Tax Research Memo

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timer Asked: Jun 3rd, 2018
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I chose Accounting because I could not fin TAX----To do this memo the writer has to be some knowledge about TAX since it is required some citation from "ATTACHED SOURCES"--PLEASE follow the instructions, template, and also I included a MEMO EXAMPLE .

Please do not hesitate to let me know if you can do the work as required.

**YOU SHOULD DOCUMENT YOUR MEMO WITH APPROPRIATE CITATIONS TO CODE SECTIONS, REGULATIONS (REG.), REVENUE RULINGS (REV. RUL.), REVENUE PROCEDURES (REV. PROC.), PRIVATE LETTER RULING (PLR) RECOGNIZED TAX TREATISES (FROM RIA CHECKPOINT). YOU MAY REFERENCE TAX RESEARCH TOOLS (SUCH AS RIA CHECKPOINT) AND TAX ARTICLES (SUCH AS FROM THE TAX ADVISOR).

Partnership Tax Memorandum June 12, 2017 TO: Prof. Martin Scheckner, CPA, MAcc (Taxation), CFP, CFE FROM: Gabriela Casanova RE: Partnership Tax Memorandum (ACG 4011-U01) The Internal Revenue Code identifies two types of partnership terminations under § 708; an actual termination and a technical termination. Under I.R.C. § 708(b)(1)(B), a technical termination occurs when “within a 12-month period, there is a sale or exchange of 50% or more of the total interest in partnership capital and profits.” Unlike an actual termination, a partnership does not cease to exist as a partnership or in its totality under a technical termination. Also, the technical termination of a partnership can take the form of one sale or it could be composed of several sales of interest. Disposing of interests through gifts, bequests or inheritance, contribution of property, and liquidation of partnership interests does not constitute a sale or exchange and as such does not trigger a technical termination (I.R.C. § 1.708-1(b)(2)). For tax purposes, a technical termination encompasses two transactions. As outlined in I.R.C. § 1.708-1(b)(4), in a technical termination: 1. “the partnership contributes all of its assets and liabilities to a new partnership in exchange for an interest in the new partnership…” 2. “… and, immediately thereafter, the terminated partnership distributes interests in the new partnership to the purchasing partner and the other remaining partners in proportion to their respective interests in the terminated partnership in liquidation of the terminated partnership…” In a technical termination, partners’ interests in the terminated partnership are ‘zeroed out’ and as such, the technically terminated partnership has a momentary 100% interest in the partnership (Williford and Sinnett). Additionally, continuing partners’ interests in the new partnership will be equivalent to their share of interest in the terminated partnership. Furthermore, the basis of assets and liabilities contributed by the terminated partnership to the new partnership remains unchanged. Nonetheless, if the terminated partnership makes a Section 754 election, the basis of assets is adjusted to reflect the election, with § 734(b) or § 743(b) adjustments, and such basis carries forward to the new partnership. Noting the new partnership is allowed to make new G.M.C. 1 06/12/2017 Partnership Tax Memorandum June 12, 2017 accounting method elections, it is thus allowed to make a Section 754 election as well. As indicated in I.R.C. § 1.754-1(b)(1), a partnership elects a Section 754 election in a written statement filed with the partnership return for the taxable year in which assets are transferred. In addition, the holding period of assets from the terminated partnership transfers to the new partnership (I.R.C. § 735(b)). Tangible assets transferred to the new partnership are treated as if they were disposed of by the terminated partnership and the new partnership treats assets transferred as though they were purchased. Depreciation restarts with regards to assets transferred. As previously mentioned, the basis of assets transferred is equivalent to the carryover basis, including any Section 754 adjustments applied. Also, the new partnership is allowed to depreciate such assets, and determine applicable depreciation allowances, according to the guidelines set forth in I.R.C. Section 168 which identifies applicable depreciation methods (200% declining balance, 150% declining balance, and straight line method), applicable conventions (half-year, mid-month, and mid-quarter convention), and recovery period (based on property class). In addition, as can be noted in the I.R.S.’s Publication 946 (2016), depreciation expense is calculated through the usage of an applicable convention which will be based on the period for which the terminating and new partnerships used or placed into service, respectively, such property during their respective taxable years. In addition, I.R.C. § 1.708-1(b)(3) indicates, “for purposes of subchapter K, chapter 1 of the Code, a partnership taxable year closes with respect to all partners on the date on which the partnership terminates.” It is the responsibility of the technically terminated partnership to file Form 1065 by the fifteenth day of the third month after the termination date. Form 1065 filed should indicate in Item G therein that the return represents a final return due to technical termination; check boxes (2) and (6). The Form 1065 for the year of termination should include partnership activity from the beginning of the fiscal year to the date of termination. Generally, an automatic six-month extension to file is obtained through the proper filing of Form 7004 prior to the original filing date. G.M.C. 2 06/12/2017 Partnership Tax Memorandum June 12, 2017 Similarly, the “new” partnership is required to file Form 1065 as well, by the fifteenth day of the third month after the tax year end or it can file Form 7004 prior to the original filing date to receive an automatic six-month extension. Item G therein should indicate the tax return represents an initial return and that the partnership is a result of a technical termination; check boxes (1) and (6). It should be noted that the E.I.N. of a partnership does not change when a partnership experiences a technical termination. Also, due to the fact that the new partnership’s partners differ from those of the terminated partnership, the partnership’s tax year may be required to change. Pursuant of I.R.C. § 706(b)(1), the new partnership’s tax year will be required to be that of the majority interest of the partners. If there is not a majority interest tax year, the partnership is required to select a tax year that passes the principal partners test (I.R.C. §706(b)(1)(B)(ii)) or reflects the least aggregate deferral (I.R.C. § 706(b)(1)(B)(iii)). If the partnership fails to file Form 1065 by the due date or extension date or if the tax return omits information for reasons other than those considered to be a reasonable cause, Instructions for Form 1065 indicate a penalty of “…$195 for each month or part of a month…the failure continues, multiplied by the total number of persons who were partners in the partnership during any part of the partnership’s tax year for which the return is due” will be applied. With regards to intangible assets and following I.R.C. § 1.197-2(g)(2)(ii), “… the transferee will continue to amortize its adjusted basis, to the extent it does not exceed transferor’s adjusted basis…” Expressly, amortization does not recommence as a result of a technical termination. Further, as noted in I.R.C. § 1.197-2(g)(2)(iv), in a technically terminated partnership, the transferor is considered to be the terminated partnership whereas the transferee is the new partnership. On the other hand, income or loss generated by the partnership from the beginning of its fiscal year to the date of termination is allocated to the partners of the business at the time. Likewise, income or loss generated thereafter is allocated to the partners of the new partnership. Income or loss can be allocated to the appropriate partners through means of the Interim Closing method or the Proration method. The Interim Closing method consists of calculating income or loss generated during the aforementioned period and subsequently allocating the calculated balance G.M.C. 3 06/12/2017 Partnership Tax Memorandum June 12, 2017 to the successor partners. The Proration method consists of calculating the annual income of the partnership and allocating a proportion of the annual income to partners based on their percentage interest and based on the active partners at the time in which such income was generated. The sale of a partner’s interests in the partnership will result in a capital gain or loss calculated by subtracting the partner’s basis of assets contributed and liabilities relieved from (as a result of the sale) from the amount realized from the sale. Moreover, the selling partner is required to recognize ordinary income or loss from sale of interest in proportion to the amount of unrealized receivables and inventory, known as “hot assets” distributed as part of the sale (Publication 541). As noted in I.R.C. § 704(d), distributive share of partnership losses can be deducted to the extent of the adjusted basis of partner’s interest in the partnership. Any excess partnership loss can be carried forward, indefinitely, until the partner’s basis can capture the losses. Nonetheless, if the partner sells its share of interest, any losses remaining at the point in time in which sale of interest is made, will be suspended. The consequences of eliminating a partner’s interest can be avoided if the sale or exchange of interests is structured in a manner that disallows conditions outlined in I.R.C. § 708(b)(1)(B) from being met. As noted within PwC’s tax research and insights article, Notable tax implications of partnership terminations and structural changes, partners can structure the sale of 50% or more of a partnership’s interest in capital and assets into two sales, with each sale occurring with a period greater than twelve months from one another. If a partnership’s interests are sold via the transaction of multiple sales, the partnership has the option of structuring the transactions so that the last sale is realized at least twelve months and one day subsequent to the predecessing sale. Williford and Sinnett also introduce the idea of redeeming partners’ interest in order to avoid triggering a sale or exchange transaction. In a redemption of interest, the partnership liquidates the terminating partner’s interest. A new partner/partners subsequently purchase from the partnership the share of interest previously redeemed as opposed to purchasing the share of interests directly from the terminating partner. G.M.C. 4 06/12/2017 Partnership Tax Memorandum June 12, 2017 Works Cited “Did Your Partnership Technically Terminate for Tax Purposes? If So, What Are The Tax Consequences?” Marcum. August 7, 2014. http://www.pmn.com/blog-tax-andbusiness/did-your-partnership-technically-terminate-for-tax-purposes-if-so-what-are-thetax-consequences. Accessed May 29, 2017. Ellentuck, Esq., Albert B. “Determining If a Technical Termination Occurs.” The Tax Advisor. June 1, 2014. http://www.thetaxadviser.com/issues/2014/jun/case-study-june2014.html. Accessed June 5, 2017. IRC § 1.197-2(g)(2) IRC § 1.197-2(g)(2)(iv) IRC § 1.708-1(b)(3) IRC § 1.708-1(b)(4) IRC § 1.754-1(b)(1) IRC § 448(a) IRC § 706(b)(1) IRC § 708(b)(1)(B) IRC § 735(b) McHugh, Colleen. “Tax Issues to Consider When a Partnership Interest is Transferred(1).” Bloomberg BNA. March 5, 2015. https://www.bna.com/tax-issues-considern17179923670/. Accessed May 30, 2017. “Notable tax implications of partnership terminations and structural charges.” PwC. June 9, 2015. PDF. “Tax Issues to Consider When a Partnership Interest is Transferred.” Marcum. February 2, 2015. http://www.marcumllp.com/blog-tax-and-business/tax-issues-to-consider-when-apartnership-interest-is-transferred. Accessed May 30, 2017. U.S. Department of the Treasury, Internal Revenue Service. Instructions for Form 1065. Washington: GPO, 2016. U.S. Department of the Treasury, Internal Revenue Service. Figuring Depreciation Under MACRS. Washington: GPO, 2016. U.S. Department of the Treasury, Internal Revenue Service. Rev. Proc. 89-15. 1989-1 CB 816, IRC Sec(s). 168. Washington: GPO, 1989. G.M.C. 5 06/12/2017 Partnership Tax Memorandum June 12, 2017 Williford, Jerry S. and Sinnett, C. Todd. “Partnership Terminations – What Changes, What Doesn’t, and What is Unclear.” StudyLib. March 3, 2010. PDF. G.M.C. 6 06/12/2017
Tax 4011 SUMMER 2018 1185 – U01A – RESEARCH MEMO – DUE 5/25/18 11:59PM THE RULES YOU MUST SUBMIT YOUR PAPER THROUGH TURNITIN. THE FILENAME OF YOUR FILE MUST CONTAIN YOUR NAME. FOR EXAMPLE “SCHECKNER TAX4011 RESEARCH MEMO”. IF YOUR FILENAME, IN YOUR DRAFT OR IN YOUR FINAL SUBMISSON, IS JUST “RESEARCH MEMO” OR SOMETHING LIKE THAT I WILL NOT LOOK AT IT. YOU ARE TASKED WITH PREPARING A TAX MEMO FOR YOUR NEW CLIENTS (DESCRIBED BELOW). YOU WILL USE TURNITIN TO SUBMIT YOUR TAX MEMORANDUM. DON’T WAIT UNTIL THE LAST MINUTE OR YOUR GRADE WILL LIKELY SUFFER. IF YOU WISH TO SEND ME A DRAFT COPY PRIOR TO SUBMISSION BUT AFTER YOU HAVE BEEN TO THE WRITING LAB I WILL REVIEW YOUR MEMO AND GIVE YOU FEEDBACK. OBVIOUSLY, IF YOU DON’T GO TO THE WRITING LAB FIRST I WILL NOT REVIEW YOUR DRAFT COPY. I WANT TO REVIEW A NEAR FINAL PRODUCT NOT A ROUGH UNREVIEWED DRAFT. YOUR MEMORANDUM SHOULD BE NO MORE THAN 5 PAGES WITH 1.5 LINE SPACING INCLUDING REFERENCES (THE SYLLABUS INDICATES 3 PAGES OF TEXT AND THE BALANCE FOR NOTES AND REFERENCES– I AM OK WITH YOU GOING OVER A BIT). YOU SHOULD USE COURIER OR TIMES NEW ROMAN AND YOUR FONT SIZE NO LESS THAN 10 NOR MORE THAN 12. YOUR REFERENCES CAN BE CITED AS ENDNOTES OR FOOTNOTES. THERE IS POTENTIALLY A LOT OF INFORMATION YOU COULD PROVIDE SO YOU WILL HAVE TO DISTILL IT DOWN WITHIN THE PAGE CONSTRAINTS. YOU SHOULD PROVIDE A MEMORANDUM THAT IS CLEARLY WRITTEN, COHERENT, AND RELEVANT. YOU MUST USE GOOD GRAMMAR. IF YOUR GRAMMAR IS POOR OR YOUR MEMO DISJOINTED, NOT CLEAR OR THOUGHT OUT YOU WILL LOSE POINTS. BECAUSE THE TOPIC IS BROAD USE YOUR EXPLANATIONS WISELY, BE PRECISE AND DON’T JUST PROVIDE GENERIC STATEMENTS. USE YOUR WONDERFUL MINDS AND THINK IT THROUGH. DO NOT REPEAT THE FACTS. I WILL ASSUME THE FACTS PROVIDED. YOU WILL NEED TO DECIDE WHAT IS MOST IMPORTANT AND ADDRESS THOSE ITEMS. NO ONE ANSWER IS ABSOLUTELY CORRECT, AND YOU SHOULD MAKE A VALID CASE FOR YOUR SELECTION AND DEFEND YOUR REASONING. YOU SHOULD DO THIS BY INDICATING WHY YOU BELIEVE YOUR SUGGESTED CHOICE OF ENTITY IS SUPERIOR TO THE OTHER TYPES OF ENTITIES AS TO TAXATION AND FLEXIBILITY OF OPERATIONS. YOU WILL BE GIVEN AN EXTRA 5% OF THE POINTS ON YOUR MEMORANDUM IF YOU VISIT THE WRITING LAB AND PRESENT ME WITH A COPY OF YOUR PAPER STAMPED AFTER IT HAS BEEN REVIEWED BY THE WRITING LAB. NOTE THE VISITS MUST BE ON SEPARATE DAYS. PLEASE UNDERSTAND THAT THE FOLKS IN THE WRITING LAB ARE NOT TAX EXPERTS AND WILL NOT UNDERSTAND WHETHER YOUR PAPER MAKES ANY TAX SENSE ONLY IF IT IS WRITTEN IN ACCEPTABLE ENGLISH. 1 VER1.1 050818 YOU SHOULD DOCUMENT YOUR MEMO WITH APPROPRIATE CITATIONS TO CODE SECTIONS, REGULATIONS (REG.), REVENUE RULINGS (REV. RUL.), REVENUE PROCEDURES (REV. PROC.), PRIVATE LETTER RULING (PLR) RECOGNIZED TAX TREATISES (FROM RIA CHECKPOINT). YOU MAY REFERENCE TAX RESEARCH TOOLS (SUCH AS RIA CHECKPOINT) AND TAX ARTICLES (SUCH AS FROM THE TAX ADVISOR). YOU MAY NOT USE – BLOGS, TAX PREPARATION SOFTWARE BLOGS, ARTICLES ON THE INTERNET UNLESS FROM AN AUTHORITATIVE SOURCE SUCH AS THE AICPA OR THE ABA. YOU MAY NOT USE IRS MATERIALS UNLESS THEY ARE RELATED TO SPECIFIC LINE ITEMS ON A RETURN WITHOUT A PERTINENT REFERENCE TO AN IRS CODE SECTION, REGULATION, REV. RUL., REV. PROC., PLR, ETC. IN THAT CASE YOU WILL HAVE TO BRIEFLY DESCRIBE WHAT THE CODE SECTION OR REG., ETC. RELATES TO. I AM NOT CONCERNED IF YOU QUOTE EXTENSIVELY SO LONG AS YOU CLEARLY IDENTIFY YOUR SOURCES AND DO SO APPROPRIATELY (YOUR REFERENCES SHOULD BE PERTINENT). YOU MAY, AND PROBABLY SHOULD, USE MS WORD’S REFERENCES SECTION. YOU CAN USE THE APA STYLE. LEARN HOW TO MANAGE RESOURCES. I AM POSTING A GRAMMAR CHECKER IN THE CONTENTS TAB THAT IS FREE TO USE AND WILL HELP SOMEWHAT. I HAVE INCLUDED A MEMORANDUM TEMPLATE IN THE RESEARCH MEMO SECTION OF BLACKBOARD FOR YOUR USE IF YOU WISH AS WELL AS A FEW OTHER HELPFUL ITEMS. IF I INCLUDE A SECTION FROM RIA CHECKPOINT I DO SO FOR A REASON – READ IT! THE FACTS Your clients have come to you for advice on forming and structuring an entity that will sell install security systems. The company will begin operations on January 1 of 2019. They are a bit confused about the different types of entities they can form and how they will be taxed. Since there will be 4 of them who will initially own the business they are aware, as are you, that they cannot form a sole proprietorship. In fact, this sentence is the last place the words “sole proprietorship” should appear. Other than providing the type of entity to be formed under state law and perhaps that your client will need to file Articles of Incorporation, Limited Partnership, of Organization, etc., don’t go into the details of the filing and formation requirements under State law. While important, this is a Federal Income Tax course! The owners of the entity will be 4 unrelated individuals; all except Robert will materially participate in the business. Of these individuals.  One of the individuals also owns an S corporation. (Alberto Nostromo) (16%). This individual will contribute appreciated property to the entity which, if sold, rather than contributed, would result in a long-term capital gain. The appreciated property has an unpaid debt on it for which Alberto is personally liable. The amount of the debt exceeds neither the adjusted basis nor the fair market value of the property.  One of the individuals (Kong Zi) was a non-resident alien who moved to the United States on January 15 of this year from Qufu China. He will own 40% of the business which he paid for 2 VER1.1 050818 in cash. It was a long trip, and although he is quite spry, he is a bit tired and feels old (but not too old not to actively participate in the business operations). He will be the company’s visionary and ideas man. Mr. Kong may return to China in a few years if he, or his wife (Měi Guā) does not like living in the U.S. However, he has no definite plans to return. His Visa allows him to work in the U.S. on an unrestricted basis.  One of the individuals will be provided a capital ownership interest solely for services to be provided (Mildred Richmond-Lee) and will be awarded (21% Ownership). They have asked you the type of ownership that she should receive and the implications both for the company, for them, and for Mildred, if any, as discussed below.  One of the individuals (Robert Wingbat-Shuthie) has a revocable living trust. (BatShut Trust) Mr. Shuthie will have a 23% ownership which he purchased for cash. Robert will not participate in the business operations. He is happy to help capitalize the company, but the thought of working makes his head hurt. Like most startups they expect to incur losses their first few years of operation. They would like to make use of the losses on their personal returns if possible. They prefer paying one level of taxation but are willing to consider a C corporation if it makes sense for them. They expect to have to borrow and lend money to the company or, have the company borrow money, or both, from lenders to finance operations. They do not expect to have receivables and inventory as they expectd their prospective clients to pay as services are performed or products are provided. They all live in Florida and will form their business and operate in Florida. They want to keep the complexity of organization and continued filings (federal and state) to a minimum. The sales staff will be independent contractors who do business with many different companies. They do not expect to have employees or other people who would be considered employees (other than possibly themselves). Possible Entities that can be created on a State level (SELECT ONE): 1. 2. 3. 4. Corporation Limited Partnership LP Limited Liability Company LLC General Partnership (does not have to register with the State to form) GP Possible tax entities (SELECT ONE) 1. C Corporation 2. S Corporation 3. Partnership 4. Trust (not usually used or appropriate for businesses unless a QSST or an EBST) 3 VER1.1 050818 YOUR TASK 1. Select the one entity that you think should be formed now under State Law 2. how that company should elect to be taxed, if applicable WHAT YOUR TAX MEMO SHOULD ADDRESS: 1. Why are you recommending this type of entity (both from a State and a Tax perspective)? 2. Your advice should include tax consequences (positive or negative) for the entity you are recommending? a. Upon formation i. What are they (for example are transfers to the entity taxable or nontaxable? Under what circumstances would they be taxable? Under what circumstances would they be nontaxable)? ii. Explain if there is a work around to reduce or eliminate the problem? b. Will it be a problem if the individual’s ownership interests are owned by entities that they own? Note that they presently anticipate owning their ownership interests as individuals. i. Are there any special tax forms that need to be filed to establish how the entity is to be taxed? If applicable why is no filing of a special form needed? c. During operations-as to income or loss. i. Who is taxed? ii. How the individual is taxed iii. On distributions of 1. Cash 2. Property 3. Specific types of property? iv. Who can benefit from a loss? 1. Under what conditions can the losses be claimed? 2. What happens to the losses that are not used? d. What tax form is filed and what is the due date? e. Upon liquidation of the owner’s interest. f. Upon liquidation of the entity. 3. How do you think the new tax law (TCJA) will affect the entity you selected and the owners? a. What provisions are the most beneficial to the entity and the owners? b. What provisions are the most unfavorable to the entity and the owners? 4 VER1.1 050818
Company Name Tax Research Memo To: Recipient Name From: Your Name cc: Name Date: Date Re: Subject INTRODUCTION: You have asked that I advise you with respect to the tax and other considerations in forming your proposed entity. You have asked me to specifically answer a number of different items which are addressed under the issues section of this memorandum. FACTS: This section is to stipulate the facts of the matter. You will not have to prepare this as the facts are already described and it would waste paper and time. Just show this section as follows: “FACTS: - see facts in separate memo” ISSUES: In this section you will list the various issues your tax memo will address. For example: 1. What types of entity can be formed under state of Florida law? 2. What type of entity should be formed under federal tax law? a. Is there a need for flexibility in the choice of entity? b. ……. LAW: Under Florida Statutes (FS) section ________ the following types of entities may be formed; CONCLUSION: Based on the above recommend that you form as a ……. The reason I suggest this type of entity is because ……. Please be aware that you should consult with competent legal counsel to assist you with the formation of the entity……. CITATIONS: (these should be endnotes and linked to the above). Use the References section of Word to assist. 2
T-SHIRTS Tax Research Memo To: Clients From: Lenin Rivera cc: Professor Martin Scheckner Date: February 16, 2018 Re: Advising on Start Up Business Entity INTRODUCTION: You have asked me to advise you with respect to the tax and other considerations in forming your proposed entity. You have asked me to answer some specific questions and concerns which are addressed in this memorandum under the issues section. FACTS: - see facts in separate memo ISSUES: In this section I will list the various issues this tax memo will address. For example: 1. What are the different types of entities can be formed under state law? 2. What type of entity do I suggest you form, now and in the future under State law? a) Is there a need for flexibility in the choice of entity? b) Are there any documents I suggest you have written to identify the rules of ownership and operation? 3. What types of entity do I think is the most appropriate? a) Upon formation b) In the future 4. Will it be a problem if the individual’s ownership interest is owned by any entities that they own? 5. How will debt be dealt with if something other than if a c corporation is formed? 6. What are the tax consequences upon formation of the entity? To the owner? Entity? 7. What changes made by the new tax law will most affect the new entity? 8. Let’s assume that the Korean branch flourishes. The profits are needed to acquire inventory in Korea for sales in Korea. Do you suggest that the Korean entity be a branch or a separate corporation? Why? LAW: Under the Internal Revenue Code § 1361 a corporation must meet certain requirements to be considered an s corporation. For example, an eligible corporation must not have more than 100 shareholders, and must not have a nonresident alien as a shareholder.1 Under the code of federal regulation section 1.1-1 individual resident are liable for income taxes whether the income is received from within or outside the United States.2 Under Florida Statute 605.0201 it lists the documents a person needs to submit to the state to form an LLC.3 CONCLUSION: Florida state law allows for four types of entities to be formed: corporations, partnerships, limited liability companies and sole proprietorships.4 I suggest that at the beginning the entity should be a limited liability company taxed as a partnership; however, in the future the company needs to be converted to a C Corp. when you decide to go public. I would not recommend starting as a C Corp. because an LLC can avoid double taxation. Also, C corporations are not flow-through entities so any losses that the company has the first few years will have to wait till the company has income to offset it.5 Starting as an S Corp. would also have its problems later if Ken Mong Kim decides to return to Korea. Although, right now you can start as a corporation and would be allowed to elect to be an S Corp. you would not be permitted later because an S Corp. can not have a nonresident alien investor. As for a general partnership its “form never offers limited liability for the partners, [but] A limited partnership can shield the limited partners”, yet it does not shield any of the general partners.5 LLC’s have more flexibility than corporations; they allow members to make their own management structure. They also, do not have to allocate losses or debts proportionate to each owner’s interest.4 Under Florida statue a person must submit articles of organization to the department of filing to forma an LLC.3 The articles of organization must contain “the name, [the] 2 street address in this state, and [a] written acceptance of the company’s initial registered agent.”3 I recommend that you also send a “description of the authority or limitation on the authority of a specific person in the company or a person holding a position or having a specified status in the company.”3 There are negative consequences that rise from forming as an LLC. It will take more time and effort to come up with the internal rules and rights of shareholders that all of you can agree on. As an LLC there is no problem in having your individual ownership interests be owned by another entity that you own. For example, Nick Danger can have his S corp. retain his portion of ownership, so can Biltmore’s living trust. Since both trusts and S Corp. are flow-through entities, the entities themselves will not pay taxes on distributed income but the individual person will pay taxes at their ordinary rate.6 All liabilities that rise out of the responsibility of conducting business are liable to the entity and not the individual.6 However, members are liable if they guarantee something. For instance, if creditors require members to guarantee a loan then the members are liable for that loan.5 Another plus to forming as an LLC taxed as a partnership is that they do not pay taxes on appreciated property that is contributed to the entity upon formation. This means that nobody will have to recognize a gain on the property that Nick Danger contributed. Although, not all of you have the same stake in the company, you will each have to file the tax form 1065, which is the tax return form for a partnership. Members will also need to file a schedule k-1 to show their part of income, deductions and credits that come from the LLC partnership.5 Under the new tax law, they try “to mitigate the rate advantage enjoyed by corporations by providing a deduction for a portion of earnings derived by taxpayers from trades or businesses conducted through pass-through entities.”7 In addition, under the new law LLC members with significant earnings will be subject to Medicare surtax and the Medicare portion of selfemployment tax.7 I suggest the for the Korean entity it should be a separate entity and not a branch. 3 Based on the above I recommend that you form as a limited liability company taxed as a partnership. The first reason why I suggest this type of entity is because flow-through entities avoid double taxation and LLC’s have limited liability. Second, nobody will have to recognize a gain on the appreciated property contributed to the entity. Finally, an LLC is normally cheaper to convert to a Corporation, but converting from a Corporation to an LLC is not. Please be aware that you should consult with competent legal counsel to assist you with the formation of the entity and taking minutes. CITATIONS: 1 26 U.S. Code § 1361 - S corporation defined. (n.d.). Retrieved February 16, 2018, from https://www.law.cornell.edu/uscode/text/26/1361 2 26 CFR 1.1-1 - Income tax on individuals. (n.d.). Retrieved February 16, 2018, from https://www.law.cornell.edu/cfr/text/26/1.1-1 3 The Florida Senate. (n.d.). Retrieved February 16, 2018, from http://www.flsenate.gov/Laws/Statutes/2013/605.0201 4 Florida DMV Online Guide. (n.d.). Retrieved February 16, 2018, from http://www.dmvflorida.org/florida-corporation-types.shtml 5 Eustice, J. S., & Kuntz, J. D. (2001). Chapter 2: Uses of S Corporations. In Federal income taxation of S corporations. Valhalla, NY: Warren Gorham & Lamont/RIA. 6 Spilker, B. C., Ayers, B. C., Robinson, J. R., Outslay, E., Worsham, R. G., Weaver, C. D., & Barrick, J. A. (2015). CHAPTER4 Entities Overview. In McGraw-Hills taxation of business entities. New York: McGraw Hill Education. 7 MELONE, M. A. (2018). THE DEDUCTION FOR PASS-THROUGH INCOME AND ITS EFFECT ON THE CHOICE OF ENTITY. Practical Tax Strategies, 100(02). Retrieved February 16, 2018. 4
A UNIFORM SYSTEM OF FEDERAL TAX CITATIONS, Second Edition Walsh College Department of Accounting and Taxation Troy, Michigan By: Mark R. Solomon Daniel S. Hoops Copyright © 2013 Walsh College TABLE OF CONTENTS Topic Forward Page ii Preface iii Primary Sources Statutes Legislative Materials Administrative Precedents Judicial Precedents 1 1 5 6 13 Secondary Sources Tax Services Treatises and Textbooks Law Reviews Other Journals and Periodicals Proceedings Reports Internet Sources 19 19 20 20 21 22 23 Citation Usage Official Citations of the Tax Court and Internal Revenue Service Order of Citation Use of Signals Short Forms for Citation Repeats 24 24 24 25 25 Conclusion 26 i FOREWORD On March 9, 2013, Mark Solomon passed away at the age of 67. Professor Solomon joined Walsh College as an adjunct instructor of taxation in 1976, and became chair of the Taxation and Business Law Department in 1981. In the ensuing years, he strengthened the Master of Science in Taxation (MST) degree's academic rigor, resulting in national recognition among MST alumni and tax professionals. Professor Solomon also took exceptional pride in each MST alumni member's promotion and professional success. Professor Solomon inspired, encouraged, and awed students with his consummate mastery of tax law. With high classroom standards and attention to detail, he encouraged and inspired students to think like the tax professionals they would ultimately become. At graduation, students sought Professor Solomon out to shake his hand and thank him for setting the bar so high. In addition to his legacy as a faculty member, Mark was a true student of taxation himself. Mark was the steward of the Walsh College Tax Library, which boasts one of the largest collections of tax-related materials in the Midwest. Mark was also the driving force behind the Tax Portal that provides access to over 600 tax-related Internet links. Ever the perfectionist and student of tax research, Prof. Solomon developed the original edition of “A Uniform System of Federal Tax Citations” in 1982 as a guide for Walsh MST students. The Second Edition of A Uniform System of Federal Tax Citations is the product of many discussions Mark Solomon and I had about updating the original system to incorporate the various resources that are now available to students and practitioners. I greatly appreciate the assistance of Diane Barrantes and Prof. Eric Skinner for their advice and assistance in improving this Second Edition. Sadly Mark is unable to see the completed results of the Second Edition. Daniel S. Hoops, 2013 ii PREFACE It is often said that the mark of an educated person is the manner in which that person speaks and writes. Perhaps so and perhaps not. What is clear, however, is that many people judge the education (and sometimes the competence) of another, whether rightly or wrongly, by that other person’s command of the written and spoken word. The tax world differs little from the rest of the world in this regard. Regardless of whether the use of a speaking-writing standard is appropriate, to say nothing of whether or not it is “fair”, many a judgment is made about the quality of a tax person by the quality of their “tax-speak”. The purpose of this text is to set forth a uniform standard of one aspect of “tax-speak” – tax citation form. What follows is intended as an in-depth (albeit non-exhaustive) review of proper citation form for the most common and most frequently cited tax materials. It goes without saying that historically tax writers have used a variety of forms of citation (indeed, every tax publisher seems to have their own version), none of which can be explicitly designated as “right” or “wrong”. There is, therefore, some modest need among tax practitioners and especially among tax students for a useful guideline to the maze of tax citation systems in current use. The Uniform System of Federal Tax Citations which follows has been prepared with a view to following, insofar as seems sensible, the system or systems most widely in use by outstanding tax scholars. Since the system, while comprehensive, is not exhaustive, matters not covered in the system should be cited in accordance with the rules set forth in A Uniform System of Citation, Twelfth Edition, Harvard Law Review Association, Cambridge, Massachusetts (1976) (hereinafter, “the Harvard Citation System”). It should be noted that many of the rules contained in this text differ markedly in form from the rules given in the Harvard Citation System. The differences are deliberate and reflect practices common in the tax bar and among other tax practitioners. In a few cases where the logic of the situation dictates, new forms of citation have been introduced. Also worth mentioning is what is not covered herein. No attention is given to proper form for footnotes (other than the form of citation within a footnote), tables of contents, bibliography format, organization of papers, styling of papers, or the use of captions – all topics of substantial importance in the writing of papers. The student is urged to consult the popular style manual by Kate L. Turabian, A Manual for Writers of Term Papers, Theses, and Dissertations, Fourth Edition, University of Chicago Press, Chicago, Ill. (1973) for further consideration of those important and often neglected matters. Mark R. Solomon, 1982 iii A UNIFORM SYSTEM OF FEDERAL TAX CITATION PRIMARY SOURCES I. Statutes A. United States Constitution References to the United States Constitution are by article, section, and clause number or by amendment. Ex. 1: U.S.CONST. art.I, sec.8, cl.1. Ex. 2: U.S.CONST. amend. XVI. B. Internal Revenue Code of 1986 When used in a textual context for the first time, refer to the cited section followed by “the Internal Revenue Code of 1986, as amended,” then (hereinafter the “Code”). Ex. 3: Section 453(b) of the Internal Revenue Code of 1986, as amended (hereinafter the “Code”). Thereafter refer to the cited section, followed by “of the Code.” Ex. 4: Section 302(b)(3) of the Code. Generally, the word “section” is not capitalized except at the beginning of a sentence. Ex. 5: Redemptions are treated in section 302 of the Code. When a Code section is being discussed at length and the context makes clear which Code section is being discussed, the words “of the Code” may be omitted. Ex. 6: As previously discussed, section 302(b) has been the source of substantial litigation. When used in footnotes for the first time, follow the format of Example 1, except use (hereinafter “I.R.C.”). Ex. 7: Section 453(b) of the Internal Revenue Code of 1986, as amended (hereinafter “I.R.C.”). Thereafter in footnotes, use “I.R.C.” followed by “§” or “Section” and the section number. Ex. 8: I.R.C. §302(b). 1 Ex. 9: I.R.C. section 302(b). Ex. 10: I.R.C. §§302(b) and 301(a). Ex. 11: I.R.C. sections 302(b) and 301(a). Ex. 12: I.R.C. §§302-318. C. Internal Revenue Code of 1954 or 1939 When used in a textual context, refer to the cited section followed by “the Internal Revenue Code of 1954” (or “1939” as the case may be), then (hereinafter the “1954 Code”). Ex. 13: Section 115(g) of the Internal Revenue Code of 1939 (hereinafter the “1939 Code”). or Section 302(b) of the Internal Revenue Code of 1954 (hereinafter the “1954 Code”). When a 1954 or 1939 Code section is being discussed at length and the context makes clear the particular Code section being discussed, further references to the Code section are sufficient. However, great care must be exercised any time sections from the 1986 Code are simultaneously being considered. Ex. 14: As previously discussed, section 115(g) of the 1939 Code was the source of substantial litigation, ultimately leading to the enactment of section 302 of the Internal Revenue Code of 1954 (hereinafter the “1954 Code”). Section 302 has been expanded since its initial enactment, which has resulted in greater clarity for taxpayers interpreting section 302 of the Internal Revenue Code of 1986, as amended (hereinafter the “Code”). Do not use “of the Code” in any context where references are being made to the 1954 Code or the 1939 Code and the 1986 Code. If the possibility of confusion exists, use “of the 1954 [or 1939] Code” and “of the 1986 Code” for clarification purposes. When used in footnotes, all references to the 1954 Code or 1939 Code sections are made in full. Ex. 15: Section 115(g) of the Internal Revenue Code of 1939. or Section 302(b) of the Internal Revenue Code of 1954. 2 D. Revenue Acts When used in a textual context, it is sufficient to refer to the popular name of the Revenue Act, followed in parenthesis by any abbreviation of the Act that is to be used frequently. Ex. 16: The Tax Reform Act of 1986 resulted in several amendments to the Internal Revenue Code. Ex. 17: The Middle Class Tax Relief and Job Creation Act of 2012 (“MCTRJC”) extended the 2% cut in social security payroll tax for employees originally approved under the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (“TRUIRJCA”). Specific sections of a Revenue Act are indicated by giving the Act and section number, followed by any codification parenthetically. Ex. 18: Installment Sales Revision Act of 1980, section 2(a) (codified at I.R.C. section 453). Ex. 19: ERTA, Section 101. The first time a Revenue Act is referred to in the text, the public law number of the act should be given in a footnote. See, the discussion infra. E. Public Laws Public laws are cited by giving the popular name, followed by the public law number, and then the year of enactment in parenthesis. Ex. 20: Foreign Investors Tax Act of 1966, Pub. L. No. 89-809 (1966). If available, it is preferable (but not required) to give the statute-at-large citation also. Ex. 21: Foreign Investors Tax Act of 1966, Pub. L. No. 89-809, 80 Stat. 1545 (1966). Where a particular section of a public law is being cited, the section number is cited following the public law number. Ex. 22: Foreign Investors Tax Act of 1966, Pub. L. No. 89-809, §102(d)(2)(C), 80 Stat. 1545 (1966). or Foreign Investors Tax Act of 1966, Pub. L. No. 89-809, section 102(d)(2)(C), 80 Stat. 1545 (1966). 3 A new congress is convened every two years, which can result in some difficulty matching a public law with the particular congress or congressional session. The following formula may be used to match the year of congress with the public law. Multiply the congressional number by 2 (because there are two years sessions for every congressional term). Add 2000 to this number, then subtract 211 to get the correct congressional year. Ex. 23: The 89th congressional session was convened in 1965. 89 x 2 = 178 178 + 2000 = 2178 2178 - 211 = 1965 Because congressional terms begin in odd years, if the particular session of congress is the 2nd session, the product will need to be increased by 1. Ex. 24: The 2nd session of the 89th Congress was held in 1966. 89 x 2 = 178 178 + 2000 = 2178 2178 – 211 = 1965 1965 + 1 = 1966. F. Tax Treaties Citing tax treaties entered into by the United States can be a lengthy process. When used textually and after a full citation has been given (including a reference to the Cumulative Bulletin, if possible), further citations may be abbreviated. Ex. 25: United States-United Kingdom Income Tax Convention, signed on December 31, 1975, as amended by an Exchange of Notes, signed on April 13, 1976, and Protocols, signed on August 26, 1976, March 31, 1977, and March 15, 1979, 1980-1 C.B. 394 (hereinafter the “U.S.-U.K. Tax Treaty”). When used in a footnote, reference should also be made to the Treaties and Other International Act Series (TIAS) as well as to the Cumulative Bulletin (in the case of recent treaties). Ex. 26 Convention for the Avoidance of Double Taxation and Prevention of Fiscal Evasion, March 4, 1942, United States-Canada, Art. X1, TIAS 983 (hereinafter the “Old U.S.-Canadian Tax Treaty”). Ex. 27: Convention for the Avoidance of Double Taxation and Prevention of Fiscal Evasion with Respect to Taxes on Estates of Deceased Persons and on Gifts, November 11, 1979, United States-United Kingdom, TIAS 9580, 1980-1 C.B. 369 (hereinafter the “U.S.-U.K. Estate Tax Treaty”). 4 II. Legislative Materials Legislative materials are comprised of numerous forms of data that may be used by legal researchers. The most commonly cited legislative history includes congressional bills and committee reports. In addition to identifying the type of material referenced, proper citation requires the researcher include the congressional term, session and year. A. House Bills Ex. 28: H.R.136, 79th Cong., 1st Sess. (1945). Ex. 29: H.R.136, 79th Cong., 1st Sess. §202 (1945). or H.R.136, 79th Cong., 1st Sess. Sec.202 (1945). B. House Reports Ex. 30: H.R.Rep. No. 1447, 87th Cong., 2d Sess. (1962). Ex. 31: H.R.Rep. No. 1447, 87th Cong., 2d Sess. 4 (1962). C. Senate Bills Ex. 32: S.300, 83rd Cong., 2d Sess. (1954). Ex. 33: S.300, 83rd Cong., 2d Sess. §202 (1954). or S.300, 83rd Cong., 2d Sess. Sec.202 (1954). D. Senate Reports Ex. 34: S.Rep. No.18, 92nd Cong., 1st Sess. (1971). Ex. 35: S.Rep. No.18, 92nd Cong., 1st Sess. 4 (1971). Ex. 36: The Congressional Budget Process – An Explanation, Senate Print 105-67, Senate Budget Committee, 105th Cong., 2nd Sess. (Dec. 1998). E. Joint Committee Explanations Ex. 37: Joint Committee on Taxation, General Explanation of the Tax Reform Act of 1976 (December 29, 1976). Ex. 38: Joint Committee on Taxation, General Explanation of Tax Reform Act of 1976 at 217 (December 29, 1976). 5 Ex. 39: Joint Committee on Taxation, 111th Cong., Estimates of Federal Tax Expenditures for Fiscal Years 2010-2014, Table 1, at 52 n. 5 (Joint Comm. Print 2010). F. Additional Rules for Congressional Reports Where possible, a parallel citation should be made to the Cumulative Bulletin for those reports reported therein. Where no Cumulative Bulletin parallel citation is possible, it is desirable (but not required) to give a parallel citation to the permanent edition of the United States Code Congressional and Administrative News. Ex. 40: S.Rep. No.94-938, 94th Cong., 2d Sess. (1974), 1976-3 C.B. 49. Ex. 41: H.R.Rep. No.96-304, 96th Cong., 2d Sess. (1979), 3 US Code Cong. & Ad. News 410 (1980). G. Hearings Ex. 42: Hearings on H.R.Rep. No. 96-304, 96th Cong., 1st and 2nd Sess. 55 (1979) (Statement of John H. Smith). III. Administrative Precedents A. Treasury Regulations When used in a textual context for the first time, refer to the cited provision of the regulations as in the following examples: Ex. 43: Section 1.954-3(b)(4) of the Income Tax Regulations. Ex. 44: Section 20.2039-4(a) of the Estate Tax Regulations. Ex. 45: Section 25.2521-1(c)(1) of the Gift Tax Regulations. Ex. 46: Section 301.6201-1(c) of the Statement of Procedural Rules. Thereafter refer to the cited section followed by “of the regulations.” Ex. 47: Redemptions are considered, in part, in section 1.301(1(c) of the regulations. Thereafter, when a regulation is being discussed at length and the context makes clear which regulation section is being discussed, the regulation section may be cited simply as “Treas. Reg.” Ex. 48: Treas. Reg. 1.301-1(c). 6 When used in footnotes, regulations are always cited as “Treas. Reg.” Ex. 49: Treas. Reg. 1.301-1(c). Proposed regulations use a citation form similar to that used for current regulations, except that in a textual context the citation is preceded by “Proposed.” However, in any cases where “Treas. Reg.” would be used, “Prop. Treas. Reg.” is substituted. Ex. 50: Proposed section 1.954-3(b)(4) of the Income Tax Regulations is deceptively complicated. Ex. 51: Prop. Treas. Reg. 1.301-1(c). Temporary regulations are treated in essentially the same way as proposed regulations. Ex. 52: Temporary section 1.367-1(c)(1) of the Income Tax Regulations. Ex. 53: Temp. Treas. Reg. 1.367-1(c)(1). Where the regulation indicates it is temporary (the letter “T” is included in the regulation), it is unnecessary to include the term “Temporary” or “Temp.” Ex. 54: Section 1.301T-1(c) of the Income Tax Regulations. Ex. 55: Treas. Reg. 1.301T-1(c). Except in rare cases it is unnecessary to cite Treasury Regulations to the Code of Federal Regulations (C.F.R.). Treasury Decisions announcing regulations are always cited to the Cumulative Bulletin in which they are reproduced. Ex. 56: T.D. 7481, 1977-1 C.B. 228. Where regulations are no longer current, difficulties are abound in proper citation. Such regulations should be cited to a source in which the relevant language can be found, usually a Treasury Decision (T.D.). Ex. 57: Treas. Reg. 1.901-3, T.D. 7294, 1973-2 C.B. 253, amended by T.D. 7481, 1977-1 C.B. 228. Note, however, that this treatment is unnecessary when discussing or citing the current version of the regulation. Regulations under the 1939 Code are cited by Code section and regulation section with 1939 indicated parenthetically. 7 Ex. 58: Treas. Reg. 113, Sec. 20B.3(a) (1939). B. Revenue Rulings Revenue Rulings are always cited to the Cumulative Bulletin, if possible. Ex. 59: Rev. Rul. 98-10, 1998-1 C.B. 643. When a Revenue Ruling has not yet been published in the Cumulative Bulletin, it is cited to the Internal Revenue Bulletin (“I.R.B.”) Ex. 60: Rev. Rul. 2002-2, 2002-19 I.R.B. 849. For Revenue Rulings issued in 1953, a slightly different form of citation is used: Ex. 61: Rev. Rul. 228, 1953-2 C.B. 26. From time to time it may be desirable to cite some (or all) of the history of a Revenue Ruling. This will always be the case if the Revenue Ruling has been obsoleted. Ex. 62: Rev. Rul. 80-36, 1980-1 C.B. 366, superseding Rev. Rul. 76-567, 1976-2 C.B. 491, amplified by Rev. Rul. 80-98, 1980-1 C.B. 368. Ex. 63: Rev. Rul. 56-432, 1956-2 C.B. 284, obsoleted by Rev. Rul. 80-27, 1980-1 C.B. 85. C. Revenue Procedures The form of citation for a Revenue Procedure is identical to that used for a Revenue Ruling except that “Rev. Proc.” is substituted for “Rev. Rul.” Ex. 64: Rev. Proc. 2005-78, 2005-2 C.B. 1177. D. Private Letter Rulings and Technical Advice Memoranda Private Letter Rulings are cited by the use of the abbreviation “PLR” followed by numbers designating the year, week of the year, and ruling number for that week. Ex. 65: PLR 8208209. Reissued Private Letter Rulings are cited (as in Ex. 59) but are followed by a capital “R”. Ex. 66: PLR 7746001R. Technical Advice Memoranda have identical citation form except that “TAM” is substituted for “PLR”. Ex. 67: TAM 200050005. 8 E. General Counsel Memoranda General Counsel Memoranda is of two kinds. The first are memoranda opinions published in the Cumulative Bulletin prior to 1953. The first kind of General Counsel Memoranda is always cited to the Cumulative Bulletin. Ex. 68: G.C.M. 27322, 1952-2 C.B. 62. Ex. 69: G.C.M. 4596, VII-2 C.B. 133 (1928). Ex. 70: G.C.M. 4565, VII-2 C.B. 169 (1928), obsoleted by Rev. Rul. 69-420, 1969-2 C.B. 264. The second kind of General Counsel Memoranda is unpublished, internal documents prepared in the Office of the Chief Counsel. These documents are not written with an intention to publish, however, taxpayer litigation has resulted in these documents being made available to the public. Such documents are cited by number and date with as much history as is deemed relevant. Ex. 71: G.C.M. 38814 (Dec. 24, 1981). Ex. 72: G.C.M. 38823 (Aug. 18, 1981), revoking G.C.M. 38131 (Oct. 9, 1979). Ex. 73: General Ins. Co., G.C.M. 39898, I-250-86 (Oct. 15, 1986) F. Other Materials Published in the Internal Revenue Cumulative Bulletin Citations for other materials published in the Cumulative Bulletin are substantially similar to the citations for Revenue Rulings. However, where the year of publication is not obvious from the Cumulative Bulletin number, the year should be given parenthetically. In addition, historical information should be given in accordance with the dictates of judgment. Ex. 74: I.T. 2241, VII-2 C.B. 65 (1928). Ex. 75: T.D. Order 170-3, 1957-1 C.B. 718, amending T.D. Order 150-41, 1956-1 C.B. 1009. The list which follows sets for the most common pronouncements (except those already discussed) set forth in the Cumulative Bulletin or the Internal Revenue Bulletin and the appropriate designation for citation purposes: Series Announcements Appeals and Review Memoranda Abbreviation ANN. A.R.M. 9 Appeals and Review Recommendations Attorney General’s Opinions Capital Stock Tax Rulings Carriers, Tax on Employment by Chief Counsel Announcements Commissioner Delegation Order Comptroller General’s Opinions Delegation Orders Employment Tax Ruling Estate Tax Rulings Excess Profits Tax Council Rulings Executive Orders Field Service Advice General Counsel Orders Income Tax Information Releases Income Tax Unit Rulings Internal Revenue Circulars Internal Revenue Mimeographs Internal Revenue News Releases Law Opinions of the Solicitor Mimeographs Miscellaneous Division Rulings Notices Office Decisions Pension Trust Service Rulings Processing Tax Ruling Program Manager Technical Assistance Memoranda Reorganization Orders Sales Tax Division Rulings Service Center Advice Silver Tax Ruling Social Security Tax Rulings Solicitor’s Memoranda Solicitor’s Opinions Solicitor’s Recommendations Tax Board Memoranda Tax Board Recommendations Treasury Department Circulars Treasury Department Orders A.R.R. Op.A.G. C.S.T. C.T. C.C.A. Deleg.Ord. C.G.O. D.O. Em.T. E.T. E.P.C. E.O. F.S. G.C.O. I.T.Info.Rel. I.T. IR-Circ. IR-Mim. IR L.O. (or O.) Mim. M.S. Notice O.D. P.S. P.T. P.M.T.A. R.O. S.T. S.C.A. Sil. S.S.T. S.M. (or S.) Sol.Op. S.R. T.B.M. T.B.R. Circ. T.D.O. G. Actions on Decisions Actions on Decisions (internal memoranda on appeals and acquiescences) are cited as “A.O.D.” followed by the Chief Counsel number, date of the A.O.D. in parenthesis, then the case name and citation. 10 Ex. 76: A.O.D. CC-1982-002 (March 29, 1982), John A. Kuhnen, 42 T.C.M. 1438 (1981). If the A.O.D. is published in the I.R.B. or C.B., reference should be included in the full citation. Ex. 77: A.O.D. 2011-5, 2011-52 I.R.B. (December 9, 2011), William Norris, T.C. Memo 2011-161. H. Treasury Memoranda Treasury Memoranda are cited as “T.M.” followed by the T.M. number and the date of release. Ex. 78: T.M. 9999 (Dec. 25, 1989). I. Internal Revenue Manual The Internal Revenue Manual is exceedingly complex to use. It consists of a basic text, handbooks, and supplements, each of which is cited differently. The basic text is indicated by “IRM,” followed by numbers for parts, chapters, sections, subsections, and sub-subsections. Where more than nine divisions are required, a higher number is used parenthetically. Ex. 79: IRM 4023.4 refers to Part IV, Chapter Zero, Section 2, Subsection 3, Sub-subsection 4. Ex. 80: IRM 403(25).1 refers to Part IV, Chapter Zero, Section 3, Subsection 25, Sub-subsection 1. Manual Supplements are indicated by “MS” followed by the IRS classification code and designation number. Ex. 81: MS 40RDD-70 indicates that the Manual Supplement supplements Chapter Zero of Part IV of the Manual, that the supplement was distributed to regional offices, district offices, and service centers, and that it is the 70th supplement in the series. Manual exhibits follow each section of the Manual and are indicated by “IRM Exhibit,” the section of the Manual, and the Exhibit number. Thus Exhibit 3 of Section Eight of Chapter Zero of Part IV is cited as in Example 70. Ex. 82: IRM Exhibit 4080-3. Handbooks are cited by their name and to the section of the Manual to which they relate. 11 Ex. 83: Handbook for the Conversion of Examination Classes from AGI to TPI, IRM 40(10)0. Specific portions of a handbook are cited by reference to their own numbering system (which is typically similar to that used elsewhere in the manual). Ex. 84: Handbook for the Conversion of Examination Classes from AGI to TPI, IRM 40(10)(0), Section 2(10)(1). J. Forms Tax forms are cited by giving the form number and the revision date, if any. Ex. 85: Form 959 (Rev. Jan. 1978). If the form is for a specific year, the year is given parenthetically, and in such cases there will ordinarily be no revision date. Ex. 86: Form 1040 (2012). Schedules are indicated by letter, followed by the form number parenthetically. Ex. 87: Schedule K (Form 1120-DISC). K. Publications Internal Revenue Service Publications are cited by name, publication number, and abbreviated revision number. Ex. 88: Tax Guide for Commercial Fisherman, Pub. 595 (Rev. Oct. 1979). L. Miscellaneous IRS Pronouncements From time to time it may be necessary to cite I.R.S. sources not published in either the Internal Revenue Bulletin or the Cumulative Bulletin. The most common such sources are special rulings (consisting of letters, informal rulings, and telegraphic rulings of the I.R.S.) and Technical Information Releases. In recent years, there have also been Treasury Department News Releases, electronic mail, field service advice and Internet bulletins. The following examples indicate the correct citation form of such materials: Ex. 89: Special Ruling (April 16, 1953), revoking Special Ruling (July 23, 1952). Ex. 90: TIR 668 (Dec. 18, 1964). Ex. 91: TIR 668 (Dec. 18, 1964), announcing Rev. Rul. 65-10, 1965-1 C.B. 254. 12 Ex. 92: Treas. Dept. News Rel. M-769 (Dec. 8, 1980). When the publication is accessible in a hardcopy version, the citation should be to the print version only. If, however, the print source is difficult or not available without great effort (e.g. the agency has designated the electronic version as the official version), a citation to the electronic source may be appropriate. See, VI. Internet Sources, infra. Ex. 93: Taxpayer Guide to Identity Theft, http://www.irs.gov/uac/Taxpayer-Guide-to-Identity-Theft (April 2, 2013). Many of the IRS Pronouncements can be found in the IRS Electronic Reading Room located at http://www.irs.gov/uac/Electronic-Reading-Room. Numerous Internet links are available to a variety of IRS pronouncements, including legal advice issued by Associate Chief Counsel (see, Ex. 94) and legal advice issued to field attorneys (see, Ex. 95). Ex. 94: AM 2013-001 (Release Date 03/01/2013) Treatment of Other Real Estate Owned under Section 263 Ex. 95: 20131902F Treasury Regulation 1.246-5(c)(6) Use of related persons or pass-through entities. Tax researchers should be aware that many of the IRS Pronouncements cannot be relied upon or cited as precedent. IV. Judicial Precedents A. Basic Form The correct form of citation for an adjudicated case is a complex matter often involving the exercise of good judgment. In the simplest and most basic situation the case name is given, followed by identification of where it may be found in an official reporter (including the volume and page number), and a parenthetical indication of the court (if not obvious from the previously-identified reporter) and the year in which the case was decided. In more complex situations (discussed infra.) it may be necessary to give a case history or parallel citations or both. Ex. 96: Burnett v. Logan, 283 U.S. 404 (1931). Ex. 97: Zonolite Co. v. United States, 211 F.2d 508 (7th Cir. 1954). Ex. 98: Estate of Hurburt, 25 T.C. 1286 (1956). Notice that (i) the names of the parties are italicized, (ii) the case name is followed by a comma, (iii) when one of the parties is the Commissioner of Internal Revenue or the United States, no abbreviation is used, (iv) no comma is used after the designation of the 13 court, (v) in the Tax Court and Board of Tax Appeals cases, only the petitioner is named, (vi) surnames are usually omitted, except in Tax Court and Board of Tax Appeals cases, and (vii) words such as “corporation,” “limited,” “incorporated,” “company,” and “associated” may be abbreviated. When used in a textual discussion and after a full citation has been given, a case may be referred to in abbreviated form. Ex. 99: Estate of Lennard followed the concurring opinion in Perry S. Lewis. When quotations are extracted from a case, it is usually desirable to indicate the page from which the quotation is taken. Ex. 100: Dravo Corp. v. United States, 348 F.2d 542 at 549 (Ct.Cl. 1965). Notice that in all cases the volume number precedes the name of the reporter and the page number follows it. B. Case History It is often of critical importance in a citation to give the judicial and administrative history of a case. In so doing the following abbreviations are frequently encountered: Historical Information acquiesced acquiesced in result only affirmed affirmed on other grounds affirmed per curiam affirming certiorari denied certiorari filed certiorari granted nonacquiesced rehearing denied reversed reversed on other grounds reversing reversing an remanding reviewed by the court Abbreviation acq. acq. in result only aff’d aff’d on other grounds aff’d per curiam aff’g cert. denied cert. filed cert. granted nonacq. rehearing denied rev’d rev’d on other grounds rev’g rev’g and remanding reviewed Usually when a Supreme Court case is cited, the history of the case as to lower courts is omitted. In other kinds of cases, it is customary to cite the opinion of the highest court hearing the case. However, in those cases where a lower court is cited, all subsequent history must be disclosed in the citation. Likewise, subsequent history is given any time 14 an appeal is made to the Supreme Court or in any case where an appeal to a higher court is pending. Ex. 101: Waterman S.S. Corp. v. Commissioner, 430 F.2d 1185 (5th Cir. 1970), cert. denied 401 U.S. 939 (1971). Ex. 102: Chapman v. Commissioner, 618 F.2d 856 (1st Cir. 1980), cert. filed (aug. 28, 1980), rev’g and remanding C.E. Graham Reeves, 71 T.C. 727 (1979). Ex. 103: Stanley A. Hagerman, 34 B.T.A. 1158 (1936), reviewed (4 dis.), nonacq. 1937-1 C.B. 37, aff’d 102 F.2d 281 (3rd Cir. 1939). Ex. 104: Mrs. Frank Andrews, 26 B.T.A. 642 (1932), reviewed (3 dis. on other grounds). As Examples 103 and 104, supra., and Example 105, infra., indicate, it is also common to indicate the presence of concurring and dissenting opinions parenthetically. If a specific concurring or dissenting opinion is cited, the concurring or dissenting judge or chief judge is indicated parenthetically by a “J.” or “C.J.” Ex. 105: Central Table Manufacturing Co. v. United States, 417 U.S. 673 (1974) at 682 (White, J., dissenting). In a few cases the case caption may change during the appeal process. This is indicated by the use of “sub nom.” From the Latin phrase sub nominee. Ex. 106: Brown v. United States, 999 F.2d 909 (17th Cir. 1999), aff’d per curiam sub nom Green v. United States, 888 U.S. 888 (1999). C. Parallel Citations Frequently tax practitioners do not have available in their private libraries complete sets of official reporters. Many practitioners find it convenient instead to use tax case reporters published by Commerce Clearing House, Prentice Hall, Research Institute of America and Lexis/Nexis. In addition, all Supreme Court tax cases are also published in the Internal Revenue Cumulative Bulletin. It is not uncommon, therefore, to give one or more parallel citations in addition to the official citation (which must always be given). Ex. 107: Quick v. United States, 503 F.2d 100 (10th Cir. 1974), 742 USTC par. 9700, aff’g 360 F. Supp. 568 (D.C. Colo. 1973), 73-2 USTC par. 9742. Ex.108: Central Tablet Manufacturing Co. v. United States, 417 U.S. 673 (1974), 1974-2 C.B. 109. 15 Where parallel citations are used, they should be used consistently throughout the writing. In general, it is recommended that parallel citations not be used unless the writer knows that a particular reader to whom the writing is addressed will have a preference for a particular set of parallel citations. Since all tax cases are easily cross-referenced from source to source, the failure to use parallel citations will usually not cause significant inconvenience and will greatly reduce the burden of drafting, proofreading, and reading for content. D. Specific Courts i. United States Supreme Court Supreme Court cases are cited to the United States Supreme Court Reports that are published by the Government Printing Office. Decisions on petitions for certiorari are cited to the same reporter. Ordinarily it is not necessary to give the history of a case decided by the Supreme Court, except in the event where a rehearing has been requested. Ex. 109: Central Tablet Manufacturing Co. v. United States, 417 U.S. 673 (1974). Ex. 110: Helvering v. Stuart, 317 U.S. 154 (1942), rehearing denied 317 U.S. 711 (1942). The Supreme Court is the only court that is always referred to by a capital “C” in legal writing. Ex. 111: The decision by the Court resolved the conflict between the circuit courts of appeals. ii. United States Circuit Courts of Appeals Cases appealed to a Circuit Court of Appeals are cited to their official reporter, “Federal Reporter,” published by West Publishing Company. Federal Reporter is in three series – the first series (F.), the second series (F.2d) and the third series (F.3d). The particular circuit is indicated parenthetically along with the year the case was decided. Ex. 112: Hansen v. Commissioner, 471 F.3d 1921 (9th Cir. 2006). Ex. 113: Given v. Commissioner, 238 F.2d 579 (8th Cir. 1956). Ex. 114: Baldwin Locomotive Works v. United States, 221 F. 59 (3rd Cir. 1915). 16 iii. Federal District Court Cases tried in Federal District Court are cited to their official reporter, Federal Supplement, published by West Publishing Company. The reporter segment of the citation is “F.Supp.” The particular district court is indicated parenthetically with the year. Ex. 115: Rockswold v. United States, 471 F.Supp. 1385 (D.Minn. 1979). A few pre-1932 district court cases have been reported in the “Federal Reporter.” Ex. 116: De Ganay v. Lederer, 239 F. 568 (E.D. Pa. 1917). Notice that the district is given, but not the division. In states (including the District of Columbia) where there is only one district court, “D.” is followed by the state. Ex. 117: Rockswold v. United States, 471 F.Supp. 1385 (D.Minn. 1979). Ex. 118: Smith v. United States, 999 F.Supp. 999 (D.D.C. 1999). In many states more than one district court exists and an additional geographic initial is used. Ex. 119: De Ganay v. Lederer, 239 F. 568 (E.D. Pa. 1917). iv. United States Court of Claims Cases decided in the United States Court of Claims are reported officially by the Government Printing Office in “United States Court of Claims Reports” (Ct.Cl.) Nevertheless, despite the existence of an official reporter it is customary to cite Court of Claims cases to the “Federal Reporter Supplement” (cases decided between 1932 and 1959). The court (Ct.Cl.) and date are indicated parenthetically. Ex. 120: Oglebag Norton Co. v. United States, 610 F.2d 715 (Ct.Cl. 1979). When referring to the opinion of a trial judge in a Court of Claims case, an unofficial citation to CCH’s USTC series or Prentice Hall’s AFTR series must be used and any subsequent history must be given. Ex. 121: Forward Communications Corp. v. United States, 78-2 USTC par. 9542 (Ct.Cl.Tr.Div. 1978), aff’d in part per curiam 608 F.2d 485 (Ct.Cl. 1979). 17 v. United States Tax Court Tax Court reported opinions are either regular opinions or memorandum opinions. Small case decisions are not officially published, but are available for researchers. Regular opinions are cited to the official reporter, “Tax Court of the United States Reports” (T.C.), published by the Government Printing Office. It is unnecessary to give the name of the court parenthetically. However, reviewed cases should be indicated, as should any acquiescence or nonacquiescence. Since the Commissioner of Internal Revenue is the respondent in every case, it is customary to give only the petitioner’s name. Ex. 122: J. Simpson Dean, 35 T.C. 1083 (1962), reviewed (1 dis.), nonacq. 1973-2 C.B. 4. Memorandum decisions are not reported officially and should be cited to the Commerce Clearing House series “Tax Court Decisions” (T.C.M.), Prentice Hall series (P-H Memo TC), or Research Institute of America (RIA T.C. Memo). The latter citations are unusual in that reference is made to a paragraph number and not to the volume number. Ex. 123: American-La France-Foamite Corp., 18 T.C.M. 447 (1959). Ex. 124: American-La France-Foamite Corp., par.59,101 P-H Memo TC (1959). Ex. 125: American-La France-Foamite Corp., RIA T.C. Memo par. 1959-101. Summary opinions are not officially reported decisions, but are available through the Commerce Clearing House and Research Institute of America. Ex. 126: Joel C. Wilson, T.C. Summary Opinion, 2013-18. Tax Court Rules are cited as “T.C.R.” in any case where it is necessary to cite a particular section of the court rules. Ex. 127: T.C.R. 31(b). vi. Board of Tax Appeals Citation form for regular Board of Tax Appeals cases is substantially similar to the form for Tax Court cases, except that “B.T.A.” is used in the reporter segment as an abbreviation for the official reporter of the Government Printing Office, “United States Board of Tax Appeals Reports.” Ex. 128: Mrs. Frank Andrews, 26 B.T.A. 642 (1932), reviewed (3 dis. on other grounds). 18 Memorandum decisions of the Board of Tax Appeals are reported neither officially, nor by Commerce Clearing House. Prentice Hall, however, does publish the opinions in its PH Memo BTA series. Ex. 129: Philip Hilbert, par. 41476 P-H Memo BTA (1941). vii. Recent Cases Cases which are too recent to be found in a bound official reporter are cited in the same fashion as their normal citation, except that the volume and page numbers are given in blank. When possible, an accessible parallel citation should be given. Ex. 130: United States v. Vogel Fertilizer Co., ___ U.S. ____ (1982), 82-1 USTC par. 9134, 49 AFTR2d 491, 1982 U.S. LEXIS 64. The Tax Court reporter is published twice a year, which can result in the researcher finding a recent court opinion prior to the publication of an official citation. In these cases, the Tax Court will issue a temporary citation until such time as the official reporter is published. Once the official citation is known or officially reported, the researcher should only use the official citation. The citations in Examples 129 and 130, infra., illustrate the use of temporary and permanent citations. Ex. 131: Cathy Marie Lantz, 132 T.C. No. 8 (2009). Ex. 132: Cathy Marie Lantz, 132 T.C. 131 (2009). SECONDARY SOURCES I. Tax Services Tax services are rarely cited and even then only under duress. When cited (under duress), the volume number is given, followed by the year, the name of the service, and the appropriate paragraph number. Ex. 133: 3 CCH 1982 Stand. Fed. Tax Rep. para. 2377.2206. Ex. 134: 2 P-H 1982 Fed. Tax para. 7333(5). Ex. 135: 7 Mertens, Law of Federal Income Taxation 38A.08 (1977). Ex. 136: 5 RIA, 1982 Fed. Tax Cood. 2d C-2307. Ex. 137: 831-3rd BNA Tax Portfolios (2013). 19 Note that where a service has multiple volumes the format is: volume number author(s), if identified, (underscored) title (italicized) page or paragraph number edition and date (in parenthesis) Ex. 138: Meyer, Income Averaging, 100-4th Tax Man. Port. 8 (1980). Ex. 139: Cutler and Martin, How to Reduce Taxes by Dividing Income Among the Family, P-H Tax Ideas par. 13001 (1982). II. Treatises and Textbooks Books, treatises, and textbooks use the following format: author(s) by last name title (italicized) edition publisher publisher’s city and state year (in parenthesis) Ex. 140: Saltzman, IRS Practice and Procedure, Warren, Gorham & Lamont, Boston, Mass. (1981). Ex. 141: Freeland, Lind, and Stephens, Fundamentals of Federal Income Taxation—Cases and Materials, 15th ed., Foundation Press, Mineola, N.Y. (2009). Where a particular page is to be identified, use “at” followed by the page number. Ex. 142: Saltzman, IRS Practice and Procedure at 235, Warren, Gorham & Lamont, Boston, Mass. (1981) (hereinafter “Saltzman”). Notice that the “hereinafter” rule may be used to simplify further citation. III. Law Reviews The format for citing law review articles is as follows: author by last name title (italicized) volume number periodical (law review is abbreviated “L. Rev.”) 20 page number at which article begins specific page (if other than beginning page) year Ex. 143: Cox, Estate Planning for Farmers After the Reform Act of 1976, 14 Wake Forest L. Rev. 577 (1978). Ex. 144: Rose, The Prohibited Interest of Section 302(c)(2)(A), 36 Tax L. Rev. 131 at 135 (1981). Articles initially designated as “Comments,” “Notes,” or “Recent Developments” are frequently presented in law reviews. Although the traditional practice has been to omit the author’s name in cases where the author is a student, the better practice is to give credit in any case where the author can be identified. Similarly, although past practice has been to omit lengthy titles, it is better to give the full title or caption of the article. Ex. 145: New York State Bar Assoc., Tax Section, Comment, Report on Reverse Triangular Mergers and Basis—Nonrecognition Rules in Triangular Reorganizations, 36 Tax L. Rev. 395 (1982). IV. Other Journals and Periodicals The rules for citing other journals and periodicals are substantially similar to those for citing law review articles. Ex. 146: Rose and Parker, The Foreign Investment in Real Property Tax Act of 1980, 34 Tax Lawyer 545 (1980). The following are the approved abbreviations for the most common tax journals and periodicals: Journal CPA Journal Chartered Life Underwriters Journal Employee Benefit Plan Review Estate Planner’s Quarterly Estate Planning Estates, Gifts and Trusts Journal Executive Compensation and Employee Benefits Report International Tax Journal Journal of Corporate Taxation Journal of Pension Planning and Compliance Journal of Real Estate Taxation Journal of Taxation Kiplinger Tax Letter Mergers and Acquisitions (The Journal of 21 Abbreviation CPAJ CLUJ Emp. Ben. Pl. Rev. Est. Plan. Q. Est. Plan. E.G.T.J. Exec. Comp. and Em. Ben. Rept. Int. Tax J. J. Corp. Tax. J. Pen. Plan. and Comp. J. of Real. Est. Tax. J. of Tax. Kiplinger Tax Let. Merg. and Acq. Corporate Venture) National Tax Journal Oil and Gas Tax Quarterly Oil and Gas Taxes Reports Pension World Personal Finance Law Quarterly Real Property, Probate and Trust Journal Review of Taxation of Individuals Tax Advisor Tax Alert Tax Barometer Tax Executive Tax Law Review Tax Lawyer Tax Policy Taxation for Accountants Taxation for Lawyers Taxes Interpreted Taxes—The Tax Magazine Tax Management Memorandum Tax Notes Tax Shelter Insider Tax Sheltered Investments Report Trusts and Estates Virginia Tax Law Review Washington Tax Review Nat. Tax J. Oil and Gas Tax Q. Oil and Gas Tax. Rep. Pens. World Pers. Fin. Law Q. Real Prop., Prob. and Trust J. Rev. of Tax. of Indiv. Tax Adv. Tax Alert Tax Barom. Tax Exec. Tax L. Rev. Tax Lawyer Tax Pol. Tax. for Acc. Tax for Lawyers Tax. Interp. Taxes T.M.M. Tax Notes Tax Shelt. Ins. Tax Shelt. Inv. Rept. Trusts and Est. Va. Tax L. Rev. Wash. Tax Rev. V. Proceedings Reports Reports of the proceedings of a tax seminar are treated for citation purposes essentially the same as law review articles. Most such proceedings consist of a series of papers or lectures reproduced (after editing) in one or more published volumes. Thus, a citation form similar to that used for law review articles is appropriate. Where there is more than one volume and the pages are numbered consecutively, it is unnecessary to give the volume number. Ex. 147: Losey, Special Problems of Nonresident Aliens, 36 N.Y.U. Inst. 1039 (1978). The following are approved abbreviations for the most common reports of tax proceedings. Proceeding Chicago University School of Law Federal Tax Conference Institute on Estate Planning, University of Miami Law Center 22 Abbreviation Chicago Tax Conf. Miami Inst. on Est. Plan. National Association of Tax Administrators Tax Conference National Tax Association Tax Conference New York University Institute on Federal Taxation Notre Dame Tax Conference Rocky Mountain Mineral Law Institute Southern California University Tax Institute Southwestern Legal Foundation Oil and Gas Law and Taxation Institute Southwestern Legal Foundation Private Investments Abroad Institute Tulane Tax Institute Nat. Assoc. of Tax Admin. Tax Conf. Nat. Tax Assoc. Tax Conf. N.Y.U. Tax Inst. Notre Dame Tax Conf. Rocky Mt. Min. Law. Inst. So. Cal. Tax Inst. S.W. Oil and Gas Inst. S.W. Priv. Inv. Abroad Inst. Tul. Tax Inst. VI. Internet Sources Internet sources are only cited directly when there are no other traditional printed sources, such as material available only through a website or blog. The citation should be made to the title, page and date of the publication as they appear on the website, followed by the Internet uniform resource locator (URL). Ex. 148: Jack Townsend, Sentencing Guideline Amendment on Unclaimed Credits, Deductions and Exemptions, Federal Tax Crimes (April 13, 2013), http://federaltaxcrimes.blogspot.com/2013/04/the-united-statessentencing-commission.html If the author or owner of the material is apparent from the website or URL, it may be omitted from the citation. Ex. 149: Model Statute on Compilation of State Tax Return Data (September 7, 2006), http://www.mtc.gov/uploadedFiles/Multistate_Tax_Commission/Uniformi ty/Uniformity_Projects/A_-_Z/Final%20%20Compilation%20of%20State%20Tax%20Return%20Data%20Statute. pdf When the material exists in a printed format, but is difficult to find or obscure, a parallel citation to the Internet source is appropriate. Ex. 150: Erel, Yang and Weisbach, Do Acquisitions Relieve Target Firms’ Financial Constraints?, National Bureau of Economic Research Working Paper No. 18840 (February 2013), http://www.nber.org/papers/w18840 Compare Example 88, supra. to Example 151 infra. 23 Ex. 151: Capital Construction Fund for Commercial Fishermen, Pub. 595 (2/2006) http://www.irs.gov/publications/p595/index.html If a slip opinion is available from an official Internet site from a court, the citation should be as follows: Ex. 152: National Federation of Independent Business v. HHS, ____ U.S. ____ (2012), http://www.supremecourt.gov/opinions/11pdf/11-393c3a2.pdf CITATION USAGE I. Official Citations of the Tax Court and Internal Revenue Service The United States Tax Court and the Internal Revenue Service follow the official citation format of The Bluebook: A Uniform System of Citation (Columbia Law Review Ass’n, et al, 19th edition, 2010) as the official source for citation. See, CCDM 33.1.2.2.3.3(3) and CCDM 35.7.2.1.3. The Tax Court announced an amendment to its citation format for filed documents under T.C. Rule 23(f). The amended rule provides that case citations prepared by computer, printers and typewriters must be underscored (see, Ex. 153), but documents “printed” should be italicized (see, Ex. 154). Ex. 153: Neely v. Commissioner, 116 T.C. 79 (2001). Ex. 154: Neely v. Commissioner. 116 T.C. 79 (2001). The IRS Chief Counsel’s Office does provide for several deviations in citation usage from The Bluebook. See, Notice CC-2012-015 Citation Form in Counsel Documents (August 1, 2012). II. Order of Citation In deciding which of multiple citations to give first, the rule is to cite first the most important authority. A reasonable order of priority is as follows: a. b. c. Statutes Cases i. Supreme Court cases (most recent case first) ii. Court of Appeals cases (most recent case first) iii. Tax Court cases (most recent case first) iv. Court of Claims cases (most recent case first) v. District Court cases (most recent case first) Administrative Precedents i. Regulations 24 d. ii. Revenue Rulings and Procedures iii. Other official pronouncements iv. Private rulings, technical advice memoranda, etc. Secondary Sources i. Treatises ii. Law review articles iii. Other articles iv. Other secondary sources III. Use of Signals Signals are used to identify various facets of authority and are always italicized. An excellent explanation of the uses of signals is set forth in sections 2.3 through 2.5 of the Harvard Citations System. Among the more common signals in usage are: a. b. c. d. e. f. g. h. i. j. k. Accord Alternative Holding But cf. But see Contra Cf. Compare. . . with. . . E.g. See also See generally Semble IV. Short Forms for Citation Repeats From time to time it is convenient to have a shorthand method of citation. This is especially so where repeated lengthy citations can be avoided. Use of “hereinafter,” “id.,” or “supra.” is indicated whenever a citation is to be repeated and the use of a device would avoid such a repeat. a. “Id.” is used to avoid repeating the immediately preceding authority. If there is a variation on the preceding authority, the variation should also be indicated. Ex. 155: 165Smith v. United States, 456 F.Supp. 285 (E.D. Mich. 2018) 166 Id. at 301. b. “Supra.” is used in cases where an authority has been cited in full previously, but where it is inappropriate to use “id.” because of the presence of intervening cited authorities. The classical rule that “supra.” is not used to cite cases has been largely abandoned, although it continues to be rare to use “supra.” to refer to statutes. Ex. 156: 8Bitker and Eustice, supra., note 3 at 519. 25 Ex. 157: 15 Smith v. United States, supra. note 1 at 229. c. “Hereinafter” is used for an authority that is cited many times, especially in cases where the authority is central to the discussion. Typically, the initial citation is followed by the abbreviated form in parenthesis. Avoid the use of “hereinafter” when the use of “supra.” would suffice. Ex. 158: Bittker and Eustice, Federal Income Taxation of Corporations and Shareholders, (1979) 4th ed., Warren, Gorhham & Lamont, Boston, Mass. (hereinafter “Bittker”). d. “Infra.” is rarely used in a citation, since all citations are given in full when they first appear. e. Other traditional short forms, such as “ibid.,” “op. cit.” and “loc. cit.” have been largely abandoned by the tax profession, although there remains those who savor the nice distinctions historically afforded by the use of those devices. CONCLUSION The art of proper citation offers a formidable array of difficulties even within the boundaries of a uniform system, since no such system could ever hope in the fastchanging legal world of today, to be exhaustive in its coverage. Accordingly, it is necessary that the tax scholar from time to time exercise sound judgment in matters of citation form. In view of the profound difficulties inherent in exercising sound judgment in the giving of tax advice on a client matter, the exercise of citation judgment should in theory offer relatively little difficulty, perhaps no more, by comparison, than would be experienced by Atlas given a fulcrum and an infinitely long lever. Of course, the sound exercise of judgment is more easily stated than achieved, especially by those of us who have left our infinitely long levers as a book-leaf between the eighth and ninth chapters of Bittker and Eustice. Therefore, it would seem necessary to espouse a rule of reason for situations and circumstances not specifically covered by the rules articulated above. The governing rule of reason is simple and two-pronged—endeavor to supply the reader with the information the reader is likely to need, even at the expense of the needs of the writer; and when in doubt, give more detail, rather than less. Such a rule of reason can hardly lead to disaster and will surely from time to time provide a muchneeded life raft to a drowning tax researcher. 26
T-SHIRTS Tax Research Memo To: Clients From: Lenin Rivera cc: Professor Martin Scheckner Date: February 16, 2018 Re: Advising on Start Up Business Entity INTRODUCTION: You have asked me to advise you with respect to the tax and other considerations in forming your proposed entity. You have asked me to answer some specific questions and concerns which are addressed in this memorandum under the issues section. FACTS: - see facts in separate memo ISSUES: In this section I will list the various issues this tax memo will address. For example: 1. What are the different types of entities can be formed under state law? 2. What type of entity do I suggest you form, now and in the future under State law? a) Is there a need for flexibility in the choice of entity? b) Are there any documents I suggest you have written to identify the rules of ownership and operation? 3. What types of entity do I think is the most appropriate? a) Upon formation b) In the future 4. Will it be a problem if the individual’s ownership interest is owned by any entities that they own? 5. How will debt be dealt with if something other than if a c corporation is formed? 6. What are the tax consequences upon formation of the entity? To the owner? Entity? 7. What changes made by the new tax law will most affect the new entity? 8. Let’s assume that the Korean branch flourishes. The profits are needed to acquire inventory in Korea for sales in Korea. Do you suggest that the Korean entity be a branch or a separate corporation? Why? LAW: Under the Internal Revenue Code § 1361 a corporation must meet certain requirements to be considered an s corporation. For example, an eligible corporation must not have more than 100 shareholders, and must not have a nonresident alien as a shareholder.1 Under the code of federal regulation section 1.1-1 individual resident are liable for income taxes whether the income is received from within or outside the United States.2 Under Florida Statute 605.0201 it lists the documents a person needs to submit to the state to form an LLC.3 CONCLUSION: Florida state law allows for four types of entities to be formed: corporations, partnerships, limited liability companies and sole proprietorships.4 I suggest that at the beginning the entity should be a limited liability company taxed as a partnership; however, in the future the company needs to be converted to a C Corp. when you decide to go public. I would not recommend starting as a C Corp. because an LLC can avoid double taxation. Also, C corporations are not flow-through entities so any losses that the company has the first few years will have to wait till the company has income to offset it.5 Starting as an S Corp. would also have its problems later if Ken Mong Kim decides to return to Korea. Although, right now you can start as a corporation and would be allowed to elect to be an S Corp. you would not be permitted later because an S Corp. can not have a nonresident alien investor. As for a general partnership its “form never offers limited liability for the partners, [but] A limited partnership can shield the limited partners”, yet it does not shield any of the general partners.5 LLC’s have more flexibility than corporations; they allow members to make their own management structure. They also, do not have to allocate losses or debts proportionate to each owner’s interest.4 Under Florida statue a person must submit articles of organization to the department of filing to forma an LLC.3 The articles of organization must contain “the name, [the] 2 street address in this state, and [a] written acceptance of the company’s initial registered agent.”3 I recommend that you also send a “description of the authority or limitation on the authority of a specific person in the company or a person holding a position or having a specified status in the company.”3 There are negative consequences that rise from forming as an LLC. It will take more time and effort to come up with the internal rules and rights of shareholders that all of you can agree on. As an LLC there is no problem in having your individual ownership interests be owned by another entity that you own. For example, Nick Danger can have his S corp. retain his portion of ownership, so can Biltmore’s living trust. Since both trusts and S Corp. are flow-through entities, the entities themselves will not pay taxes on distributed income but the individual person will pay taxes at their ordinary rate.6 All liabilities that rise out of the responsibility of conducting business are liable to the entity and not the individual.6 However, members are liable if they guarantee something. For instance, if creditors require members to guarantee a loan then the members are liable for that loan.5 Another plus to forming as an LLC taxed as a partnership is that they do not pay taxes on appreciated property that is contributed to the entity upon formation. This means that nobody will have to recognize a gain on the property that Nick Danger contributed. Although, not all of you have the same stake in the company, you will each have to file the tax form 1065, which is the tax return form for a partnership. Members will also need to file a schedule k-1 to show their part of income, deductions and credits that come from the LLC partnership.5 Under the new tax law, they try “to mitigate the rate advantage enjoyed by corporations by providing a deduction for a portion of earnings derived by taxpayers from trades or businesses conducted through pass-through entities.”7 In addition, under the new law LLC members with significant earnings will be subject to Medicare surtax and the Medicare portion of selfemployment tax.7 I suggest the for the Korean entity it should be a separate entity and not a branch. 3 Based on the above I recommend that you form as a limited liability company taxed as a partnership. The first reason why I suggest this type of entity is because flow-through entities avoid double taxation and LLC’s have limited liability. Second, nobody will have to recognize a gain on the appreciated property contributed to the entity. Finally, an LLC is normally cheaper to convert to a Corporation, but converting from a Corporation to an LLC is not. Please be aware that you should consult with competent legal counsel to assist you with the formation of the entity and taking minutes. CITATIONS: 1 26 U.S. Code § 1361 - S corporation defined. (n.d.). Retrieved February 16, 2018, from https://www.law.cornell.edu/uscode/text/26/1361 2 26 CFR 1.1-1 - Income tax on individuals. (n.d.). Retrieved February 16, 2018, from https://www.law.cornell.edu/cfr/text/26/1.1-1 3 The Florida Senate. (n.d.). Retrieved February 16, 2018, from http://www.flsenate.gov/Laws/Statutes/2013/605.0201 4 Florida DMV Online Guide. (n.d.). Retrieved February 16, 2018, from http://www.dmvflorida.org/florida-corporation-types.shtml 5 Eustice, J. S., & Kuntz, J. D. (2001). Chapter 2: Uses of S Corporations. In Federal income taxation of S corporations. Valhalla, NY: Warren Gorham & Lamont/RIA. 6 Spilker, B. C., Ayers, B. C., Robinson, J. R., Outslay, E., Worsham, R. G., Weaver, C. D., & Barrick, J. A. (2015). CHAPTER4 Entities Overview. In McGraw-Hills taxation of business entities. New York: McGraw Hill Education. 7 MELONE, M. A. (2018). THE DEDUCTION FOR PASS-THROUGH INCOME AND ITS EFFECT ON THE CHOICE OF ENTITY. Practical Tax Strategies, 100(02). Retrieved February 16, 2018. 4

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