Tax Court in the Classroom

Editor: Annette Nellen, J.D., CPA 

One of the goals of higher education is to provide students with professional skills that will help them prepare for future success. One of the most significant challenges for educators is to improve students’ communication, analytical, and research skills. This column describes an exercise in which students combine all these skills in mock Tax Court. In this exercise, students research a basic tax issue, write a research memorandum, and orally present the issue in a “court session” in class. For each issue, one student represents the taxpayer, while another student represents the government. Tax practitioners from the community act as “judges” for each court session. This exercise has successfully and significantly assisted students in improving their communication and analytical skills and has proven instrumental in helping them prepare for their professional careers in accounting.

Mock Tax Court has had a significant positive impact in the tax research and planning course taught at Western Washington University, where the exercise is used to conclude the course. Preparation for mock Tax Court requires students to use the tax research and planning skills developed throughout the course, analytically plan a strategy for their cases, and argue the issue orally before the class and an accounting professional who acts as judge for the court session. The students are not evaluated based on the judge’s decision but by the entire class on vocal clarity, whether their presentation is easy to follow and makes sense, their persuasiveness, the completeness of their argument, and whether overall the argument was presented well.

This method has been shown to have major benefits to all the students, since members of the class benefit not only from their own research and presentation but also from their observation of the oral arguments provided by the other students.

Overview of the Course

Tax Research and Planning, the course in which the mock Tax Court exercise is used, is a senior-level undergraduate tax elective, which has a required prerequisite of a basic income taxation course. The course is offered once per academic year and generally has an enrollment of 24–32 undergraduate accounting students.

In the course, students are assigned to “consulting groups.” Each group consists of four or five students with diverse experience, problem-solving abilities, and course backgrounds. Throughout the course, students perform individual tax research on a portion of each assigned research case and then integrate the individual research results for each case into a group memorandum (executive summary), which includes planning strategies for the case. Communication, analytical, and research skills are developed as research case assignments increase in difficulty and level of expertise needed as the course progresses. Feedback (from peer reviews and the professor) is used throughout the learning process to monitor student progress and development of critical thinking skills.

Mock Tax Court Basics

The final research case in the course is somewhat different from the ones used earlier in the class, with the students individually preparing and arguing an issue in mock Tax Court. Several sessions of mock Tax Court are held as part of the course so that each student has the chance to present and argue an issue. Judges from the accounting profession are invited to participate in the court, with one judge presiding over each session. A variety of accounting professionals, both those who work with taxation and those who do not, are invited so that students can see how the judges’ rulings may differ. Each court case includes several issues. Students’ abilities to think and respond rapidly are utilized as two students are assigned to each tax issue, but on opposing sides (plaintiff vs. defendant). All students not participating in a particular court case rate the participants on such factors as vocal clarity, understandability, persuasiveness, and technical coverage of their oral argument, thus stimulating active participation and encouraging the development of listening skills.

The Mock Tax Court Process

Each consulting group is paired with another consulting group and assigned a particular “court date.” For each court date, one group is designated as the counsel for the taxpayer and one group is the counsel for the government. These selections are most commonly accomplished by each group determining their most preferred and least preferred dates for court and stating their preference to represent either the taxpayer or the government. Any conflicts are resolved by coin flips or random drawings.

A case containing several separate issues is assigned for each court date, with one issue assigned to each student. Thus, if there are five issues, ten students are assigned to that case, five on the taxpayer’s side and five on the government’s side. Cases are sufficiently simple that students are able to present facts, authority, and reasoning in the brief amount of time allotted. In addition, the issues are designed to be ones that either side could win. (See the exhibit for sample issues.) Each student researches his or her own issue, concentrating not only on authority and reasoning to support his or her position but also on refuting the opposing position. Each student is required to create a research memorandum reflecting his or her work, which is subjected to peer review within that student’s consulting group prior to their court date. This enhances the students’ professional peer engagement skills. Each student then prepares notes for court from his or her research memorandum.

The format of how mock Tax Court will be conducted is reviewed with the students. Students are instructed that it is imperative that the court arguments be conducted in a professional manner and are encouraged to refer to their opponent as “my esteemed colleague.”

On the court date, the students set up the classroom for court. A table with a podium is placed at the center front of the classroom, flanked by chairs for the students participating in the court. The plaintiff (taxpayer) team is on one side of the podium, the defendant (government) team on the other, and all face the rest of the class. The judge sits facing the podium, with the nonparticipating students behind the judge. The judge is introduced and presented with a commemorative gavel. A member of the plaintiff team stands and introduces all members of the plaintiff team, then starts with the facts and arguments for the first issue. The remaining members of the plaintiff team present their arguments. There is a short break for the defendant team to confer, then that team is introduced and members present their arguments in the same order as the plaintiff team. There is another short break for the plaintiff team to confer, then that team has a brief amount of time to present rebuttals, since the plaintiff had not previously heard the defendant’s arguments.

All observers are provided with a review sheet. Upon conclusion of the arguments, the observing students indicate on the sheet who they believe should win each issue. They also evaluate each participant on vocal clarity, whether the presentation was easy to follow and made sense, persuasiveness, completeness of the argument, and whether overall the argument was well presented. The review sheets are collected, and the judge then gives his or her ruling on each issue, generally supported by his or her reasoning. (The judge has no previous knowledge of the case and does no advance research.) At the following class meeting, students are given a summary of how the observing students ruled on the issues to compare with the judge’s rulings. This shows students that different conclusions can be reached from the same information and arguments.

Results

Mock Tax Court provides students with a vehicle to integrate research, analytical, and communication skills. The added element of having an accounting professional as judge motivates students to perform at a higher level.

Students themselves generally like this exercise. Each time the course is taught, students are given an anonymous questionnaire containing questions about mock Tax Court, administered in conjunction with normal student-teacher evaluations. In most years, 100% of the students have responded positively to the question, “Did you enjoy participating in mock Tax Court?” All students generally felt that they had received value from participating in the court, with almost 90% rating the value as high or very high. All the students also responded positively to the question, “Did participating in mock Tax Court improve your oral communication skills?” In written evaluations, students have reacted positively to the benefits derived from mock Tax Court, and the level of positive response has held steady over the years as mock Tax Court has been developed and refined.

Guest judges have also stated that they were impressed by the high quality of presentations and arguments. These professionals have commented not only on the students’ thorough understanding of the issues but also on the clear analyses and persuasive arguments.

Potential Use in Other Tax Courses

Mock Tax Court has great potential for use in a variety of tax courses, from introductory courses through advanced graduate work—essentially any situation where students have acquired the necessary basic tax research skills. In order for mock Tax Court to work effectively, however, students must be given cases that can be won by either side and that can be covered thoroughly in the time available. The instructor must emphasize to the students the importance of preparing supporting and opposing arguments for both sides of each issue. It takes a thorough understanding of all sides of an issue to be able to present and defend it orally in a pressured environment.

Conclusion

Participation in mock Tax Court has successfully and significantly helped students improve their communication and analytical skills and further develop their research skills, better preparing them for success as future accounting professionals. Mock Tax Court may be used as a valuable component in any tax course, introductory through advanced, provided that students have the necessary basic tax research skills.

EditorNotes

Annette Nellen is a professor in the Department of Accounting and Finance at San José State University in San José, CA. She is a former member of the AICPA Tax Division’s Tax Executive Committee and is a current member of the Tax Division’s Individual Income Tax Technical Resource Panel. Marguerite Hutton is a professor in the Department of Accounting at Western Washington University in Bellingham, WA. For more information about this column, contact Dr. Hutton at zite.hutton@wwu.edu.