This form is useful during an IRS tax examination or audit. It establishes the legal basis for the hierarchy or precedence of laws that the IRS must abide by. This would be useful if the IRS tries to use only its regulations rather than being willing to look at the 26 U.S.C. §861/source claims that superceded it.

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What is Binding on the IRS

"The Federal Income Tax Regulations (Regs.) are the official Treasury Department interpretation of the Internal Revenue Code..." [IRM, 4.10.7.2.3.1 (05/14/99)]

"The Service is bound by the regulations." [IRM, 4.10.7.2.3.4 (05/14/99)]

"[T]he Secretary shall prescribe all needful rules and regulations for the enforcement of this title." [26 USC § 7805(a)]

"Interpretative regulations are issued under the general authority of IRC section 7805(a) , which allows regulations to be written when the Secretary determines they are needed to clarify a Code section." [IRM, 4.10.7.2.3.2 (05/14/99)]

"Decisions made at various levels of the court system... may be used by either examiners or taxpayers to support a position... A case decided by the U.S. Supreme Court becomes the law of the land and takes precedence over decisions of lower courts... Decisions made by lower courts, such as Tax Court, District Courts, or Claims Court, are binding on the Service only for the particular taxpayer and the years litigated. Adverse decisions of lower courts do not require the Service to alter its position for other taxpayers." [IRM, 4.10.7.2.9.8 (05/14/99)]

"Rulings do not have the force and effect of Treasury Department Regulations, but they may be used as precedents." [4.10.7.2.6.1 (05-14-1999)]

"IRS Publications, issued by the National Office, explain the law in plain language for taxpayers and their advisors... While a good source of general information, publications should not be cited to sustain a position." [IRM, 4.10.7.2.8 (05-14-1999)]