With apologies to the character Shrek from the eponymously named movie, tax law is very much like an onion. Although many would suggest that the Internal Revenue Service (IRS) is very much like an ogre, the determination of an answer to many tax questions is akin peeling back the layers of an onion.
This is because the tax code, which is the tax statutes passed by Congress and signed into law by the President, is only one layer of the determination of your tax burden. The Internal Revenue Code represents the first layer, and is the tax law, strictly speaking. The IRS is the administrative agency that was created by Congress and delegated the authority to promulgate regulations and other administrative decisions to interpret and implement the IRC.
A Revenue Ruling is one of many administrative materials that interpret the IRC and provide guidance to taxpayers in how the IRC functions. And how many administrative materials does the IRS produce that interpret the IRC?
They include Cumulative Bulletins, News Releases, General Counsel Memoranda, Actions on Decisions, Technical Memoranda, Revenue Procedures, Delegation Orders, Revenue Rulings, Executive Orders, Treasury Department Orders, Private Letter Rulings, Technical Advice Memoranda, Field Service Advice, Chief Counsel Advice, Litigation Guideline Memoranda, Litigation Bulletins and Information Letters.
And then there are the court cases, which begin with the Tax Court, which is a specialized federal court that only hears cases related to taxation. Those decisions may be reviewed by a federal court of appeals. For the taxpayer, the advantage of filing a case in the Tax Court, as opposed to a federal district court, is that they need not pay the disputed tax prior to the litigation.
And this is why when you as a tax attorney their opinion on a tax matter, the answer often is, “It depends.”
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