In each issue, JATA publishes reviews of textbooks and other books of interest to tax scholars. All book reviews are solicited by the Associate Editor. However, if you know of a book that you would like reviewed, or if you are interested in reviewing a book, please contact the Associate Editor.
Taxation, Virtual Currency and Blockchain
Virtual currencies have risen from the shadows of their theoretical underpinnings to stake claim as a mainstream financial tool. While this emergence has been a positive development in many ways, it has also posed a number of important challenges to stakeholders and tax practitioners alike. Existing taxing regimes were largely unprepared to meet the many challenges posed by the meteoric rise of virtual currencies, and even today, more than ten years after the creation of Bitcoin, practitioners, taxpayers, and policy makers continue to struggle.
Thankfully, the call to make sense of this rapidly changing field has now been heard. With her new book, Taxation, Virtual Currency and Blockchain, Professor Aleksandra Bal bravely steps forward to answer the call by having conducted a thorough and comprehensive review of the field. Through her work, Professor Bal endeavors to synthesize the tangled web of cryptocurrency taxation content into a comprehensive, organized, and understandable source book. By rendering this service, she helps to bring order and clarity to this emerging and rapidly changing field.
The stated purpose of Taxation, Virtual Currency and Blockchain is to provide readers with an in-depth review of potential tax implications that may result from this emerging technology. The book goes further, however, by examining basic and fundamental policy questions such as whether virtual currencies require additional regulation, or whether tax issues posed by virtual currencies can be managed through existing regulatory regimes. Over the course of nine chapters, Bal dives headlong into many of the more widely recognized, as well some of the more nuanced, questions presented by virtual currency taxation. In a field that is rapidly rising in prominence, this book accomplishes its stated purpose. The book does indeed provide a roadmap through a dense forest of material, and paves the path forward for students and scholars alike.
Taxation, Virtual Currency and Blockchain could not have been more timely published or be more urgently needed. Virtual currencies have now become a firmly entrenched component of the economic landscape. As numerous new proposals for initial coin offerings are currently being advanced, including plans by major global players such as Facebook, it is critical for tax professionals to become informed and prepared. Virtual currencies, and associated tax issues, are now a mainstream phenomenon and practitioners, academics, and regulators must take notice.
The book is organized into nine distinct chapters with each chapter taking on a discrete topical area. The author drives the book forward with an introductory section of three chapters. These first three chapters open the discussion by providing readers with a historical overview of cryptocurrency and its origins. In Chapter 1, Professor Bal provides a blueprint that foreshadows the following chapters and an outline of the scope of the book and its content.
For readers who may need a basic review, Chapter 2 is particularly helpful, and provides important history, background, and context. This chapter examines the importance of blockchain to virtual currency development, as well as how blockchain works as a theory and in practice. The author illustrates that blockchain is built upon well-established and well-understood technologies including peer-to-peer networks, cryptographic algorithms, distributed ledgers, and a decentralized consensus. The author makes it clear to the reader that the true genius of blockchain is not in the technology it utilizes, but in the manner by which blockchain combines existing technologies to accomplish its purpose.
Continuing her review of basic concepts, Bal thoughtfully sets forth a useful background that includes the four fundamental principles upon which blockchain is built: (1) a distributed database (no single party controls the system and each party on a blockchain has access to the entire database and its complete history); (2) peer-to-peer transmission; (3) irreversibility of records; and (4) pseudo-anonymity. She attentively reminds readers that the identity of the parties is not disclosed during transactions and that blockchain is an openly distributed ledger that records transactions between two parties efficiently, in a verifiable and permanent way. This review of blockchain and cryptocurrency basics helps provide a solid foundation for exploring the rest of the book for readers who might be new to these concepts.
Moving into Chapter 3, Professor Bal describes the critical role that the development of smart-contracts played in blockchain's emergence. Dr. Bal provides contextual background on smart-contracts (a digital contract executed through computer code) dating back to 1996. She also explores the benefits and risks of virtual currency, as well as classification issues that are significant to taxation. Further, Dr. Bal also discusses initial coin offerings (ICOs) and the qualification of virtual currency as regulated securities under securities laws within the United States. Together, the first three chapters of the book provide critical background material for readers new to the field, while allowing those with more subject-matter familiarity to focus on subsequent sections of the book. Armed with this review, readers are now prepared to tackle the rest of the material.
In Chapter 4, the author examines the conceptual foundations of virtual currency income taxation. In this chapter, she explores income tax considerations generally, including income determination, capital gains, and questions raised by virtual currencies. Her review is theoretical in nature and is not jurisdiction-specific. The potential activities that may create income tax concerns are posed as universal and may include (1) exchanges of goods and services for virtual currency, (2) exchanges of legal currency for virtual currency, (3) exchanges of virtual currency for another virtual currency, (4) currency mining, (5) possession of virtual currency that appreciates in value, and (6) receipt of virtual currency (for instance as a gift or an inheritance). The author posits that many of the issues that impact virtual currency are analogous to issues that impact similar assets in other contexts.
In Chapter 5, Bal turns to jurisdictionally specific examinations of income taxation by prominently addressing the virtual currency tax orientation of the United States, including the IRS's position on major issues. Bal notably points out that in the IRS's 2014 notice Virtual Currency Guidance, the IRS addresses many questions regarding cryptocurrency taxation in the United States. The IRS generally views virtual currency as property, and, as a result, the same tax principles that apply to property transactions apply to transactions in virtual currency in the United States. Bal completes her coverage of income taxation in Chapter 6 by providing recommendations for improvements of existing tax systems in managing virtual currency challenges.
In the following three chapters, Dr. Bal pivots away from income taxation, and turns her analysis to consumption taxes. Chapter 7 provides a general overview of these taxes in the context of virtual currency. In Chapter 8, Bal then addresses specific jurisdictional examples, most notably focusing on the United States. In Chapter 9, Bal closes out her coverage of consumption taxes by making several recommendations for consumption tax policy makers and regulators.
Dr. Bal's work contains an advocacy component as well. Chiefly contained in Chapter 6 and in Chapter 9, Bal promotes reforms. In Chapter 6, Bal makes recommendations for income tax administration and compliance practices. The author also ardently advances a procedural due-process policy development argument, and proposes that policymakers must engage a sound policy adoption process, particular to each jurisdiction, in order to craft a cryptocurrency taxation regime that is optimally structured to meet the needs of each individual tax authority. In Chapter 9, Bal identifies best practices for taxing virtual currency transactions and examines methods for improving consumption tax practices.
In concluding her book, Bal provides a wide variety of useful resources for the benefit of the reader. She provides an annex that consists of a compilation of regulations from a significant sample of important jurisdictions for evaluation, reference, and comparison. Bal also provides an extensive resource of important cases, a substantial bibliography that is useful for identifying sources for further research, and a comprehensive list of publications by tax administration and regulatory bodies.
In Taxation, Virtual Currency and Blockchain, Bal provides a thoughtful and well-considered overview of the major taxation issues posed by virtual currency. In this timely work, she synthesizes a nebulous body of content into a clear and sensible design. She provides readers with the structure for mastering a complex and emerging area of taxation—and this is no small feat. For professors who are seeking a text that tackles this important and emerging field, this book would provide an excellent choice. The book is written in an understandable and accessible fashion, and each chapter adds significant value to the text. It would make an excellent introductory resource.
Taxation, Virtual Currency and Blockchain is replete with pertinent regulatory and legislative references. The book extensively incorporates significant and critical cases, rulings, and regulations. Accordingly, for instructors who wish to utilize the case method, this book could serve as a good embarkation point or possibly as a supplementary text. Additionally, the book could deliver a valuable subject-matter overview by providing structure for further study. Combining this book with appropriate and desired supplemental materials may be a good strategy as well.
Bal's work makes an important contribution to an emerging and important area of tax law. Her work is well-researched, well-written, and well-timed. This book could be particularly useful in a course on emerging issues in taxation, or as a supplement to a technology taxation or an income taxation course. This book would be a good resource for use most likely in a graduate accounting (M.S.A.) program, a graduate tax (M.S.T.) program, or a graduate tax law (LL.M.) program. Moreover, the book would be an excellent reference source for anyone who is interested in taxation of virtual currency.
Comparative Taxation: Why Tax Systems Differ
Countries use national tax systems to cover all infrastructure and service expenditures through these mandatory contributions to the common good, for which they do not have income from their own resources or charge fees. They also use national tax systems to encourage desirable behavior and discourage bad deeds. One may expect established best practices that apply across countries over time, but tax systems are embedded in social systems that change continuously. The first edition of the book, authored by the late Cedric Sandford and published in 2000, aimed to provide an overview of the tax systems primarily from the perspective of his home country, the United Kingdom. He covered tax structures, taxes at lower tiers of government, income taxes, consumption taxes, capital or wealth taxes, tax compliance as well as tax policy-making, and tax reform. Sandford presented observations, OECD statistics, and trends before offering explanations.
This second edition continues Sandford's approach and expands coverage in two ways. First, the authors aim to present a comparative analysis of their residence countries, which are the United Kingdom, Australia, and the U.S. (these three OECD member countries share Anglo and common law perspectives). Second, in addition to the expected update of the previously covered topics, discussions of supranational influences on national tax systems, environmental taxes, tax issues surrounding multinational corporations, and tax complexity were added by expanding one chapter and adding three new chapters. The length of the book increased by 60 percent from 224 to 358 pages. The second edition includes 30 tables and seven figures as well as a bibliography with 385 entries, of which 293 (76 percent) have been published since 2000, the year of the first edition. The references include 37 journal articles published in 2017 as well as 65 from the two preceding years. The book is organized in 12 chapters.
The first three chapters (Chapters 1–3) introduce the reader to the questions the authors seek to answer in their quest to explain why tax systems differ, followed by a discussion of tax system families (i.e., groups of countries with similar tax system structures for different reasons), as well as an introduction to supranational and subnational influences on national tax systems, which the authors summarily call tax assignment. In recent years, the OECD has increased in size and stepped up its influence on tax policy, which is reflected throughout the book. This part includes the OECD classification of taxes as well as tax statistics of select countries.
The following five chapters (Chapters 4–8) discuss types of taxes, beginning with personal income taxes, followed by corporate income taxes, capital or wealth taxes, consumption taxes, and environmental taxes, respectively. Interspersed with statistics, the authors offer explanations for what drives the reliance on certain taxes over others. Consumption taxes is the longest chapter, which concludes with the merits of a VAT. The new chapter on environmental taxes relies significantly on OECD studies, statistics, and recommended key design principles for tax policy-makers.
The remaining chapters (Chapters 9–12) cover issues surrounding multinational corporations, tax complexity, tax compliance, and tax reform, respectively. The new multinational chapter is centered around the global competition for capital over the past two decades. Another new chapter discusses tax complexity. It covers the tax operating costs for both taxpayers and administrations before it looks into the sources of complexity and ways governments might minimize it. The last chapter discusses tax reform. (The book was published prior to the U.S. tax reform in late 2017 and thus does not include it.) The tax complexity and tax reform chapters are identified as co-authored by Chris Evans, who resides in Australia. This comes through in the writing. Readers are invited to guess who took the lead on the other chapters.
This book promises to be a refreshing update for anyone interested in contemporary tax policy beyond the U.S. It contains a wealth of information for legal and empirical tax researchers and offers materials for teachers of any tax course. Its style is also suitable for graduate and Ph.D. students. At times, the authors use a Q&A format by posing “why” questions and then answering them. This is quite effective and would be a welcome feature in each chapter. The book may be used as a text for a tax policy course or supplemental reading in a comparative tax or international transactions course. This will, however, require some explanation, because the coverage goes beyond the promises of the title. The extensive bibliography with numerous recent entries is another asset. Anyone who wants to examine a reference in context will long for an e-book version.
Our Selfish Tax Laws: Toward Tax Reform that Mirrors Our Better Selves
Ut imago est animi voltus sic indices oculi.—CiceroMarcus Tullius Cicero, De Oratore 3.221 (“The face is a picture of the mind with the eyes as its interpreter.”)
Anthony Infanti is one of the country's most accomplished critical tax scholars. For almost 20 years, he has devoted himself to exposing the biases that are embedded in the tax laws of the United States and advancing the argument that the law reflects and even creates inequalities. In his new book, Professor Infanti broadens his argument by placing the study of U.S. tax law in a larger context, using comparative studies of the tax laws of the Canada, France, and Spain, especially in the areas of housing policy and the taxable unit, to illustrate each country's different values. He convincingly demonstrates that the U.S. tax system both values and benefits those who already possess power and privilege. Professor Infanti's book illustrates the myriad ways that the U.S. tax law both supports and is a constituent part of a discriminatory legal system that treats people differently because of race, ethnicity, class, gender, sexual orientation, immigration status, gender identity, and disability. In that way, the tax laws are a “mirror” of the society we currently have. But Professor Infanti goes a step further and calls readers to see, in the reflection of the tax laws, the possibility of our “better selves.” Professor Infanti recognizes the extraordinary expressive value of the tax law; he imagines a system of collection, enforcement, and public spending that benefits all people and reflects the nation's highest and best values of equal opportunity, human dignity, and shared community.
The book divides into six chapters. In Chapter 1, “A Tax Meditation on Selfishness,” Professor Infanti sets the stage for the argument that the tax law is a unique lens for examining cultural attitudes and values. Tax law, he explains, raises basic questions about fairness—who pays how much and what the taxpayer gets in return from the government (in the form of benefits or services). On the one hand, Professor Infanti explains, we have come to expect a certain amount of selfishness from ourselves and others as taxpayers. No one likes to pay taxes, and in a self-reporting system, a certain level of strategic (or perhaps Professor Infanti would say “selfish”) behavior is tolerated. On the other hand, Americans consistently engage in more charitable giving, both financially and in terms of community involvement, than citizens of almost any other nation. Therein lies a fundamental contradiction in our national character: we could see paying taxes as fulfilling our civic duty, but many Americans feel that the current—or perhaps any—system is “unfair.” This gulf between attitudes toward “private” (voluntary) charitable giving in the form of donations of time or money to schools, arts organizations, or local religious institutions, on the one hand, and “public” (involuntary) giving in the form of taxation embodies the very tax selfishness that Professor Infanti brilliantly describes as “American as apple pie.”
In Chapter 2, “The Tax Mirror,” Professor Infanti illustrates the relationship between tax law and larger social values. He locates his work in the rich tradition of comparative law scholarship that examines how laws are borrowed, transplanted, and circulated among nations. He notes the dearth of comparative tax scholarship and, at this level, Professor Infanti's work is already a significant contribution to the field. But where Professor Infanti truly shines is in illuminating the direct link between a society's tax law and its culture, where others see only economic policy. Professor Infanti moves to test his theory that tax law is a cultural reflection in Chapters 3 and 4.
Chapter 3, entitled, “Comparative Case Study: Housing Policy and Tax Law,” examines the housing law and policy in four countries—the United States, Canada, France, and Spain. Professor Infanti explores major differences between a government's rhetorical commitment to housing and its real economic backing for the same. In the United States, for example, there is not now and there never has been a right to affordable housing, even though homeownership is part of the stereotypical “American dream.” The U.S. federal government provides generous tax credits for developers of low-income housing and vouchers to (supposedly) increase the stock of affordable housing. Yet Professor Infanti explains how these programs operate more effectively as subsidies for large corporations and private landlords. By contrast, in Canada, where the federal government acknowledges a right to housing, the tax law encourages home ownership primarily through individual tax incentives. It discourages rental developments by limiting depreciation and the deductibility of real estate losses, for example. The Canadian federal government has committed to a national housing co-investment fund, as well. Whether that program will be successful in increasing affordable housing is unclear, but it represents an alignment between the government's stated values and actual policy. In both the United States and Canada, there is a tension in housing policy between direct federal government involvement and market incentives, a topic that Professor Infanti explores in detail.
Fiscal policy in France reflects that country's acknowledgment of housing as a right of all citizens and some immigrants. Banks make interest-free loans to individuals for the purpose of purchasing homes. The banks then receive governmental reimbursement—in the form of federal tax credits—for the loss of interest income on these loans. Furthermore, there is a special income tax imposed on the wage base of certain employers (a “logement”) that is earmarked for funding social housing.
As in France where tax laws and housing policy are intertwined, Spain also provides a variety of incentives for homeownership. Rather than reflecting a social commitment to housing as a right, however, Spain's polices are motivated by an explicit choice to link the housing market with the economy (most notably in the form of greater employment in housing construction jobs). Undoubtedly, physical destruction of buildings during Spain's civil war led to a housing shortage and provided an immediate incentive for the government to institute tax incentives for construction of private housing. Tax credits in particular have transformed Spain from “a nation of renters to one of homeowners,” as Professor Infanti explains. But the close relationship between the economy and the housing industry means that in times of economic crisis, the government may need to play a more active role in providing basic services (like housing) to those who are too poor to benefit from incentives delivered through the tax system.
Tax specialists may find themselves on more familiar ground in reading Chapter 6, entitled, “Comparative Case Study: The Taxable Unit.” Much of Professor Infanti's prior work has exposed the ways that the U.S. tax system discriminates against non-traditional families, especially same-sex couples.1 Although the U.S. Supreme Court recognized the validity of same-sex marriages in United States v. Windsor,2 it remains true that couples—whether same-sex or different-sex—who are married are privileged over those who are not. In contrast, Canada has an individual-based filing system, with correspondingly strict rules on assignment of income so as to avoid income-shifting. France makes the family, or rather the household, the taxable unit, and requires couples to file together. Couples who are married or in formally recognized unions received greater benefits than those who do not; couples include on their tax return the income of minors and any dependents in the household. Spain also treats the family as the appropriate tax unit, but does not require joint filing, as it has been constitutionally recognized that joint filing may disadvantage secondary earners.
In each of these four countries, Professor Infanti sees a reflection of larger values. In the United States, the choice of the taxable unit means that marriage occupies a privileged place in the law. The greatest incentives (in the form of a marriage “bonus”) go to families that conform to the traditional one-earner model. In Canada's choice of the individual as the tax unit, Professor Infanti sees a “flexibility of a willingness to evolve and adapt to social reality.” That is, families come in a variety of different forms and there is symbolic value in formally treating women and men as equal in all respects. France's choice of the family as the mandatory taxable unit reflects the “primacy of the family in French society,” whereas Spain's designation of the family as a taxable unit, without mandatory filings, represents a tension between a desire to prioritize the family and a hope that Spain will take its place among “modern” European nations.
In Chapter 5, entitled, “The Tax Mirror and the American ‘Self,'” Professor Infanti uses the comparative lessons of the previous chapters to argue that the American “self” idealized by the tax code is male, white, heterosexual, and married with a non-working spouse who cares for children. The married couple most privileged by the law likely is comprised of two citizens who are cisgender, physically and mentally able, and racially privileged. Where others might see taxpayers in economic terms only—their balance sheets and checkbooks—Professor Infanti sees “how the social and economic marginalization of subordinated groups is replicated in, and reinforced by our tax system. The intersecting and interconnected messages of exclusion conveyed by our federal tax system … are troubling regardless of the dollars and cents involved—for how to do out a price tag on anyone's humanity?” And there is Professor Infanti's clarion call to all tax professionals: We who define, enforce, interpret, and advise about the tax laws must strive for a law that validates and benefits all people.
In his final chapter, entitled, “Mirroring Our Better Selves,” Professor Infanti offers suggestions on how to reframe interpersonal, local, and national conversations about taxation. He urges taxpayers to work together to create a tax system that respects and values all Americans. This process can begin only when we recognize the tax law as the non-neutral system that it is. Perusing Professor Infanti's work helps start that process: The book is impeccably researched and written. It is easy for both tax specialists and non-specialists to read. The book open readers' minds and helps them engage with big-picture questions about why—beyond revenue-raising—a nation's tax laws are important. After reading this book, no one can feel the same way about paying the annual tax bill due each April 15. It may never be a day for celebration, but it certainly should be a day of aspiration—a day we each recommit to creating and supporting a society that achieves justice for all.
See, e.g., The Moonscape of Tax Equality: Windsor and Beyond, 108 Nw. U. L. Rev. Colloquy 110 (2013), reprinted in 108 Nw. U. L. Rev. 1115 (2014); LGBT Families, Tax Nothings, 17 J. Gender Race & Just. 35 (2014); LGBT Taxpayers: A Collision of “Others,” 13 Geo. J. Gender & L. 1 (2012); Inequitable Administration: Documenting Family for Tax Purposes, 22 Colum. J. Gender & L. 329 (2011); Decentralizing Family: An Inclusive Proposal for Individual Tax Filing in the United States, 2010 Utah L. Rev. 605; Deconstructing the Duty to the Tax System: Unfettering Zealous Advocacy on Behalf of Lesbian and Gay Taxpayers, 61 Tax Law. 407 (2008); Tax
Equity, 55 Buff. L. Rev. 1191 (2008); Homo Sacer, Homosexual: Some Thoughts on Waging Tax Guerrilla Warfare, 2 Unbound: Harv. J. of the Legal Left 27 (2006).
United States v. Windsor, 133 S. Ct. 2675 (2013).
Tax Controversies: Practice and Procedure, Fourth Edition
The discipline of IRS practice and procedure remains a mystery to graduate tax students and many practitioners. Often, professional services firms fail to provide their staff with any cogent educational development material on this topic. Undergraduate programs shed little insight into the complex area of the tax compliance and consulting areas.
This long-awaited update from the third edition (published in 2009) does much to mitigate the dearth of texts related to IRS practice and procedure. It provides appropriate topic depth without needlessly confusing the student. Through its many footnotes and code section references, the reader is able to gain an additional depth of understanding. Moreover, its “modular” approach to topics allows for both a full- and half-semester course of study.
Not unlike most traditional textbooks, the first couple of chapters provide a historical context of the general IRS function in regard to procedural matters. However, unlike other textbooks, this introductory material ought to be assigned and covered. While graduate students concentrating in taxation may have become accustomed to reading about the history of the federal tax system back to the early 1900s, culminating with the Sixteenth Amendment, few students understand how procedural matters fit into the picture. Other than perhaps answering a few IRS notices or demand letters, students often have no idea what the Practice and Procedure area involves. So, a strong understanding of the less exciting nuts and bolts is an appropriate way to begin.
One valuable tool entitled “Overview of the Federal Tax Controversy Process” is found early in Chapter 1. My approach is to use the diagram it presents as a reference point while covering each of the distinct areas of focus. For example, the book contains chapters that cover significant procedural areas of the law, including the following: Returns and Examinations; Privilege; IRS Appeals; Statutes of Limitations; Choice of Litigation fora; Deficiency Notices; Civil Penalties; and Statutory Interest. The remaining chapters are rounded out with more in-depth topics including the following: Liens, Levies, and Collections; Innocent Spouse provisions; Ethical Issues; and Tax Research.
As part of our Graduate Tax Program, the Tax Practice and Procedure course is offered in a half-semester format. Except for the first two introductory chapters, there is no need to follow the book's progression; instead, I assign the chapters in manner I find most heuristically enriching. This flexibility enables me to tweak the course to meet students' interests and needs, and allows me to add or delete materials, as needed, without disrupting course flow. For those teaching a full-semester course, materials may be easily added depending on the goals of the instructor and the needs of the class.
In my view, the layout of the text may be described as follows:
Chapters 1 and 2—Introduction and IRS Rulemaking
Chapters 3–13—Areas of Fundamental Knowledge (e.g., Examinations, Privilege, Confidentiality, Appeals, Statutes of Limitations, Deficiencies, Litigation, Penalties and Interest)
Chapters 14–20—Advanced Topics (Liens, Levies, Collections, Offers in Compromise, Innocent Spouse Relief, Ethical Issues, and Tax Research)
Why do I use this text? For many of us in tax, the study of Tax Practice and Procedure began and ended with IRS Practice and Procedure, written by the late Mr. Saltzman, and periodically updated by the publisher. For a while, I did use that text in my course and found it to be somewhat arcane and dense. I was delighted when I found the Lederman and Mazza text and after a quick review, I immediately adopted the previous edition for my course and, not to my surprise, students reported that it was readable and comprehensible.
The basic structure of each chapter involves introduction of the materials and related references to IRC sections, regulations, and court cases. Each chapter functions independently of the others. Finally, each chapter ends with several relevant problems for discussion. These problems can either be assigned or used as the basis for class discussion. Importantly, these problems tend to isolate concepts to prevent a “muddying” of the waters. The author solutions are complete and on point.
As an example, Chapter 5, entitled “IRS Appeals,” is instructive. The placement of this chapter early in the text reinforces the pervasiveness of this function. It reminds readers how the examination process operates and describes how the appeals process may be utilized at this early phase. The various strategic options available to the taxpayer are also explored, raising the following important issue. In response to a so-called 30-day letter, should a taxpayer go directly to Appeals or wait until the receipt of a 90-day letter? The text reviews if and to what extent it makes more sense to wait passively or act proactively.
For those taxpayers for whom it may be appropriate, the text reviews the preparation of a formal Protest Letter and also when an informal letter may suffice (i.e., amount at issue is $25,000 or less). A detailed discussion of the various types of protests (skeletal, report responsive, and comprehensive) provides an opportunity for students (and practitioners) to think critically in terms of which type of protest would best fit their particular fact pattern. The pros and cons of each type of protest letter are also explored in detail. The discussion then turns to the statuses of docketed versus non-docketed appeals negotiations. In both cases, the taxpayer (or representative) is dealing with Appeals. However, not only are the discrete procedural issues reviewed, but also the strategic advantages and disadvantages of each particular course of action are discussed.
The chapter continues with a discussion of Form 870-AD, which memorializes the agreement between the Appeals Division and the taxpayer and contrasts the technical differences with the Form 870 (which would likely be secured at the examination level). This analysis includes a court case and a review of the equitable estoppel doctrine. The chapter ends with a brief mention of so-called “closing agreements” provided under IRC 7121, which preclude either party from reopening a case absent a showing of fraud, malfeasance, or misrepresentation of a material fact. Due to their finality, such agreements are used infrequently and are limited to those situations where the subsequent tax effect is material.
As the course material unfolds, students should be periodically warned that the tax controversy process is not, by nature, a linear process. Depending on the goals of the taxpayer (or representative) and the strength of the taxpayer's position, for example, the Appeals Division can be reached at several different times in the process of settling a controversy. Students should continually reference back to the tax controversy diagram found in Chapter 1.
In sum, I strongly recommend this book for a graduate-level course in a Masters of Science Taxation program. Students who might benefit from this text should have a deep interest in the inner workings of the federal tax system. As I have said, it can be tailored to fit either a half-semester or full-semester format, but it may not be appropriate for a first course in a graduate program.