Chapter 2
Working With
The Tax Law
Individual Income Taxes
1

2

Statutory Sources of Tax Law
(slide 1 of 2)

• Internal Revenue Code
– Codification of the Federal tax law provisions in a logical sequence
– Have had three codes:
• 1939, 1954, 1986

3

Statutory Sources of Tax Law
(slide 2 of 2)

• Example of Code Citation: § 32(f)(5)(B)(ii)(I)
§ = Abbreviation for “Section”
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32 = section number
(f) = subsection
(5) = paragraph designation
(B) = subparagraph designation
(ii) = Clause
(I) = Subclause

4

The ACA breaks the record!!
• The Affordable Care Act, in all its simplicity, added something powerful to the Internal Revenue Code:
• § 4980I(b)(3)(C)(iii)(II)(aa)
• A seventh unit, that has, as far as I can tell, no name
•

“that premium cost for the provision of such coverage under such option in such taxable period if priced for the age and gender characteristics of the national workforce.”
5

6

Administrative Sources of Tax Law
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Treasury Department Regulations
Revenue Rulings
Revenue Procedures, and
Various other administrative pronouncements 7

Regulations
– Issued by U.S. Treasury Department
– Provide general interpretations and guidance in applying the Code

• Issued as:
– Proposed: preview of final regulations
• Do not have force and effect of law

– Temporary: issued when guidance needed quickly
• Same authoritative value as final regulations

– Final:
• Force and effect of law
8

Revenue Rulings
• Officially issued by National Office of IRS
– Provide specific interpretations and guidance in applying the Code
– Less legal force than Regulations
– Issued in IRB and accumulated in the Cumulative
Bulletins

9

Revenue Procedures
• Concerned with the internal management practices and procedures of the IRS
– Issued similar to Revenue Rulings
– Issued in IRB and accumulated in the Cumulative
Bulletins

10

Letter Rulings
• Provide guidance to taxpayer on how a transaction will be taxed before proceeding with it
– Issued for a fee upon a taxpayer's request
– Describe how the IRS will treat a proposed transaction

• Apply only to the taxpayer who asks for the ruling
– Post-1984 letter rulings may be substantial authority for purposes of the accuracy-related penalty

• Example of Letter Ruling citation
– Ltr.Rul. 201125030
• 30th ruling issued in the 25th week of 2011

• Over 2000 a year

11

Gaming and Leisure Properties

12

November, 2013 10-Q

13

Tax Treaties
• The U.S. signs tax treaties with foreign countries to:
– Avoid double taxation
– Render mutual assistance in tax