Tax-Law Analysis 

Abstract

Tax law has a unique analytical framework, which the nature of tax law requires. In areas of uncertainty, advisors and taxpayers are unable to predict the outcome of some reporting positions with perfect certainty. If a taxpayer takes a reporting position that results in the taxpayer paying less tax at the time a tax return is filed, the taxpayer runs the risk of being required to pay tax later upon an IRS audit. Congress recognizes that there are areas of uncertainty in tax law and only imposes penalties if the authority supporting a reporting position is weak. To determine the strength of a reporting position, a tax advisor must be able to identify and analyze legal authority that relates to the reporting position and determine whether the authority supports the desired reporting position or is contrary to it. The analysis then requires assessing the (1) relevance, (2) persuasiveness, and (3) type of document of each authority that relates to a reporting position and weighting each authority. By weighting the types of authority based upon those three criteria, an advisor is able to determine the likelihood that a reporting position will be upheld. That likelihood determines whether the support for a reporting position is sufficient for the taxpayer to avoid penalties in the event a court determines that tax was owed with respect to the reporting position. Knowing the weight of authority supporting a reporting position allows taxpayers to make informed decisions about entering into and structuring transactions and taking such reporting positions. * Brad is a professor of law at Brooklyn Law School and the principal at Bradley T. Borden PLLC. This Article is based upon a paper delivered at the Tax Forum, and the Author thanks participants for comments on an earlier draft of the Article. This Article is based upon a paper delivered at the Tax Forum, and the Author thanks participants for comments on an earlier draft of the Article. The positions and any errors in the Article remain the Author's.