By Sherrill L. Gregory, EA, USTCP
The
Exam Tax Court
A
s IRS audits more taxpayers, it is While EAs and CPAs are granted authority un-
probable that more notices of de- der Circular 230 to represent taxpayers at all IRS
ficiency will result. For deficiency administrative hearings, that authority does not
cases, a timely filed petition in extend to the Tax Court. There is disagreement
response to the statutory notice grants jurisdic- among some professionals as to whether an EA
tion to the Tax Court (the Court). The main or CPA can prepare a client’s Tax Court petition,
advantage to litigating tax controversies in this but it is clear an individual who is not admitted
Court is that the tax, interest, and penalties do to practice cannot sign a client’s petition.3
not need to be paid before the petition is filed, When the Board of Tax Appeals (precursor
making it a more taxpayer-friendly venue than to the U.S. Tax Court) was established in 1924,
other courts. non-attorneys were admitted to practice on
What options are available to an EA or equal footing with attorneys. This changed in
CPA when a client receives that 90-day letter? 1942 when automatic admission to practice
Can an EA or CPA prepare a petition for the was restricted to attorneys. The Tax Court
taxpayer? Can either professional represent exam process arose because, under § 7452,
a taxpayer at an IRS administrative hearing “no qualified person shall be denied admis-
once a case is docketed? Is it possible to meet sion to practice before the Tax Court because
with IRS area counsel in pretrial proceedings of his failure to be a member of any profes-
on a docketed case? What must an EA or CPA sion or calling.”
About the Author: do to practice in Tax Court? Under current Tax Court rules (adopted
September 20, 2005),4 before being admitted,
After passing the Tax Court exam on her first
attempt, Sherrill L. Gregory, EA developed Prepar- Admission to the Tax Court an applicant must establish to the Court’s
ing to Practice before the U.S. Tax Court, a course In Court proceedings, taxpayers can repre- satisfaction he or she is “of good moral and
designed to assist other tax professionals studying sent themselves (pro se) or be represented by professional character and possesses the
for this exam. Her tax preparation and representa-
tion practice is located in Southern California. Email an individual1 admitted to practice before the requisite qualifications to provide competent
questions to Sherrill at mbamstea@earthlink.net. Court, whether he or she is an attorney2 or not. representation before the Court.”
20 M ay • J u n e 2 0 0 7
Interested applicants must submit a com- Practice and Procedure may be the easiest the other sections. A copy of the ABA Model
pleted Application for Admission to Practice section for an applicant to pass. A copy of the Rules of Professional Conduct is provided for
for non-attorneys and the appropriate fee. Rules of Practice and Procedure6 is available use during the exam.
Before admission, the applicant must pass the during the exam. Topics include Court rules and The 2006 exam results were available in
exam and be sponsored by two persons who procedures, along with IRS requirements in the late March 2007. Of the fifty-eight applicants
are admitted to practice before the Court. process. Knowledge of jurisdiction is tested with who sat for the exam, six passed (all six were
Once admitted, a non-attorney has the same questions that ask if the Tax Court has subject from the author’s 2006 prep course). A suc-
rights and responsibilities as an attorney, but matter jurisdiction in different situations; most cessful applicant knows only that a passing
only in Tax Court. often these questions require only “yes” or “no” score was achieved. An unsuccessful applicant
answers. Many questions can be answered with can purchase a copy of his or her responses
The Written Admission a list (which lends itself to mnemonics or other for a nominal fee ($8 for the 2006 exam) but
Examination memorization tools) or a short essay. must make the request soon after notification.
By law the exam must be held no less From past exam questions it is evident Unless appeals are pending, all exam answers
often than every two years. It is likely the the Court uses its own cases on the exam. are destroyed 120 days after notification of the
next anticipated exam will occur Novem- Applicants should be familiar with recent exam results.
ber 13, 20085 at the Tax Court building in Tax Court cases, along with Court of Appeals Previously, only three lifetime attempts
Washington, DC. The Court must publish a decisions (especially those that overturn or af- at this exam were permitted, but now ap-
press release announcing the exam date and firm Tax Court decisions) and Supreme Court plicants may retake the Tax Court exam as
provide pertinent information, including the decisions relating to tax matters. often as desired.
fee ($75 in 2006) and dates that applications Federal Taxation is a surprisingly difficult
are accepted. Watch ustaxcourt.gov during exam section, even for those who have already Why Take the Tax Court Exam?
April 2008 for this. demonstrated competency in tax knowledge. The odds of passing the exam are against the
Over a four-hour period, the 2006 Tax While a copy of the IRC is available during the applicant. For several recent exam cycles the
Court exam tested competence in these exam, time passes too quickly to look up many pass rate ranged between 5.6 percent and 16.5
subject areas: answers. Broad areas of tax law can be tested percent.7 So, why make the considerable effort
• Tax Court Rules of Practice and Proce- rapidly in a series of questions to “state the gross to join the approximately 2418 people who have
dure tests information contained in the Tax income” in various situations. Certain exam passed this exam since the 1942 change?
Court’s Rules of Practice & Procedure, includ- topics recur with regularity, including cancel- Court jurisdiction today is much broader
ing areas of court jurisdiction. (25 percent or lation of indebtedness income, travel expense than the deficiency issues it was designed to
60 minutes of allocated time) deductibility, estate and gift issues, marriage and handle, so there is more opportunity for a pro-
• Federal Taxation tests information con- divorce, partnership and corporation formation fessional to practice. The Court has jurisdiction
tained in the Internal Revenue Code and its and liquidations, S corporate distributions, and only as granted by Congress and can hear cases
regulations, along with recent Tax Court and real estate transactions. A calculator can be used related to deficiencies, innocent spouse relief re-
other tax-related court decisions. (40 percent for any required calculations. quests, some employment tax issues, collection
or 96 minutes) Questions that look much too difficult to cases, and more. In a recent change, all Collec-
• Evidence tests information contained be true are likely from a Court case; although tion Due Process (CDP) cases are now heard in
in the Federal Rules of Evidence, including the party’s name does not appear in the ques- Court for petitions filed after March 13, 2007.
evidentiary applications in the courtroom. tion, the fact pattern will be unique. According to Nina Olson’s Taxpayer Advo-
(25 percent or 60 minutes) Evidence, added as a separate exam section cate 2006 Annual Report to Congress,9 having
• Legal Ethics tests information contained in 1996, may be the most difficult section for representation can enhance a taxpayer’s success
in the American Bar Association’s Model Rules non-attorneys to pass. The questions gener- in Tax Court. While a non-attorney may never
of Professional Conduct, including practitioner ally pose courtroom scenarios which require be comfortable handling a complex Tax Court
conflicts of interest and imputed disqualifica- the applicant to recognize hearsay or other trial (there are benefits to three years of law
tion. (10 percent or 24 minutes) evidentiary issues presented in testimony and school) there are ways to help clients, espe-
The entire exam must be passed at one apply the relevant rules. No reference material cially in the S case forum10 where proceedings
sitting with a score of 70 percent or better on is permitted for this section. are more informal and the rules of evidence
each section. Exam answers are recorded in Legal Ethics was also added in 1996. As are relaxed.
blue books provided by the Court. Gram- the smallest section, the temptation may be For some Circular 230 professionals the
mar and spelling are not graded, but answers to shortchange study efforts, but it must be Tax Court exam represents the epitome of
should be concise and legible. passed with the same competency level as all excellence, a challenge to be conquered simply
M ay • J u n e 2 0 0 7 21
The
Exam
Tax Court
because it is there. Adding those coveted let- clients. A non-attorney practitioner is compe- should visit ustaxcourt.gov on a daily or weekly
ters after your name demonstrates a high level tent to advise clients on court procedures and basis to read the regular and memorandum
of professional competence. to help assess a potential case and the decision opinions published. It helps to experience the
There may be extrinsic values as well. If an to file a petition. The practitioner’s knowledge language and process of the Court and can guide
Appeals Officer knows the practitioner is able can influence a client’s success in Court even your studies by identifying case trends that may
to take a case to Tax Court, will that affect the if the case is settled before trial. become exam topics. Remember the Tax Court
hazards of litigation assessment in the IRS’ exam is written and administered by judges of
decision to settle a case? Although that cannot How to Study for the Exam the Tax Court.
be tested empirically, it appears to be true based Questions for the past three exams can be Find study aids (such as flash cards, audio
upon conversations the author had with area or purchased from the Court. Sadly, no official or tapes, and printed study guides which may
district counsel over the past few years. Several suggested answers are published, which makes have practice questions and answers) from law
IRS attorneys indicated that resolution is more knowing how to study for this rigorous exam school bookstores to assist with federal taxa-
likely in Appeals if the practitioner has the abil- more challenging. Some exam questions re- tion, evidence, and legal ethics studies. Watch
ity to represent the taxpayer in Court, especially peat, but use current tax law to answer a prior copyright dates to avoid studying dated mate-
if the litigated dollar amounts are not large. exam question rather than relying on what was rial that may have changed.
Understanding Tax Court procedures and the appropriate response then. Even better, make your own flashcards,
processes allows the savvy professional to pro- Because it appears the Court uses its own audio tapes, or outlines as study aids. What-
vide the highest level of service to his or her cases for exam questions, the wise applicant ever your learning style, using as many of
22 M ay • J u n e 2 0 0 7
Endnotes
1
Only individuals can be admitted to practice; corporations
and firms are not admitted or recognized.
your senses as possible during study helps of actual exam-day conditions. If all sections 2
An attorney is admitted after completing an application, paying
with long-term memory retention and recall. are not addressed within the four hours, the a fee, and establishing that he or she is a member in good stand-
ing in the appropriate court. The attorney is not required to
Reading, writing, hearing, and speaking the applicant will fail even if the other sections are demonstrate any competence in federal taxation law.
material as many ways as possible is an effec- 100 percent correct. 3
A representative who signs the petition must provide a
Tax Court Bar Number under Rule 34.
tive way to study. Finally, there are a few courses available 4
Rule 200(a)(1)
Applicants should practice writing answers, privately to assist in exam preparation, includ- 5
Generally, the exam is given the second Thursday of
not just to strengthen their hand (when was the ing a series of classes presented by the author November, unless Veteran’s Day conflicts with this date.
6
The Rules can be downloaded from ustaxcourt.gov or
last time anyone wrote four hours straight?), to prepare professionals for this exam. obtained from the Court for $22.
but also to establish what is known, and more 7
In 2000, 17 out of 103 passed (16.5%); in 2002, 7 out of
47 passed (14.9%); in 2004, 4 out of 72 passed (5.6%).
importantly, what is not known. Writing and Want More Information? Compare this with 10.5% in 1992 (8 out of 76); 10.2% in
saying it aloud will help identify areas where There will be a Tax Court class offered at 1994 (13 out of 127); 8% in 1996 (14 out of 175); and 8.3%
knowledge is not yet complete. this year’s NTPI. The class will provide an in 1998 (13 out of 156)
8
According to a 3/9/07 telephone call with Christina Ayres,
Stay current on tax law changes by attend- introduction to Court procedures and include admissions clerk for the Tax Court, 7,342 people have been
ing education seminars and reading profes- a discussion on exam preparation. The class is admitted as non-attorney practitioners through the 2004
exam. Some 7,101 of those were grandfathered into practice
sional journals. available to all Circular 230 professionals—see before the Court in 1942.
Time management and test taking skills are www.naea.org for registration information. 9
See the Ten Most Litigated Tax Issues segment at
irs.gov/pub/irs-utl/2006_arc_section3.pdf.
very important to cultivate. Taking one or two It is not too early to start preparing for the 10
In small tax cases the tax owed per year generally
timed practice tests can replicate the pressure 2008 Tax Court exam. EA does not exceed $50,000.
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