CHAPTER SIX

1. CULMINATION OF THE TAX RESEARCH PROCESS CHAPTER SIX

2. EXPECTED LEARNING OUTCOMES • Understand all steps in the research process • Know when additional steps are necessary • Recognize when the research is complete • Appreciate the ethical applicable standards

3. THE TAX RESEARCH PROCESS

4. CRITICAL ANALYSIS OF AUTHORITY • Always start with the LAW (First) • Applicable Treasury interpretations (Second) • IRS position on issue • How close are facts of rulings & procs. • Confirm Treasury Regulations reflect current statute. • Applicable case law (Last) • What court cases address research question • All cases not just the ones supporting your position • Appeals v. Court of original jurisdiction • Case still authoritative • If more than one case, which are strongest • Always citate cases • Balancing the two types of authority • What if limited treasury guidelines & cases? • Go over list on Page 312

5. SOURCES OF ETHICAL GUIDELINES • All research and critical analysis must be performed under umbrella of legal and ethical guidelines: • Circular 230 (Treasury) • AICPA and ABA (Accounting & Legal Profession) • Internal Revenue Code (Congress) – Section 6662 (accuracy related penalties) and related regulations

6. Circular 230 • Applies for all that practice before the IRS • CPAs, attorneys, enrolled agents • New rules: tax advisors • Aspire to best practices standards • Act fairly and with integrity • Monetary penalties can apply.

7. Professional MembershipGuidelines • AICPA • Subject to Code of Conduct: • http://www.aicpa.org/about/code/index.html • Statements on Standards for Tax Services (SSTSs) • http://www.aicpa.org/download/tax/SSTSfinal.pdf

8. Circular 230 • http://www.irs.gov/pub/irs-pdf/pcir230.pdf • Guidelines on • Engaging the client/fact gathering • Researching • Communicating and Advising • Tax Return Reporting

9. Engaging the Client • Circular 230 – Best Practices • Communicate clearly with the client regarding terms of engagement • Determine clients expected purpose for and use of advice • Clear understanding of scope and form of advice • Risk management of the firm

10. Fact Gathering • Reasonable Inquiries to check that information is not incorrect, inconsistent or incomplete • Can’t hide behind ignorance of facts or turning a blind eye. • Verify that source documents exist (perhaps view some).

11. Researching • Due diligence/Realistic Possibility Stndrd - • Sustainable on its merits • Circular 230 and Reg. 1.6694-2(b) • Reasonable and informed analysis • Chance of 33%+ of being sustained. • Audit lottery alone is not realistic stnd. • List on page 323 of where to get info. • If foregoing test not met, can take a position if it is not frivolous. • Position taken must have substantial authority for understatement of income.

12. Other Limitations • Recognition of limits of current professional competency • Don’t play tax god. • Solicit help from other professionals • Different licenses CPA v. Law • Lawyer for Litigation/Document review • Beware of Firm Shopping

13. Engagement Letter • Critical document to spell out expectations of client & professional – contract • If engagement changes, issue addendum to letter. • Helps avoid malpractice claims • Possibly limit scope of work to prevent future malpractice claims.

14. Other Considerations Continued • Avoid conflicts of interests among clients. • If representing conflicting clients get a waiver spelling out duties. • Opinion Letters • Are you/firm willing and competent to render opinion • Are opinion standards reasonable • What conditions/exceptions do you place on the persons relying on the opinions • What person will be expressly or implicitly entitled to rely on the opinions

15. Passage of Time - Duty to Update and other Issues • Engagement letter should spell out whether you have a duty to update work for changes subsequent to original advice • No hard and fast guidelines here. • Avoid too many diverse responsibilities that may imply fiduciary relationship – esp valuations and with estates • Go over chart on page 333

16. TAX RESEARCH STANDARDS • Fact gathering “Reasonable inquiries” • Researching “Realistic and Advising possibility” • To avoid $ “Substantial penalties authority”

17. COMMUNICATING RESEARCH RESULTS CHAPTER SEVEN

18. EXPECTED LEARNING OUTCOMES • Understand the various forms of communication • Appreciate the purpose of an office memo, client letter, and protest letter • Effectively communicate

19. INTERNAL WRITTEN COMMUNICATION • Office memo: - firm record and road map to research issue • Material facts • Research question/issue • Citation to relevant authority • Conclusion and reasoning • Remember firm attrition accents need for well document file.

20. EXTERNAL WRITTEN COMMUNICATION • Client letter • Protest letter • Letter Ruling request

21. WRITING A CLIENT LETTER • Statement re: scope of research • Statement re: facts • Discussion of opinion (short form or long form) – go over page 362-363 • Summary statement

22. WRITING A PROTEST LETTER – 30 day letter • Used for T/P to present arguments about the reporting position • Information to include (page 369) • Statement of purpose – pursuade taxing authority • Statement re: facts • Statement of issue • Presentation of supporting arguments and authority (consider alternative arguments) • Summary statement – role of client advocate more pronounced here

23. WRITING A LETTER RULING • See list on Page 371 • Statement of purpose • Statement re: facts • Statement of issue • Presentation of supporting arguments and authority • Summary statement

24. ORAL COMMUNICATION • Be prepared • Talk without reading notes • Establish eye contact • Consider presentation aids • Other – project voice / Speak at reasonable pace / avoid filler / try to relax.