Questions and Answers
What are three primary statutory sources of U.S. federal tax law?
- The Constitution, 2) Various tax treaties, 3) The Internal Revenue Code
What significant effect did the 16th Amendment have on U.S. income tax?
Eliminated the claim that the Federal income tax was unconstitutional.
What is a tax treaty?
An agreement negotiated between countries concerning the treatment of individuals and companies subject to the tax laws of multiple countries.
Explain the purpose of a tax treaty.
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Briefly summarize the usual steps of the legislative process for the development of federal tax legislation.
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List the three committee reports that typically are prepared for a new tax law.
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When are committee reports useful to a tax researcher?
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What is a public law number?
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Where would a tax researcher find pertinent committee reports?
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What is valuable about the Floor Debate Report for a tax researcher?
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Discuss the evolution of today's Internal Revenue Code.
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How is the Internal Revenue Code subdivided?
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How are the subtitles of the Internal Revenue Code identified?
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In the citation § 101(a)(2)(B), what does the 'a' stand for?
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Which Code section contains the statute for the definition of Gross Income?
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Are there any exceptions to the general formatting rules for a Code section?
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Not all statutory tax laws are found in the Internal Revenue Code.
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Identify the general contents of § 61.
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Comment on the interpretation problem regarding words that connect phrases, such as 'and' and 'or'.
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Comment on the interpretation problem regarding recent changes in the Code.
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Comment on the interpretation problem regarding effective dates.
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Comment on the statement, 'All tax questions can be answered using the Internal Revenue Code.'
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Use an online tax service to locate § 117 of the Internal Revenue Code. How many subsections does § 117 include?
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How many paragraphs does § 117(b) include?
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How many subparagraphs does § 117(d)(2) include?
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Study Notes
Statutory Sources of U.S. Federal Tax Law
- Primary sources are the Constitution, tax treaties, and the Internal Revenue Code.
16th Amendment
- Ratified on February 3, 1913, allowing Congress to levy income taxes without apportionment among states.
Tax Treaties
- Agreements between countries to address taxation of individuals and entities in multiple jurisdictions.
Purpose of Tax Treaties
- Aim to eliminate double taxation and can cover various topics including estate taxes, corporate taxation, and withholding issues.
Legislative Process for Federal Tax Legislation
- Begins in the House Ways and Means Committee, proceeds through both houses of Congress, involves a Joint Conference Committee, and requires presidential approval to become law.
Committee Reports in Tax Legislation
- Generated by the Ways and Means Committee, Finance Committee, and Joint Conference Committee to provide insights and clarify tax law.
Importance of Committee Reports for Researchers
- Useful in interpreting unclear tax laws and understanding intentions behind legislative changes.
Public Law Numbers
- Each law passed by Congress is assigned a number indicating the session and order of passage, e.g., P.L. 100-203 refers to the 100th Congress's 203rd bill.
Publications for Committee Reports
- Key sources include the IRS's Internal Revenue Bulletin, GPO’s Cumulative Bulletin, BNA’s Primary Sources, CCH's Public Law Legislative History, and RIA’s collections.
Value of Floor Debate Reports
- These reports summarize discussions on tax bills and provide details on the legislative intent behind new provisions.
Evolution of the Internal Revenue Code
- The 16th Amendment led to a series of Revenue Acts, which were later compiled into the Internal Revenue Code of 1939, then reorganized in 1954, and extensively revised in 1986.
Structure of the Internal Revenue Code
- Subdivided into subtitles, chapters, subchapters, parts, sections, and subsections.
Identification of Subtitles
- Subtitles are labeled with capital letters, each relating to a specific area of tax law.
Citation Interpretation
- In citations like § 101(a)(2)(B), letters and numbers indicate subsections, paragraphs, and subparagraphs within the Code.
Exceptions in Code Interpretation
- Some Code sections contain general rules accompanied by exceptions that must be carefully considered for accurate interpretation.
Importance of Connecting Words
- Words like "and" and "or" significantly alter the application of provisions; precise interpretation is crucial.
Effective Dates of Tax Provisions
- Provisions may not take effect immediately and can have varying effective dates; clarity is needed in understanding these details.
Limitations of the Internal Revenue Code
- Not all tax questions can be answered solely using the Code; other sources may be necessary for full comprehension.
Researching § 117 of the Internal Revenue Code
- § 117 includes 4 subsections, § 117(b) contains 2 paragraphs, and § 117(d)(2) has 2 subparagraphs.
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Test your knowledge on the primary statutory sources of U.S. federal tax law with these flashcards. This quiz covers key concepts from Chapter 3 and explores important amendments that impact income tax in the United States.