• All authorities relevant to the tax treatment of an item, including the authorities contrary to the treatment, are taken into account in determining whether substantial authority exists.
• The weight of authorities is determined in light of the pertinent facts and circumstances. There may be substantial authority for more than one position with respect to the same item.
• Because the substantial authority standard is an objective standard, the taxpayer's belief that there is substantial authority for the tax treatment of an item is not relevant in determining whether there is substantial authority for that treatment.

Nature of Analysis.The weight accorded an authority depends on its relevance and persuasiveness, and the type of document providing the authority. For example, a case or Revenue Ruling having some facts in common with the tax treatment at issue is not particularly relevant if the authority is materially distinguishable on its facts, or is otherwise inapplicable to the tax treatment at issue. An authority that merely states a conclusion ordinarily is less persuasive than one that reaches its conclusion by cogently relating the applicable law to pertinent facts. The weight of an authority from which information has been deleted, such as a private Letter Ruling, is diminished to the extent that the deleted information may have affected the authority's conclusions. The type of document also must be considered. For example, a Revenue Ruling is accorded greater weight than a private Letter Ruling addressing the same issue. Private rulings, technical advice memorandums, general counsel memorandums, Revenue Procedures and/or actions on decisions issued prior to the Internal Revenue Code of 1986, generally must be accorded less weight than more recent ones. Any document described in the preceding sentence that is more than 10 years old generally is accorded very little weight. There may be substantial authority for the tax treatment of an item despite the absence of certain types of authority. Thus, a taxpayer may have substantial authority for a position that is supported only by a well-reasoned construction of the applicable statutory provision.

The following are considered authority for purposes of determining whether there is substantial authority for the tax treatment of an item:

• Applicable provisions of the Internal Revenue Code and other statutory provisions
• Proposed, temporary, and final regulations construing such statutes
• Revenue Rulings
• Revenue Procedures
• Tax treaties and regulations thereunder, and Treasury Department and other official explanations of such treaties
• Federal court cases interpreting such statutes _ Congressional intent as reflected in committee reports
• Joint explanatory statements of managers included in congressional conference committee reports, and floor statements made prior to enactment by one of a bill's  managers
• General explanations of tax legislation prepared by the Joint Committee on Taxation (the Blue Book)
• Private Letter Rulings and technical advice memoranda issued after October 31, 1976
• Actions on decisions and general counsel memoranda issued after March 12, 1981
• Internal Revenue Service information or press releases, and notices, announcements, and other administrative pronouncements published by the Service in the Internal Revenue Bulletin

Internal Revenue Code.The provisions of the Internal Revenue Code are binding in all courts except when the provisions violate the United States Constitution.

Treasury Regulations (Income Tax Regulations).The regulations are the Treasury Department's official interpretation and explanation of the Internal Revenue Code (I.R.C.). Regulations have the force and effect of law unless they are in conflict with the statute they explain.

Revenue Rulings.The Internal Revenue Service has said the following about the weight given to Revenue Rulings:

Rulings and procedures reported in the Bulletin do not have the force and effect of Treasury Department Regulations, but they may be used as precedents. Unpublished rulings will not be relied on, used, or cited as precedents by Service personnel in the disposition of other cases. In applying published rulings and procedures, the effect of subsequent legislation, regulations, court decisions, rulings, and procedures must  be  considered, and Service personnel and others concerned are cautioned against reaching the same conclusions in other cases unless the facts and circumstances are substantially the same.

Letter Rulings and Technical Advice Memoranda.These are IRS rulings directed at a particular taxpayer.

Field Service Advice (FSA).These are IRS rulings issued to the IRS field operations by the Office of Chief Counsel. They may be directed to a particular taxpayer or to a particular issue.

The taxpayer in a dispute with the Internal Revenue Service has two choices after he or she receives the statutorynotice or notice of final determination (“90 day letter”):

1. File a petition in the Tax Court without paying the tax
2. Pay the tax and file a claim of refund. If the IRS rejects the claim of refund, the taxpayer can file a suit in the Federal District Court or the Claims Court

The U.S. Tax Court is a federal court of record established by Congress under Article I of the Constitution in 1942. It replaced the Board of Tax Appeals. Congress created the Tax Court to provide a judicial forum in which affected persons could dispute tax deficiencies determined by the Commissioner of Internal Revenue prior to the payment of the disputed amounts. The Tax Court is located at 400 Second Street, N.W.,Washington, D.C.20217. Although the court is physically located in Washington, the judges travel nationwide to conduct trial in various designated cities.

The Tax Court is composed of 19 judges acting as “circuit riders.” This is the only forum in which a taxpayer can contest a tax liability without first paying the tax. However, jury trials are not available in this forum. More than 90% of all disputes concerning taxes are litigated in the Tax Court.

The jurisdiction of the Tax Court was greatly expanded by RRA 98. The jurisdiction of the Tax Court includes the authority to hear tax disputes concerning notices of deficiency, notices of transferee liability, certain types of declaratory judgment, readjustment and adjustment of partnership items, review of the failure to abate interest, administrative costs, worker classification, relief from joint and several liability on a joint return, and review of certain collection actions. Furthermore, this court also has limited jurisdiction under I.R.C. §7428 to hear an appeal from an organization that is threatened with the loss of its tax-exempt status. Under I.R.C. §7478, the Tax Court can also issue a declaratory judgment for a state or local government that has failed to get a tax exemption for a bond issue.

The IRS issues a statutory notice of deficiency in tax disputes in which the Service has determined a deficiency. In cases in which a deficiency is not a issue, the IRS will issue a notice of final determination. A notice of final determination will be issued in the following types of tax disputes:

• Employee vs. Independent Contractor Treatment
• Innocent Spouse Claim Determinations
• Collection Due Process Cases

Both the statutory notice and the notice of final determination will reflect the date by which a petition must be filed with the Tax Court. The 90-day date cannot be extended by the Internal Revenue Service. If a Tax Court petition cannot be filed by the 90-day date, the taxpayer may write the Tax Court and request the correct forms to file a Tax Court petition. (The forms may also be obtained at the Tax Court Web site, webmaster@ ustaxcourt.gov). If the letter is postmarked by the 90-day date, the Tax Court will treat the letter as an imperfect petition and allow the taxpayer an additional period of time to perfect the petition and pay the filing fee. If a taxpayer cannot pay the $60 filing fee at the time the petition is filed, he or she  should request a waiver of the filing fee. The Tax Court may or may not grant a waiver of the filing fee, but will generally grant an extension for the taxpayer to pay the filing fee.

Taxpayers may represent themselves in Tax Court. Taxpayers may be represented by practitioners admitted to the bar of the Tax Court. In certain tax disputes involving $50,000 or less, taxpayers may elect to have their case conducted under the Court’s simplified small tax case procedure. Trials in small tax cases generally are less formal and result in a speedier disposition. However, decisions entered pursuant to small tax case procedures are not appealable. The Small Claims Division has a simplified petition and procedure so that the taxpayer can present his or her own case. However, the IRS can remove the case to the regular docket if the case involves an important policy question.

Cases are scheduled for trial as soon as practical (on a first-in, first-out basis) after the case becomes at issue. When a case is scheduled, the parties are notified by the court of the date, time, and place of trial.

The vast majority of Tax Court cases are settled by mutual agreement of the parties without the necessity of a trial. However, if a trial is conducted, in due course a report is ordinarily issued by the presiding judge setting forth findings of fact and an opinion. The case is then closed in accordance with the judge’s opinion by entry of a decision stating the amount of the deficiency or overpayment, if any.

The Chief Judge of the Tax Court decides which opinions will be published. The Chief Judge can also order a review by the full court of any decision within 30 days. Published decisions are reported in the Reports of the Tax Court of the United States. Unpublished opinions are reported as Memorandum Decisions by tax service publishers. Both the published and unpublished opinions may be found on the United States Tax Court Web site, webmaster@ustaxcourt.gov.

Any decision of the Tax Court can be appealed to the Circuit Court of the taxpayer’s residence. A final appeal can be made to the Supreme Court, but since its jurisdiction is discretionary, the court hears relatively few tax cases.

The taxpayer can choose to file a refund suit in the Claims Court or the Federal District Court once the taxpayer has paid the deficiency. In both courts, decisions of the Tax Court are not binding. The Claims Court sits as a single judge. A jury trial is available only in the Federal District Court.

The 13 judicial circuits of the United States are constituted as follows:

Circuits            Composition

D. C.                 District of Columbia

1st                    Maine, Massachusetts, New Hampshire, Puerto Rico, Rhode Island

2d                     Connecticut, New York, Vermont

3d                     Delaware, New Jersey, Pennsylvania, Virgin Islands

4th                    Maryland, North Carolina, South Carolina, Virginia, West Virginia

5th                    District of the Canal Zone, Louisiana, Mississippi, Texas

6th                    Kentucky, Michigan, Ohio, Tennessee

7th                    Illinois, Indiana, Wisconsin

8th                    Arkansas, Iowa, Minnesota, Missouri, Nebraska, North Dakota, South Dakota

9th                    Alaska, Arizona, California, Idaho, Montana, Nevada, Oregon, Washington, Guam, Hawaii

10th                  Colorado, Kansas, New Mexico, Oklahoma, Utah, Wyoming

11th                  Alabama, Florida, Georgia

Fed.                  All Federal judicial districts