| Course | AC566 Tax Research and Intro to International Taxation |
|---|---|
| Unit | Unit 2 |
| Paper type | Authority hierarchy exercise |
| Length | About 630 words, 5 pages double-spaced |
| Format | APA 7 student paper |
| School | Purdue University Global |
| Program | MS in Accounting |
| Updated | October 2026 |
Free sample paper for AC566 Unit 2
Eight Sources, Ranked Before Any Is Quoted: A Unit 2 Authority Hierarchy Exercise on a Settled Casino Debt
[Student Name]
Purdue University Global
AC566: Tax Research and Intro to International Taxation
Unit 2 Authority Hierarchy Exercise
[Instructor Name]
[Date]
The client and every figure are composite; the statutes, regulation, cases and textbook cited are real; this is coursework, not tax advice.
The Question
The client ran up $2,500,000 of gambling markers at an Atlantic City casino, disputed the debt on the ground that the casino kept extending credit after it knew he had a gambling problem, and settled for $500,000. Does he have $2,000,000 of income from the discharge of indebtedness?
The Ranked Sources
1. Section 61(a)(11). Includes income from discharge of indebtedness in gross income (Gross income defined, 26 U.S.C. § 61, 2018). Primary authority enacted by Congress; it binds every court and the IRS.
2. Section 108(e)(5). Treats a reduction of debt owed by a purchaser to the seller of property as a purchase price adjustment rather than income (Income from discharge of indebtedness, 26 U.S.C. § 108, 2018). Equally binding statute, ranked second only because its application here is contested.
3. Treasury Regulation section 1.61-12. Interprets the discharge rules. Regulations issued under the Treasury's general authority carry great weight, but since the Supreme Court's 2024 decision, judges stopped accepting the Treasury's interpretation of an unclear statute merely because it was a reasonable one; they decide the statute's best meaning themselves and treat the agency's view as persuasive (Loper Bright Enterprises v. Raimondo, 2024).
4. Zarin v. Commissioner, Third Circuit, 1990. Reversed the Tax Court and held that a gambler who settled an unenforceable casino debt had no discharge income, treating the settlement as fixing the amount of a disputed liability (Zarin v. Commissioner, 1990). It binds the Tax Court for a taxpayer in New Jersey, whose appeals go to the Third Circuit.
5. Zarin, Tax Court, 1989. Held the opposite. Still citable for its reasoning, and followed by some commentators, but reversed on appeal in the client's own circuit, so it carries little weight for him.
6. IRS Publication 4681 on canceled debts. Explains the IRS's view in plain language. Useful for understanding the agency's position but not authority; taxpayers cannot rely on it in court.
7. A treatise chapter on discharge of indebtedness. Secondary authority. Valuable as a map to primary sources and for its analysis of the circuit split, but persuasive only.
8. A blog post by a gambling attorney. Not authority. It points to Zarin, which is useful, but nothing in it can be cited.
Rank decides weight before the reading starts: for this client, a court of appeals decision in his own circuit outranks a Tax Court decision it reversed, and both rank below the statute they interpret, which is why the exercise sorts the sources before quoting any of them.
Why the Circuit Matters
When a case could be appealed, the Tax Court applies the precedent of the appeals court that would hear it. A New Jersey taxpayer's appeal goes to the Third Circuit, so Zarin's appellate holding governs his case in the Tax Court. A taxpayer in another circuit faces a different set of authorities: other courts have questioned the contested-liability reasoning, and the IRS has not accepted it generally. The same eight sources would be ranked differently for a client in Nevada (Sawyers & Gill, 2021).
What the Ranking Suggests
The statute is the starting point, the regulation explains it, and Zarin is the controlling interpretation for this client. The likely answer is that a bona fide dispute over an unenforceable debt, settled at arm's length, does not produce $2,000,000 of income for a Third Circuit taxpayer, though the IRS might still challenge it.
References
Gross income defined, 26 U.S.C. § 61 (2018).
Income from discharge of indebtedness, 26 U.S.C. § 108 (2018).
Loper Bright Enterprises v. Raimondo, 603 U.S. 369 (2024).
Sawyers, R. B., & Gill, S. L. (2021). Federal tax research (12th ed.). Cengage.
Zarin v. Commissioner, 916 F.2d 110 (3d Cir. 1990).
Reading the AC 566 Unit 2 instructions
Unit 2 of AC566 asks you to rank sources of tax authority for a specific client question. State the question first. Then list each source with its type, the body that issued it and a sentence on its weight, ordered from most to least authoritative. Distinguish primary authority, such as statutes, regulations and cases, from secondary sources and non-authority. Explain how recent developments affect weight, for example the end of automatic deference to agency interpretations. Address which court decisions bind this client, considering the circuit to which a case would be appealed. Explain how the ranking would change for a client elsewhere. Close with what the ranked sources suggest about the answer. The two Code sections, Zarin and Loper Bright, plus the research text, belong in your APA 7 list.
How this AC566 Unit 2 example is built
The sample states the restaurateur's question about $2,000,000 of possible discharge income. Eight ranked rows follow: section 61(a)(11) and section 108(e)(5) at the top, the regulation with a note on how Loper Bright ended automatic deference, the Third Circuit's Zarin decision binding a New Jersey taxpayer, the reversed Tax Court decision, IRS Publication 4681 as non-binding guidance, a treatise as secondary authority and a blog post as no authority. The highlighted sentence explains why ranking precedes quoting. A section explains how the circuit determines which Zarin applies, and the close summarizes the likely answer.
AC566 Unit 2 rubric: what earns full points
Authority hierarchy exercises in AC566 earn points for correct ranking with reasons. Graders check that statutes outrank regulations, that cases are weighed by court and by whether they bind the client's circuit, and that IRS publications and secondary sources are recognized as non-binding. The rubric rewards accurate treatment of recent changes to agency deference and a clear explanation of how the client's location affects the weight of conflicting decisions. Explaining how the ranking would differ for another client shows understanding beyond this case. Exercises that rank by recency or by how helpful a source is, or that treat publications as authority, lose credit. APA 7 references to the primary sources complete the work.
AC566 Unit 2 help: mistakes that cost points
Weak Unit 2 exercises rank sources by how useful they are to the client rather than by authority. A reversed Tax Court decision is treated as good law because it is more detailed. IRS publications are cited as if they bound the IRS or the courts. Regulations are described with pre-2024 deference language. The circuit question is ignored, so a decision binding in one circuit is treated as binding everywhere. Secondary sources and non-authority are lumped together. If your section's client question involves different sources, a writer can rank them with reasons for your client's circuit. Some students also forget to say what the ranked sources suggest about the answer, which is the reason for ranking them in the first place. One closing paragraph that does so turns the list into research.
Get an AC566 Unit 2 example written to your instructions
The source list and fact pattern from the Unit 2 assignment, the client's state where the prompt names it, and the rubric get this started. Every source is ranked with its issuer, date and a reason for its placement, with forum rules applied where they decide the order. It takes 24-48h, and your first sample is free. The paper above is an original model document written by our desk, not a submitted student paper and not an official Purdue University Global document.
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AC566 Unit 2 questions, answered
Why does the client's state matter to the ranking?
Because it determines the circuit to which a Tax Court decision would be appealed, and under the Golsen rule the Tax Court follows that circuit's precedent. A New Jersey resident's case goes to the Third Circuit, where Zarin controls. The same eight sources, ranked for a client in another circuit, would place Zarin as persuasive only, and the example says so in a note beneath the table.
Did Loper Bright make regulations less important?
Less deferred to, not less important. The 2024 decision ended Chevron deference, so a court now decides for itself the best reading of an ambiguous statute rather than accepting a reasonable agency view. Final regulations still bind the IRS, still carry substantial weight, and many rest on express delegations Congress wrote into the Code. The example ranks the regulation second and explains that nuance in two sentences.
Where can I find a free AC566 Unit 2 sample paper?
This page holds a full AC566 Unit 2 authority hierarchy exercise ranking eight sources on a composite client's settled casino debt, with Zarin, Loper Bright, circuit analysis and APA 7 references.
Why does the Third Circuit's Zarin decision outrank the Tax Court's?
The Third Circuit reversed the Tax Court in that case, and a New Jersey taxpayer's appeal would go to the Third Circuit. The Tax Court follows the precedent of the appeals court that would hear the case.
Is IRS Publication 4681 authority?
No. It explains the IRS's view in plain language, but it is not binding on courts or taxpayers. It is useful for understanding the agency's position and is ranked below primary and secondary authority.