1. legislative
2. administrative
3. judicial

• authority from congress
• ex: statutory (constitution, IRC, treaties, Committee Reports)

1. House Ways and Means Committee
2. House of Reps
3. Senate Finance Committee (can do whatever they want to it)
4. Senate
5. Joint Conference Committee (compromise house and senate versions)
6. House and Senate again
7. President (sign or veto)
8. Congress (override veto with 2/3 vote)

• authority from the Treasury Department and the IRS
• ex: treasury regs, revenue rulings, private letter rulings, revenue procedures, technical advice memoranda)

1. legislative, interpretive, or procedural
2. propsed (for atleast 30 days), temporary (effect of law but only for 3 years), final

• do not have as much weight as regulations
• limited to a given set of facts
• deal with more specific issues then regs

• request from TP for IRS to provide tax consequences on a specific set of facts
• can be for completed transactions
• precedent applies only to TP making request
• IRS doesn't have to respond

• requested by IRS field agents during an audit
• applies only to affected TP

1. U.S. Tax Court
2. U.S. District court
3. U.S. Court of Federal Claims
4. U.S. Tax Court - Small Cases Division

• hears only tax cases
• one court, but 19 judges travel in smaller groups throughout country to hear cases
• TP doesn't have to pay deficiency before trial
• Jury trial not an option

• jurial trial if wanted
• must pay deficiency prior to going
• judges are not specialists in tax
• many courts across the country

• one court (D.C.)
• must pay first
• 16 judges (not specialists in tax)
• no jury trials

U.S. Tax Court - Small Cases Division

• $50,000 or less
• no appeal

1. U.S. Supreme Court
2. U.S. Court of appeals

• hears all appeals from tax and district court
• 11 circuits plus D.C. circuit
• must follow precedent of Circuit Court of Appeals for the circuit in which the District Court is located
• Tax Court will follow previous decisions in the Circuit that will have jurisdiction on appeal

1. 6 years if gross income omissions exceed 25% of the gross income stated on the return
2. no statue if TP willfully evaded tax in a fraudulent manner

• received by TP with Revenue Agent's Report (RAR) if agreement not reached between IRS and TP on tax to be paid
• IRS encourages agreement to the RAR or request of an appellate conference
• TP not required to respond

1. individuals whose gross income exceeds the individual's automatic deductions 
2. if net self-employment income exceeds $400 during the tax year

• 5% per month of the tax due with the return
• max of 25% penalty and min is lesser of $135 or amount of tax due
• not imposed if reasonable cause for filing late

• 15th day of April, June, September, and January if the amount of tax owed is atleast $1,000
• no penalty if tax is less than $1,000
• no penalty if tax payments during year were lower of 90% of current year taxes or 100% of last year's taxes (If AGI > $150,000, then tax payments during year must be at least 110% of last years)

• .5% per month (max of 25%)
• if nonpayment and nonfiling are imposed, total max is 25%
• not imposed if reasonable cause for filing late

occur when TP disregards the tax rules without reasonable cause

1. penalty of 20% of the tax due to inaccuracy if reason is negligence
2. 20% of tax due to inaccuracy if "substantial" understatement
3. 20% of tax understatement for substantial misvaluation of property
4. 40% for gross misvaluation of property
5. 75% of underpayment for fraud and an additon of 50% of inderest due on underpayment

individuals: when additional tax due exceeds the greater of $5000 or 10% of total tax on the return

corporations: understatement exceeds the lesser of 10% of tax required to be shown on return (or $10,000 if that is greater) or $10 million

• if an unreasonable position (no substantial authority to it) is part of the return or refund claim, they must pay the greater of $1000 or 50% of the income derived by the preparer for preparing the return
• if unreasonable position included, and preparer willfully attempts to understate tax liability or recklessly or intentionally disregards rules or regs, penalty is greater of $5,000 or 50% of the income earned by the tax preparer
• additional penatlies: not signing returns, not providing a copy to TP, not keeping list of records, endorsing or negotiating a refund check, disclosing info (unless for quality peer review or under an administrative order by an agency), and $100 for not exercising due dilligence