Question

Write a 700- to 1,050-word paper that includes the following: Explain the primary sources of tax law. Define secondary sources of tax law. Define substantial authority. Describe the role of the courts and the Internal Revenue Service in interpreting and applying the sources of tax law

Answer 1

I) Primary Source of Tax Law:

The first primary source of tax law is the Internal Revenue Code or IRC, which comprises Title 26 of the United States Code. It is considered the foundation of all tax law (Anderson, 2010). There are three other primary sources of tax law, which are Legislative Sources, Administrative Sources, and Judicial Sources. Legislative sources consist primarily of the U.S. Constitution, new tax laws, treaties with foreign countries,and reports issued by congressional committees as new laws are enacted. Legislative sources are generally accorded a higher level of authority than the other judicial and administrative authorities (Timber Tax, 2010) Administrative interpretations are found within treasury regulations.

II) Secondary Source of Tax Law:

Secondary sources of the tax laws are tax services, journals, treatises, newsletters and even textbooks. The secondary source is considered unofficial sources of tax information. This information is issued by a professional or journal writer thus containing their personal point of view on the law. It is the interpretation of the tax law via the statutory or primary sources that are in publication. This information is used for analyses and evaluation of the primary sources. This source is best for research, when both sides of an issue is at hand, and the researcher can form their own opinion on said issue.

III) Substantial Authority:

If there is substantial authority for a position taken on a tax return, neither the taxpayer nor the tax preparer will be subject to the penalty for under reporting income even if the IRS successfully challenges the position taken on the return. By contrast, if there is not substantial authority for a position taken on a tax return, the under reporting penalties may be imposed unless the position has been adequately disclosed and there is a reasonable basis for the position.

IV) Role of the courts and the Internal Revenue Service in interpreting and applying the sources of Tax Law:

Internal Revenue Service has found the tax payer has under reported their income, neither the preparer nor taxpayer is subject to penalties. Substantial authority protects both the taxpayer and the tax preparer from penalties even if the IRS has challenged the tax return and won. Substantial authority is something taxpayers need to be aware of and needs to be used ethically by the tax preparers. The role of the courts and the Internal Revenue Service interpreting the sources of the tax laws are in the case of disputes and issues with taxpayer’s income tax filings. The purpose of the tax courts is to make sure that the taxpayers are paying the correct taxes that are assessed under the tax laws. The Internal Revenue Service’s role is to process tax returns and ensure that there are no deficiencies. The Internal Revenue Service also ensures that the tax laws are being followed and issues administrative rulings for different issues. The courts role in interpreting and applying the sources of tax law are to enforce the tax laws as they interpret them.