Advanced tax students: In chapter 3 we learned about Constitutional and Legislative sources of the tax law.

Primarily the Internal Revenue Code. Chapter 4 deals with Administrative Regulations and Rulings. These Administrative sources are issued by the IRS (The IRS is part of the Treasury Department). It is important for a researcher to understand the different IRS pronouncements, how to locate them and use them in solving tax research issues. Additionally as you read the chapter, try to get a sense of the importance of each Administrative source. What carries more weight, etc.

1. Who gave the Treasury Department the authority to administer the Federal Tax Laws? Internal Revenue Service (IRS) 2. Explain the difference between the Internal Revenue Code and the Regulations. How are they related? The Internal Revenue Code is a source of federal law passed by congress. It is incorporated in the Title 26 of the U.S. Code. Regulations are the interpretations of the provisions of a portion of the Internal Revenue Code that is issued by Treasury with the approval of Congress. 3. What is the difference between General Regulations and Legislative Regulations? Legislative Regulation is regulation in which Internal revenue service is run by Congress to accomplish a legislative function and to identify the essential requirements of a tax provision. On the other hand General Regulation is a regulation that is issued under the powerallowed to the Internal Revenue Service to interpret the language of the Code with specific congressional authority. 4. Explain what a Revenue Ruling is. Revenue Rulings are the administrative sources by the IRSwhich apply the law to certain factual situations.

a. Why is it an important tool for a tax researcher?

Because, a revenue ruling outlines the IRS's interpretation of the tax laws, Tax professionals, and taxpayers can use it as reliable guidelines for the tax returns.

b. Where can revenue rulings be found?

Revenue Rulings can be found on the Internal Revenue Bulletin and they are issued by the National Office of IRS.

5. Explain what a Revenue Procedure is. A revenue procedure is an authorized statement of a procedure that affects the rights or duties of taxpayers or other public members under various tax authorities such asInternal Revenue Code, tax treaties, regulations, etc. Similar to revenue rulings it is also published on Internal Revenue Bulletin. 6. The IRS issues Letter Rulings. Briefly explain what the following letter rulings are, and their value to a researcher: a Private letter ruling When a taxpayer has a tax issue with the IRS, prior to taking any type of action such as paying taxes, etc he or she can request the IRS to rule on that tax issue. In that situation IRS sends back a letter called the private letter ruling to the taxpayer that explains the rulings and the reasoning for the decision. That Private letter ruling is only applicable to that tax issue and the taxpayer. It is helpful to a researcher because it can provide a solution to the tax issue that a researcher might be looking for.

b. Technical Advice Memoranda Technical Advice Memoranda is similar to Private letter ruling except it applies to the completed transactions where a Private letter ruling is issued prior to the completion of the transactions. It is requested by the tax preparer or a taxpayers agent regarding the issues on a completed transaction and it only applies to the taxpayer, whose issue has been addressed. Again it can be very helpful to the researchers in getting solutions to some of their tax issues.

c. Determination Letter Determination letter is an official decision by the IRS on whether or not a retirement or pension planrequested by an employer meets all the criteria of Employee Retirement Income Security Act (ERISA). Usually, a determinationletter confirms the full compliance of the retirement plan or advises the employer that the plan is not in compliance and more work is needed to be done before the plan can be officially approved. It is helpful to the researcher when researching on retirement or pension plans. 6. What is meant when the IRS announces acquiescence or non-acquiescence to a court decision? Acquiescence or non-acquiescence applies when the IRS loses a case or decision in the court. An acquiescence applies when IRS follows court decision despite of its being against or unfavorable to IRS. Non-acquiescence applies when the IRS disagree with the court decision made against it and decides to follow the decision only to the taxpayers cases that are resulted in that adverse ruling.

a. Why is this information important to a researcher? It is important to a researcher because if the IRSacquiesce the court decision on a case then a taxpayer can depend on that decision as an example and it can be followed by tax practitioners under a similar fact patterns. However if the IRS non-acquiesce the court decision then the taxpayer must evaluate where to pursue a similar fact pattern. In that situation litigation cost and the probability of winning must be evaluated before proceeding with the case similar to the IRS has nonacquiesced. The researchers should also read Actions on Decision to get a better understating of the court decision against IRS, relevant facts, and the discussion of the rational supporting ofacquiescence and non-acquiescence.

b. How are these issued by the IRS? Acquiescence and non-acquiescence referred as Actions on Decision.

c. Where can they be found by the tax researcher? They can be found in the Internal Revenue Bulletin and Cumulative Bulletin. 7. Explain the two types of Chief Council Memoranda. Two types of Chief Council Memoranda are Technical Memorandum(TM) and General Counsel Memoranda (GCM). TM describes the regulations and GCM is only generated when IRS requests for it. It explains the reason behind the adoption of thePrivate Letter Rulings and Revenue Rulings. 8. Describe the Internal Revenue Bulletin and identify the types of documents published in the Bulletin. Explain when it is published and the citations used to reference the Bulletin. The official publication of IRS for its decrees called Internal Revenue Bulletin. Revenue Rulings, Revenue Procedures, Actions on Decision, Private Letter Rulings, etc are published in the bulletin. It was last published on August 5, 2011. Citation: http://www.irs.gov/app/picklist/list/internalRevenueBulletins.html 9. Compare and contrast IRS Proposed Regulations, IRS Temporary Regulations, and IRS Final Regulations. Explain the weight of authority and citations for each type of regulation and tell where the regulations are published by the IRS. Proposed regulation is the time between and before the Treasury Decision becomes final. It is the time during which individuals are allowed to make any suggestions to the Treasury Decision before getting finalized. It does not have any effect of law. After hearing individuals suggestions and changes made by the IRS to the Treasury Decisions, it becomes final and called Final

Regulations.Temporary regulations are issues to provide immediate guidance to the taxpayers in regard to a new provision of law.It cannot be valid for more than three years from the issuance date. Final Regulations holds the highest weight then Temporary Regulations and then Proposed Regulations. Temporary regulations should be treated and followed as final regulations until a Final Regulation is issued. Proposed Regulations are just for guidance they are not supposed to be followed in the place of the law. They are published in the Internal Revenue Bulletin. Temporary Regulations Citation: http://www.irs.gov/pub/irs-utl/td9239.pdf Proposed Regulation Citation: http://www.ncua.gov/resources/RegulationsOpinionsLaws/ProposedRegulations.aspx Final Regulation Citation: http://www.irs.gov/pub/irs-tege/td9454.pdf

10. What is the subject of Rev. Rul. 2006-36? (look it up i.e.: RIA search find by citation Revenue rulings) Rev. Rul. 2006-36 : Income exclusionsamounts received under accident and health plans unrelated designated beneficiaries. Rev. Rul. 2006-36, 2006-2 CB 353, 08/14/2006, IRC Sec(s). 105 Citation: https://checkpoint.riag.com/app/main/doc?usid=2c1d6bfe908&DocID=iRULNG70%3A16532.1 &collId=T0toc090&docTid=T0toc090&feature=tcheckpoint&lastCpReqId=3389530&ods=RUL REV&searchHandle=ia744d05f00000131bbc10244916dcda4

11. What does Regulation 1.213-1(e)(1)(iii) say about claiming capital improvements made to property as medical expenses? (RIA search find by citation IRC) Capital expenditures are generally not deductible for Federal income tax purposes. See section 263 and the regulations thereunder. However, an expenditure which otherwise qualifies as a medical expense under section 213 shall not be disqualified merely because it is a capital expenditure. For purposes of section 213 and this paragraph, a capital expenditure made by the taxpayer may qualify as a medical expense, if it has as its primary purpose the medical care (as defined in subdivisions (i) and (ii) of this subparagraph) of the taxpayer, his spouse, or his dependent. Thus, a capital expenditure which is related only to the sick person and is not related to permanent improvement or betterment of property, if it otherwise qualifies as an expenditure for medical care, shall be deductible; for example, an expenditure for eye glasses, a seeing eye dog, artificial teeth and limbs, a wheel chair, crutches, an inclinator or an air conditioner which is detachable from the property and purchased only for the use of a sick person, etc. Moreover, a capital expenditure for permanent improvement or betterment of property which would not

ordinarily be for the purpose of medical care (within the meaning of this paragraph) may, nevertheless, qualify as a medical expense to the extent that the expenditure exceeds the increase in the value of the related property, if the particular expenditure is related directly to medical care. Such a situation could arise, for example, where a taxpayer is advised by a physician to install an elevator in his residence so that the taxpayer's wife who is afflicted with heart disease will not be required to climb stairs. If the cost of installing the elevator is $1,000 and the increase in the value of the residence is determined to be only $700, the difference of $300, which is the amount in excess of the value enhancement, is deductible as a medical expense. If, however, by reason of this expenditure, it is determined that the value of the residence has not been increased, the entire cost of installing the elevator would qualify as a medical expense. Expenditures made for the operation or maintenance of a capital asset are likewise deductible medical expenses if they have as their primary purpose the medical care (as defined in subdivisions (i) and (ii) of this subparagraph) of the taxpayer, his spouse, or his dependent. Normally, if a capital expenditure qualifies as a medical expense, expenditures for the operation or maintenance of the capital asset would also qualify provided that the medical reason for the capital expenditure still exists. The entire amount of such operation and maintenance expenditures qualifies, even if none or only a portion of the original cost of the capital asset itself qualified. Citation: https://checkpoint.riag.com/app/main/doc?usid=2c1d6bfe908&DocID=iad975712096a11dc8063 c7f8ee2eaa77&collId=T0toc083&docTid=T0toc083&feature=tcheckpoint&lastCpReqId=33898 13&ods=FTREGS&pinpnt=1.2131&searchHandle=ia744d05e00000131bbcb86738c5ac6e0&d=d#1.213-1

12 In the citation Reg. 1.274-6T(a)(2): a. What does the 1 stand for? 1 Regulation type Income Tax

b. What does the 274 stand for? 274 Code 274 which is Disallowance of certain entertainment, etc expenses.

c. What does the 6T stand for? 6T Temporary Regulation Number 6

d. What does the a stand for?

(a) Regulation Paragraph

e. What does the 2 stand for? 2 Regulation Subparagraph

13. The IRS, as an administrative agency, is responsible for: a. formulating and interpreting the tax laws b. interpreting and enforcing the tax laws c. formulating and evaluating the tax laws d. planning and formulating the tax laws 14 Most official IRS pronouncements are written by: a. The IRS Office of Chief Counsel b. The IRS Commissioner c. The Treasury Secretary d. IRS Field Office Staff Members 15. The Commissioner of the IRS is appointed by the: a. The Treasury Secretary b. The President of the United States c. The Chief Counsel of the IRS d. General Counsel of the Treasury Department 16. Which statement is CORRECT regarding Proposed Regulations? a. They cannot become final until the expiration of at least 30 days after they are published in proposed form. b. The IRS cannot make changes to Proposed Regulations before they become final. c. The public must be given an opportunity to comment on Proposed Regulations before they become final. d. Only (a) and (c) are correct. 17. Which of the following IRS pronouncements has the highest weight of authority? a. IRS Revenue Rulings b. IRS Taxpayer Publications c. IRS Announcements d. All of the above IRS pronouncements have equal weight of authority. 18. Treasury Decisions are published first, officially, in:

a. the Internal Revenue Bulletin b. first in the Internal Revenue Bulletin and then in the Federal Register c. the Federal Register d. Congressional Committee Reports 19. Which of the following Regulations bears the greatest precedential value? a. Legislative Regulations b. Proposed Regulations c. General Regulations d. Income Tax Regulations 20. Which of the following Regulations deals with estate taxes? a. Reg. 1.162-21(a)(2) b. Reg. 25.2503-4 c. Reg. 1.6662-5T d. Reg. 31.3121(a)-2 e. None of the above. 21. In the citation Reg. 1.162-2(a)(1), the number 162 stands for the: a. type of Regulation. b. related Code section. c. Code of Federal Regulations. d. Regulation paragraph. 22. All of the following types of tax documents are published in the Internal Revenue Bulletin except: a. IRS Revenue Procedures. b. IRS Letter Rulings. c. Treasury Decisions. d. New Tax Treaties e. All of the above documents are published in the Internal Revenue Bulletin. 23. Which of the following statements is INCORRECT with regard to IRS Revenue Rulings? a. Revenue Rulings apply the Code and Regulations to a specific fact situation. b. Revenue Rulings are published chiefly to give guidance to taxpayers. c. A Revenue Ruling is an official pronouncement of the IRS National Office. d. All of the above statements are correct. 24. In the citation Rev Rul. 87-90, 1987-1 CB 198, the number 90 is the:

a. Ruling number for the year. b. Year of ruling. c. Paragraph number in the CB. d. Volume number in the CB. 25. Revenue Procedures deal with: a. Specific taxpayer requests for the IRSs position on a tax issue. b. Applying the Code and Regulations to a specific factual situation. c. The internal practice and procedures of the IRS in the administration of the tax laws. d. All of the above. 26. Which of the following is CORRECT with respect to Private Letter Rulings? a. They are issued by the IRS National Office in response to a specific taxpayer request. b. They can be cited as precedent by other taxpayers. c. They are published weekly by the IRS in the Internal Revenue Bulletin. d. They are also known as Technical Advice Memoranda. e. None of the above statements is correct. 27. Determination Letters are: a. issued by the National Office of the IRS on proposed transactions. b. issued by a local IRS office, usually on completed transactions. c. published first in the Internal Revenue Bulletin. d. Issued to IRS field agents as audit guidance. 28. An acquiescence indicates that a court decision will be: a. appealed by the IRS. b. followed in similar situations only if it favors the IRS. c. followed in similar situations, even if it is adverse to the IRS. d. ignored by the IRS. 29. Which of the following statements is INCORRECT regarding Actions on Decisions (AODs)? a. AODs are prepared when the IRS loses a case in a court. b. AODs are published in the Internal Revenue Bulletin. c. AODs are published when the IRS wins a case in court. d. The IRSs decisions on AODs are driven by litigation costs, revenue effects, and administrative and policy directives. e. All of the above statements are correct. 30. With regard to IRS Announcements and Notices, which of the following statements is CORRECT?:

a. IRS Notices contain guidance on substantive interpretations of the law. b. IRS Announcements and Notices are published in the weekly Internal Revenue Bulletin. c. IRS Announcements contain guidance on substantive interpretations of the law. d. Only (a) and (b) are correct. e. All of the above statements are correct.