12/09/2023

BỘ GIÁO DỤC VÀ ĐÀO TẠO

TRƯỜNG ĐẠI HỌC KINH TẾ - TÀI CHÍNH
THÀNH PHỐ HỒ CHÍ MINH

TAX PLANNING

Chapter 5: Tax Research

TRẦN NGỌC THANH

thanhtn@uef.edu.vn

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Đại học Kinh tế - Tài chính thành phố Hồ Chí Minh www.uef.edu.vn

Table of contents

What is Tax research?

Tax research process

Application in Vietnam: Tax

advisor certification in
Vietnam

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1. What is tax research?

Tax research
• Tax research is the process of determining the most probable tax
consequences of a course of action undertaken by an individual or
organization.
• Tax research is related to tax consulting profession
=> Expect tax advisers to provide accurate, useful, and complete tax
information on a timely basis.
• Tax research is an intellectual skill that is developed through both
education and experience.

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Tax research
• A client may engage a tax adviser to research a transaction (or series of
transactions) that has already occurred or a transaction that the client proposes
to undertake at some future date.

Tax research
In case of a transaction that has already occurred:
• The adviser must identify the consequences of
the transaction and the proper reporting of the
transaction on the client’s tax return.
• The facts surrounding the transaction are a
matter of record and are no longer subject to the
client’s control.
• The adviser is limited to providing a tax
compliance service to the client.

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Tax research
o In case of a transaction that the client proposes
to undertake at some future date:
• The adviser can determine the tax consequences
of the prospective transaction and suggest ways
in which the transaction can be modified to result
in a more favorable outcome.
• The prospective transactions are subject to the
client’s control.

Tax research
• Thien Thanh Joint Stock Company, before recruiting employees, has
asked the Tax Consulting Company to advise the human resources
department to develop a policy on salary and remuneration for its
employees such as salary, allowance grants, health insurance premiums,
voluntary retirement insurance, rent, bonuses aimed at bringing tax
benefits to both parties (company and employees).

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2. Tax research process

Tax research process

• The tax research

process can be broken
down into six steps:

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Step 1: GET THE FACTS

o Get the facts to understand the client’s transaction
• Before a researcher can analyze the tax consequences
of a transaction, you must thoroughly understand the
transaction itself.
• Specifically, the researcher should discuss the details
of the transaction with your client to ascertain the
client’s motivation.
• The researcher should not assume that the client’s
initial summary of the transaction is accurate and
complete.

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Step 1: GET THE FACTS

• The researcher should question the client about the “who,

when, where, why, and how” of the transaction.
 What are the client’s economic objectives in
undertaking the transaction?
 What does the client foresee as the desired
outcome?
 What risks has the client identified?
• The researcher must take into account the level of the
client’s tax knowledge

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Step 1: GET THE FACTS

Case 1: Sara Colter, a professional photographer, is a new client who has
engaged your tax consulting firm to determine the tax consequences of a
proposed transaction. Sara’s sale of a 12-acre tract of land to ABC Company.
Sara provides the following facts in her initial summary of the transaction:
• Sara purchased the land from Mr. and Mrs. Bean in 2019 for $400,000 cash.
• Sara and ABC Co. have reached a tentative agreement under which ABC Co.
will pay $325,000 cash for the land and will pay all transaction expenses.
As a tax consulting, what questions should you ask to understand the
transaction? (Reference to 4 variables to make tax planning possible)

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Step 1: GET THE FACTS

• Whether the parties involved are “related parties” for the income shifting
• Classification of the asset as capital or noncapital.

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Step 1: GET THE

FACTS
• Do you have any personal relationship with Mr. and Mrs. Bean? Did you know
them in any capacity other than as the sellers of the land that you purchased in
2019?
• How did you and ABC Co. reach an agreement that the land is worth only
$325,000?
• Why has the land declined in value since you purchased it?
• Do you own any stock in ABC Co.? Who are ABC Co.’s stockholders?
• What was your reason for purchasing the land?
• Have you made any improvements to the land since 2019?

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Step 1: GET THE FACTS

• She has no personal relationship with the Beans and did not know them prior to her purchase
of their land. The purchase was arranged through a professional real estate broker.
• Two months ago, Sara obtained two independent appraisals of the value of the land. Both
appraisals concluded that the current market value of the land is $325,000. ABC performed its
own appraisal that confirmed this value.
• The $75,000 decline in value is attributable to local zoning restrictions on the land that were
put in place in 2010.
• Sara does not own ABC Co. stock. Twenty-four individual stockholders own the 1,000
outstanding ABC shares. Two of these stockholders are Sara’s brother Jack and Jack’s son
Robert. Sara is not acquainted with any of the other stockholders.
• She purchased the land because she thought that its value would increase over time and she
could eventually sell it at a profit.
• She has not made any improvements to the land; it is in the same condition today as the day
she purchased it.

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Step 2: IDENTIFY THE ISSUES

o Identify the tax issues or opportunities and formulate
specific research questions
• After a researcher understands a client’s transaction and
all the relevant facts, he/she can identify the tax issue or
opportunities.
• If the tax issues lead to multiple research questions, the
researcher must determine the order in which the
questions should be answered.
• The ability to recognize tax issues is the product of
technical education and professional experience.

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Step 2: IDENTIFY THE ISSUES

Case 1:

Issue: Will Sara’s sale of the land to ABC Co. result in a loss that she can deduct
on her individual income tax return?

• Will Sara realize a loss on the sale of her land to ABC Co.?
• Can Sara recognize her realized loss?
• Given the character of the realized loss, to what extent can Sara deduct the
loss in the computation of taxable income for the year of sale?

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Step 3: LOCATE AUTHORITY

o Locate relevant tax law authority
• The mission is to locate authority providing answers to
the research questions.
• There are two main categories of reference materials:
+ Primary authorities: Tax law and related laws
+ Secondary authorities: textbooks, treatises, professional
journals, and commercial tax services, which attempt to
explain and interpret the tax law.

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Step 3: LOCATE AUTHORITY

Case 1: Return to the example involving Sara Colter’s sale of land. To begin your search for authority,
you can research
• Legal documents in the field of real estate business
• Tax Coordinator Analysis => “Chapter I, Sales and Exchanges, Capital Gains and Losses.”

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Step 4: ANALYZE AUTHORITY

o Analyze relevant authority and answer the
research questions.
• In some cases, the authority may provide
equivocal answer because the authority is
inconclusive or subject to interpretation.
• Or perhaps different sources of authority
provide conflicting answers.
=> In these cases, the researcher must bring
his/her judgment to bear in analyzing the
authority and answering the question.

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Step 4: ANALYZE AUTHORITY

o Analyze relevant authority and answer the
research questions.
• In the analysis process, the research can
make a factual judgment and/or an evaluative
judgment.
• A factual judgment is based on the a set of
facts => Objective.
• An evaluative judgment is related to
conclusions inferred from facts => Subjective,
observers may draw different conclusions
from the same facts.

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Step 4: ANALYZE AUTHORITY

For example: Mrs. Hang operates a business as a sole proprietorship. Last week,
she traveled to New York for an important meeting with a major client. Mrs. Hang
paid $2,615 for a first-class airline ticket and paid $340 per night for her hotel room.
Can Mrs. Hang deduct these business expenses?

Sec. 162. Trade or business expenses

a. In general
There shall be allowed as a deduction all the ordinary and necessary expenses paid or incurred during
the taxable year in carrying on any trade or business, including—
1. a reasonable allowance for salaries or other compensation for personal services actually rendered;
2. traveling expenses (including amounts expended for meals and lodging other than amounts which
are lavish or extravagant under the circumstances) while away from home in the pursuit of a trade or
business.

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Step 4: ANALYZE AUTHORITY

Sec. 162. Trade or business expenses
a. In general
There shall be allowed as a deduction all the ordinary and necessary expenses paid or incurred during
the taxable year in carrying on any trade or business, including—
1. a reasonable allowance for salaries or other compensation for personal services actually rendered;
2. traveling expenses (including amounts expended for meals and lodging other than amounts which
are lavish or extravagant under the circumstances) while away from home in the pursuit of a trade or
business.

Factual judgment Evaluative judgment:

- If the expenses were not lavish and extravagant, the
entire amount is deductible.
- However, if some amount was lavish or extravagant,
such amount is nondeductible

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Step 4: ANALYZE AUTHORITY

Case 1: Return to the example involving Sara Colter’s sale of land. In the Step 1-3, you
determine:
• Sara will realize a $75,000 loss if she sells her land to ABC Co. for $325,000 cash.
• According to the general rule of Section 1001(c), realized losses are recognized “except
as otherwise provided in this subtitle.”

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Sec. 267. Losses, expenses, and interest with respect to transactions between related taxpayers
a. In general
1. Deduction for losses disallowed
No deduction shall be allowed in respect of any loss from the sale or exchange of property, directly or
indirectly, between persons specified in any of the paragraphs of subsection (b).
b. Relationships
The persons referred to in subsection (a) are:
2. An individual and a corporation more than 50 percent in value of the outstanding stock of which is
owned, directly or indirectly, by or for such individual;
c. Constructive ownership of stock
For purposes of determining, in applying subsection (b), the ownership of stock
3. An individual shall be considered as owning the stock owned, directly or indirectly, by or for his family;
4. The family of an individual shall include only his brothers and sisters (whether by the whole or half
blood), spouse, ancestors, and lineal descendants.

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Step 5: REPEAT STEPS 1 THROUGH 4

o Repeat Steps 1 Through 4 !
• When we may discover that we failed to
ascertain all the facts necessary to complete
the analysis of the client’s transaction.
=> A tax researcher must repeat step 1 repeat
steps 1 through 4 several times.

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Step 5: REPEAT STEPS 1

THROUGH 4
Case 1: Return to the example involving Sara Colter’s sale of land.
• Basing on Step 4, we know to ask again Sara one more question: How many shares of
ABC stock do Jack and Robert each own?
• She replies that Jack owns 350 shares and Robert owns 200 shares of the 1,000
outstanding shares of ABC stock.

• Sara’s family includes her brother Jack but does not include her nephew Robert.
Therefore, Sara indirectly owns the 350 ABC shares
 Thus, she and CCM Inc. are not related parties
 Sara can recognize her $75,000 realized loss in this transaction

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Step 6: COMMUNICATE YOUR CONCLUSIONS

o Reporting
• The final task of the tax research
process is to documents
research work by preparing a
written summary of the research
process.

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Step 6: COMMUNICATE YOUR CONCLUSIONS

o Such summary usually takes the form of a
research memo that includes:
(1) a statement of the pertinent facts,
(2) a statement of the research issue or issues,
(3) an analysis of the relevant sources of authority,
(4) an explanation of the researcher’s conclusions,
(5) the details of any advice given to the client
as part of the research engagement

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Application in
Vietnam: Tax
consulting
certification in
Vietnam

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Hiệp hội Kế toán công chứng

Anh quốc – The Association
of Chartered Certified
Accountants (ACCA).

 Được thành lập từ năm 1904, Hiệp hội Kế toán công

chứng Anh quốc là tổ chức uy tín với lịch sử hàng trăm
năm phát triển.
 Giá trị của văn bằng ACCA được công nhận rộng rãi trên
toàn cầu, mang đến cho giới chuyên môn tài chính, kế
toán, kiểm toán một chương trình chuyên nghiệp.
 Hiện nay ACCA là Hiệp hội nghề nghiệp có sự phát triển
nhanh nhất thế giới với hơn 480,000 hội viên và 188,000
hội viên tại hơn 181 quốc gia trên toàn cầu.
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Kế toán viên công chứng Úc

– Australia Certified Public
Accountant (CPA Aus.)

 Được thành lập từ năm 1886, CPA Australiacó một lịch sử

lâu đời.
 CPA Australia là tổ chức nghề nghiệp lớn nhất châu Úc với
132,000 hội viên ở hơn 111 quốc gia mang danh hiệu CPA
được các doanh nghiệp và các tổ chức tài chính kế toán
toàn cầu công nhận.

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● Foundation level (6): Economics & Markets;

Foundation of Accounting; Fundamentals of Business
Law; Business Finance; Financial Accounting &
Reporting; Management Accounting
● Professional Level (6): Ethics & Governance;
Strategic Management Accounting; Financial
Reporting; Global Strategic Leadership
● Elective subjects: Advanced Taxation; Financial Risk
Management; Advanced Audit & Assurance; …

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" S U C C E S S I S
W A L K I N G F R O M
F A I L U R E T O
F A I L U R E W I T H N O
L O S S O F
E N T H U S I A S M . ”
WINSTON CHURCHILL

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