UCF Tax 6065

1
UCFTax 6065

• Constitutional and Legislative Sources of Federal
  Tax Law
• Text Chapter Three

2
Statutory Sources of Tax Law

• U.S. Constitution
• 16th Amendment
• Tax imposed by Congress must apply uniformly
  throughout the U.S.
• Tax Treaties
• Purpose is to eliminate double taxation when
  citizen of U.S. earns income in another country
  (or vice versa)
• When Treaty and IRC or other law conflict, the
  one adopted later usually controls
• Tax Treaties are available through CCH and RIA
• Internal Revenue Code

3
Legislative Process

• Exhibit 3-5
• Committee Reports
• Explain changes
• Reasons for proposals
• Found in the IRSs Internal Revenue Bulletin
• CCH and RIA have Committee Reports
• Enacted Legislation is referred to by Public Law
  
• P.L. 110-289 is the 289th law passed by the 110th
  Congress (2007-2008 Congress). This act is the
  Housing and Economic Recovery Act of 2008.

4
Internal Revenue Code of 1986, as Amended

• Title 26 of the United States Code
• Subtitles (A)
• Chapters (1)
• Subchapters (B)
• Parts (VI)
• Sections (179)
• However, all you really need is the Section
  number because each section number is used only
  once in the code
• Section (179)
• Subsection (b)
• Paragraph (6)
• Subparagraph (B)
• Clause (i)

5
Where to find IRC

• Paid Tax Services
• RIA
• CCH
• Free Internet Sites
• http//uscode.house.gov
• May also need to refer to 1939 or 1954 code if
  referring to an old court case that referenced
  code sections prior to 1954 (1939 code) or prior
  to 1986 (1954 code)

6
Interpreting IRC

• Often, Code provisions are long, interrelated,
  and confusing (textbook page 104)
• Most Code sections contain
• A general rule
• Followed by conditions that must be satisfied
• Followed by exceptions
• Sometimes followed by exceptions to the
  exceptions!
• Definitions

7
Interpreting the Code - Advice

• Determine the limitations and exceptions to a
  provision
• Just because a section fails to mention an item
  does not mean that the item is excluded
• e.g. all-inclusive definition of gross income in
  section 61
• Read definitional clauses carefully
• e.g. Section 403(i) defines employee to include
  employer
• Do not overlook words such as and and or
• Read the code section completely

8
Interpreting the Code - Advice

• Watch out for cross-referenced or related
  provisions
• Conflicts sometimes arise between code sections
• e.g. Section 163 and Section 265
• Be alert for hidden definitions
• e.g. there are several definitions of related
  parties and small business corporation
• Some answers may not be found in the code!
• Take careful note to measuring words such as
  less than 50 exceeds 35 at least 80 and
  more than 80

9
Interpreting the Code - Examples

• Example 1
• Jasmine is under age 19 and lives with her father
  and her aunt. She is supported 1/3 by her father
  and 2/3s by her aunt. Who (if anyone) can claim
  a dependency exemption for Jasmine?
• Example 2
• Jasmine is 25 and a full-time student at UCF. She
  lives with her boyfriend John. Jasmine receives a
  non-taxable scholarship that pays for her tuition
  and books, but John pays for all of her living
  expenses. Jasmine has no taxable income. Can John
  claim a dependency exemption for Jasmine?