Discussion Question 1 Do the following decisions have the same precedential value: (1) Tax Court regular decisions,

(2) Tax Court memo decisions (3) decisions under the small cases procedure of the Tax Court? Why? Which of the following sources do you think would be most beneficial for your client: (1) Tax Court regular decisions, (2) Tax Court memo decisions, (3) decisions under the small cases procedure of the Tax Court, or (4) Fifth Circuit Court of Appeals? The United States Tax Court was created in 1942 to take the place of the Board of Tax Appeals. The Tax Court has national jurisdiction and any person or entity that pays taxes can litigate there. Regular and memo decisions are issued by the Tax Court. The first time the Tax Court decides on a legal issue their decision is called a regular decision. Memo decisions come about due to slight variations of a previously decided case. Both regular and memo decision have the same authoritative weight. Cases can also be heard under the Tax Courts small cases procedure if the amount being disputed is under $50,000 including penalties and taxes but not interest. The hearing of these cases is less formal. The taxpayer can represent themselves and cases are judged by special commissioners instead of one of the tax court judges. The opinions of the commissioners are not published and do not have any precedential value. However, the cases decided on under small cases procedure cannot be appealed. I think when deciding which source would be most beneficial for a client it would depend on many different things such as what the case is about, whether it has been decided on before, and where they reside or do business. The fifth circuit court of appeals may be appealing to someone who has a case that has not been decided on in the past. The circuit courts are bound by the Supreme Court decisions and their own prior decisions. If the type of case has not been decided on the Circuit Courts have no precedent they have to follow. The Tax Court must rule consistently with the decisions of the court for the circuit where the taxpayer lives or does business. Resources Anderson, K. E., Pope, T. R., & Kramer, J.L. (Eds.). (2010). Prentice Halls federal taxation 2010: Corporations, partnerships, estates, & trusts (23rd ed.). Upper Saddle River, NJ: Prentice Hall. Discussion Question 2

What business entities are available for a new business? What are the tax and nontax advantages of each form? Select two business types and provide an example of when that selection is most appropriate from a tax perspective and from a nontax perspective. The business entities that are available for a new business are a sole proprietorship, partnership, C corporation, S corporation, limited liability company, or limited liability partnership. All the different types of business entities have different tax and nontax advantages. A sole proprietorship is owned by one individual, whom personally takes financial responsibility of the company. All business income and expenses are reported on the owners personal taxes. Because of this the income generated by the company is used along with the owners personal income to find the marginal tax rate. The marginal tax rate of a sole proprietorship may be lower than that of a corporation. Profits and cash may be withdrawn/contributed to the business without tax consequences. Even though separate books are generally kept for a sole proprietorship the money in the companys accounts belongs to the owner. Property may be withdrawn/contributed to the company without recognizing a gain/loss. The owner can use business losses to offset nonbusiness income like interest, dividends, and salary earned. A partnership is a business that is formed by two or more individuals or entities for profit. A partnership pays no taxes, but the income generated from the business is reported on the owners individual tax returns. The tax rate for a partnership may be lower than that of a corporation. The income earned by a partnership cannot be double taxed. Additional taxes are not imposed on distributions to the partners. With that said money or property can be contributed/withdrawn from the company without recognizing the gain/loss. Losses can be used to offset income from other sources. C Corporations are subject to double taxation. They are considered a separate entity from the owners personal finances. Shareholders employed by the corporation are considered to be employees for tax purposes and are entitled to tax-free fringe benefits. A fiscal year can be used instead of a calendar year as the companys reporting period. Shareholders can exclude 50% of the gain realized on the sale or exchange of stock that is held for more than 5 years. S Corpoarations are subject to single level taxation. S corporations pay no taxes. The shareholders marginal tax rates may be lower than a c corporations marginal tax rate. Company losses flow through to the returns of the shareholders which can be used to offset income earned from other sources. Shareholders can contribute/withdraw money from the company without recognizing gain.

A limited liability company (LLC) are treated like a partnership for tax purposes but the owners are not personally liable for the company. The LLC may choose to be taxed as a corporation or be treated like a partnership. A limited liability partnership (LLP) are usually formed when people are looking to start a business in the professional service industry. The advantage of an LLP is that the owners are not liable for the negligence or misconduct of their partners. They are still held accountable for their actions and the actions of employees under them. A LLP can also choose to be taxed as a corporation or partnership. The type of business entity that is selected for a prospective company depends on which entity would be more beneficial. For example, a limited liability partnership would be great for a prospective company that want to open its doors as a public accounting firm with multiple owners. This gives them all of the same advantages of a partnership without the liability for other partners negligence or misconduct. A group of three people want to start a partnership type of business in the lawn care industry. However, they are afraid to have personal liability of the company. In this case a Limited Liability Company would be a good fit because they entity would pay its own taxes. Resources Anderson, K. E., Pope, T. R., & Kramer, J.L. (Eds.). (2010). Prentice Halls federal taxation 2010: Corporations, partnerships, estates, & trusts (23rd ed.). Upper Saddle River, NJ: Prentice Hall. Participation Class: What are some of the different types of published opinions and citations? What type of role do they have in court making decisions? Also what are the precedential value of the various decisions? There are many different types of published opinions and citations that are published in various sources. Below are a few examples of published statutory and administrative tax related primary sources. U.S. Code, Title 26 Internal Revenue Code

Code of Federal Regulations

Final and Temporary Treasury Regulations

Internal Revenue Bulletin Proposed Treasury Regulations Treasury decisions Revenue rulings and procedures Committee reports Public laws Announcements & Notices

Cumulative Bulletin Proposed Treasury Regulations & decisions Revenue rulings & procedures Committee reports Public laws Announcements & Notices

These various published sources of tax information can be used to aid the court in making decisions. Especially in a type of case that has never been ruled on by the particular court. The opinions & citations of courts are also published such as U.S. Supreme Court rulings, District Court rulings, Tax Court memos & regular rulings, and many more. The Supreme Court rulings seem to have the largest impact on making court decisions and carry the highest precedential value. The reason I say this is because they are followed by Tax Court, District Courts, U.S. Court of Federal Claims, and the Circuit Courts of Appeals. The Circuit Court of Appeals has a high precedential value as well. Other courts are required to follow the decisions of the court of appeals the case is appealable in. Some of those courts are Tax Court, U.S. District Court, and U.S. Court of Federal Claims. Decisions made by the U.S. District Court have no precedential value outside of its own jurisdictions.

Resources Anderson, K. E., Pope, T. R., & Kramer, J.L. (Eds.). (2010). Prentice Halls federal taxation 2010: Corporations, partnerships, estates, & trusts (23rd ed.). Upper Saddle River, NJ: Prentice Hall.

Class:

"Distinguish between proposed, temporary, and final Treasury Regulations. Distinguish between interpretative and legislative Treasury Regulations." What are your thoughts about the Treasury Regulations? When a Treasury Regulations is first issued it is done in a proposed form. The public, including various organizations are able to comment on the proposed regulation. Taking the publics comments into consideration, the Treasury Department then finalizes the regulation with revisions if needed, or allows the proposed regulation to expire. Along with being classified as proposed, temporary, or final, treasury regulations are also classified as interpretive or legislative. Legislative regulations are formed after Congress delegates the Treasury Department to create tax rules in relation to a certain matter. Interpretative regulations are issued under the authority of Sec. 7805 and are created to put the IRCs statuary language into laymans terms. In my opinion it seems that interpretative Treasury Regulations carry a fair amount of weight in court. The court can strike interpretative regulations if they think it is unreasonable and plainly inconsistent with the revenue statues. Legislative regulations can be challenged; however, they are much more difficult to overturn than interpretative regulations. Resources Anderson, K. E., Pope, T. R., & Kramer, J.L. (Eds.). (2010). Prentice Halls federal taxation 2010: Corporations, partnerships, estates, & trusts (23rd ed.). Upper Saddle River, NJ: Prentice Hall. Class:

What do you think about LLC's or LLP's? What are some of their advantages and/or disadvantages? Do you think if you opened a business with someone else that you would use one of those options or would you use a partnership? Sdfd Class:

What do you think about in dealing with LLP's that partners are liable for their acts and acts by employees under their direction but not for the other partners? Is this fair? Why? sdkfjdk