M2A1
ASSIGNMENT
TAX MEMORANDUM
Based on assigned fact situation
Assignment specifics:
- Prepare a near final file memo on your problem for class discussion on September 18
- Submit final revised memo in D2L drop box by Sunday September 22
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Communications & the Tax Professional
- What Makes Tax Research Communication Effective ?
- Requires it be fully developed and delivered in a manner that is accepted & understood by the audience
- Preparation for Effective Communication requires:
- Thorough application of research techniques
- Thorough research of expectations of the audience
- Identification of factors that interfere with the message
- Feedback & corrective measures to the communication
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Communications & the Tax Professional
- The researched File Memo, followed by
- Communication to the client
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Structure of Technical Tax Communications
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Purpose of the File Memo
- Organize facts, tax issues, relevant law & conclusions
- Creates document for a review of research activities by the practitioner’s supervisors or colleagues
- Allows for documentation of matter for later review
- Occurs when the client , an auditor or a successor CPA involved with the client wants to understand the rationale for the recommendation
- Facilitates a later review of the recommendations to the client without having to recreate the underlying research
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The File Memo: Format and Content
- Facts
- Brief summary of relevant facts and issues
- Issues
- A list of tax issues being researched
- Conclusions
- Quickly determine whether each issue is “pro” or “con” for taxpayer
- Support
- Detailed review and evaluation of controlling laws
- Full citations
- Strengths and weaknesses of both sides of tax argument
- Actions to Be Taken
- Recommend subsequent actions for client
- Identify other strategies for tax return or audit positions
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Tax memo assignment
- 2-4 page memo to a partner in an accounting firm who provided you with the facts
- Take the facts as given, state factual assumptions if necessary
- Grade evaluation?
- Research is the point
- CCH AnswerConnect is a major tool
- Must cite the IRC section(s) being evaluated with (limited) quotes of important language that relate to your facts
- Recommended to cite a decision by the IRS or a court that supports your position (this is recommended for this memo, and required for the final project)
- Importance of grammar and vocabulary
The File Memo: Facts
- Taxpayer will not always provide all relevant facts
- Taxpayer may forget (potentially detrimental) facts
- Taxpayer does not always know which documents are important
- Must rely on taxpayer’s memory which may not be sufficient
- Loss of records/witnesses may occur
- The researcher must use professional judgment and experience to obtain all the relevant facts from the taxpayer
- The research must recognize that tax research may produce a need to gather additional facts if new tax issues are identified in the research process.
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The File Memo,
Links and Attachments (not part of your assignment)
- File Memo most often used by other tax professionals
- Language should be clear, yet can be more technical
- Reference primary & secondary authority with citation format
- Attach for file documentation only most important documents which can include:
- Case briefs
- Highlighted copies of primary sources of law
- Highlighted copies of explanatory material
- Related in-house memos
- Various IRS rulings
- Journal articles
- Above documents should highlight important sections
- NOTE that file documentation is not part of current assignment
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Evaluating Sources of Tax Law
- Court case opinions written well contain a wealth of information on tax issues:
- Identifies evolution of pertinent tax law
- States competing interpretations of the law
- Identifies critical facts and issues
- Often includes lengthy concurring and dissenting opinions
- Identifies additional relevant facts or issues to argue against opinion
- Rationale can be helpful for appeal of case
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Evaluating Sources of Tax Law
- Revenue Rulings and Revenue Procedures frequently modified or held invalid
- To successfully negate an unfavorable pronouncement often takes litigation for the weight of competing arguments to be considered
- District Court opinions in your client’s jurisdiction are likely precedent to follow
- If enough similarity exists in the facts or tax issues of those cases to your client’s scenario
- Tax Court decisions for taxpayers in your client’s jurisdiction on similar facts & tax issues are precedent to follow
- Tax Court decisions for taxpayers NOT in your client’s jurisdiction on similar facts & tax issues may or may not be precedent to follow
- It depends on whether the appellate circuit for your client has taken a different position on the issue which is comparable to a Tax Court decision for another taxpayer in a different geographic circuit
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Evaluating Sources of Tax Law
- Appellate court decisions (outside Supreme Court)carry highest precedential weight as follows:
- From client’s geographic Circuit unless distinguishable
- From the U.S. Court of Appeals Federal Circuit if any taxpayer chooses to litigate the matter in the U.S. Court of Federal Claims.
- Important circuit decisions
- 2nd Circuit (includes New York)
- 7th Circuit (includes Chicago)
- 9th Circuit (includes California)
- Federal Circuit
- Older cases
- Geometrically declining importance, except for
- Supreme Court cases
- Cases continually cited for rationale in current decisions
- 2nd, 9th, and Federal Circuit cases
- Where it is the only precedent available
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Evaluating Sources of Tax Law
- Tax treatises and journals
- Identify current, critical tax issues
- Can include comprehensive summary of controlling law
- Court decisions are never completely predictable
- Yet, on more complex issues, careful review of court decisions is essential for effective posturing to support a position
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Client Letters
- Telephone calls and e-mails to clients are prevalent
- Should be followed up with a detailed letter
- Letter should be brief: No more than two pages
- Often easier explaining complicated issues face-to face
Format & Content:
- Salutation/social graces/general conclusion
- Summary of results
- Objective of research
- Statement of facts/disclaimer
- Summary of critical sources
- Implications of the results
- Assumptions/limitations
- Closing/reference to follow-up meeting/ social graces
- Attachments
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Sample Client Letter -Sophisticated Client
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Sample Client Letter – Less Sophisticated Client
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Effective Written Business Communications
- Main point(s) in first paragraph
- State well-defined purpose, and stick to it
- Avoid “filler” language, clichés, and trendy jargon
- Revise several times for clarity
- Use social amenities
- Spell Names CORRECTLY – Know recipient’s current titles – Add short handwritten messages for added personal touch where appropriate
- Review carefully using editing and proofreading aids
Use the KPMG info for your reference
https://www.kpmguniversityconnection.com/University/view/curriculum/?module_id=96
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