Tax law makes the government (meaning the IRS) your partner for most business transactions. Partners sometimes disagree. When you and the IRS have a disagreement, you need the law, a regulation, ruling, or some other document that proves your point.
This article is about the value of documents in your dealings with the IRS. Your first encounter with the worrisome side of your partnership could come in some form of IRS audit. When an audit happens (and they’re happening more and more often these days), you need to know when and how to use documents to prove your deduction.
Don’t expect your partner to know the partnership agreement. Your encounter with the IRS might involve someone who has never read the law—and never will. (IRS auditors do most of the audits. They do not read the law. They are not accountants. Most IRS agents are accountants.)
Sometimes your partner’s big concern has little to do with what the law says. For example, at the IRS appeals level, the hazards of litigation may override what the law says.
If you have to take your case to court, you will find that documents and court rulings have specific meanings for the court. Some of the court rulings form precedent that the court must follow. Other court rulings and IRS documents represent substantial authorities that the court likes to consider.
This article tells you how to use court rulings and documents that enforce your rights in your tax-law partnership. See exhibit 1 below for an overview of how documents are ranked.
In the exhibit, the first column lists the documents you will use in discussions with the IRS. The second column shows the hierarchy if you choose to deal with the courts. Think of ... Log in to view full article.