents court must follow • Supreme Court Decisions • Circuit Court in taxpayer’s circuit

  37. U.S. Courts of Appeal

  38. Citation Format: Appellate Court

  39. U.S. Supreme Court • Jurisdiction - Highest court in nation • Per Article III of the U.S. Constitution: Judicial power “to all cases of law and equity, arising under this Constitution, the laws of the U.S. and treaties . . .” • Nine justices • Appointed for life by President and confirmed by Senate • All justices hear every case

  40. U.S. Supreme Court: Domain • Only hears cases in Washington, D.C. • Hears tax cases from the Federal appellate courts, but rarely accepts tax cases • Permission to present a case requested by writ of certiorari • Tax cases accepted usually involve • Conflict among circuits • Tax issue of major importance

  41. U.S. Supreme Court • Jury trial is NOT available • Precedents Supreme Court follows • Prior Supreme Court decisions • Supreme Court decisions have full force of law • Website: http://www.supremecourtus.gov

  42. Citation Format: Supreme Court

  43. Headnotes and Case Briefs • The headnote presents a summary of the case • Written and inserted by the court reporter editors • Each issue may have its own headnote • A brief summarizes a court decision • One page format includes • Citation • Issue(s) • Facts • Holding • Analysis

  44. Case Brief Illustrated

  45. Internet and Judicial Sources • Court cases can be obtained on a number of free websites • Law schools, journals, tax publishers, and individuals • Examples: • Emory U. School of Law http://www.law.emory.edu • Cornell U. School of Law http://www.law.cornell.edu • U. of Texas School of Law http://www.utexas.edu/law • Practitioners Publishing Co. http://www.ppc.com • Will Yancey’s Home Page http://www.willyancey.com • Not as easy to use as commercial services

  46. Summary of Trial Courts

  47. Court Reporter Summary

  48. Court Reporter Summary

  49. Citation Conventions and Observations

More Related