Punctuation

In this lesson, we focus on those punctuation rules where, based on our experience, M.Tx. students and tax professionals can improve their writing skills the most. End of the sentence punctuation is not usually a problem. However, proper use of the next most common form of punctuation, the comma, is sometimes misunderstood. Writers often put commas where it feels right, which makes their written communication difficult to follow for those who know better (or feel differently). Correct use of the comma can greatly increase the flow and understandability of your writing. Thus, most of this lesson deals with the correct use of commas. We also review some rules about semicolons, apostrophes, and quotation marks.
   

Commas

To correctly use commas, you must first understand basic sentence structures. For example, the difference between independent and dependent clauses should be clear. An understanding of these terms is fundamentally important in determining the correct placement of many commas. A short glossary at the end of this lesson defines these and other sentence parts for individuals needing a refresher on terminology. The comma rules discussed below are presented in abstract form and immediately followed with several examples.

Commas separate independent clauses.  A coordinating conjunction follows the comma and precedes the second independent clause. Sentences containing two independent clauses are sometimes called compound sentences.

Comma Rule 1: <Independent clause>, <conjunction> <independent clause>.
Example 1a: Section 162 permits taxpayers to deduct trade or business expenses, and §165 allows losses to be deducted.
Example 1b: Sections 162 and 165 permit taxpayers to deduct trade or business expenses and allow taxpayers to deduct losses. (Note that the second clause is not independent, so no comma appears.)
Example 1c: Gross income includes all income from whatever source derived, but the Code excludes certain items such as life insurance proceeds.
Example 1d: The Code taxes all income from whatever source derived but excludes certain items such as life insurance proceeds. (Note that the second clause is not independent, so no comma is needed.)
Sentences with two independent clauses can be structured differently than suggested in Comma Rule 1. An alternative construction that may be appropriate is to remove the conjunction and replace the comma with a semicolon. (Semicolons are discussed later.) Still another possibility is to convert the compound sentence into two separate sentences.
Example 1e: Section 162 permits taxpayers to deduct trade or business expenses; §165 allows losses to be deducted. (Cf., example 1a.)
Example 1f: Section 162 permits taxpayers to deduct trade or business expenses. Section 165 allows losses to be deducted. (Cf., example 1a.)
When a dependent clause follows an independent clause, no comma separates them. However, a comma does follow a dependent clause introducing a sentence, identifying for the reader where the independent clause begins.
Comma Rule 2: <Independent clause> <dependent clause>.

<Dependent clause>, <independent clause>.

Example 2a: Section 151(a) allows individuals to deduct personal and dependency exemptions since the ability to pay tax is generally inversely related to family size.
Example 2b: Since the ability to pay tax is generally inversely related to family size, §151(a) allows individuals to deduct personal and dependency exemptions.
Example 2c: Section 151(a) allows individuals to deduct personal and dependency exemptions if they otherwise meet all requirements.
Example 2d: If they otherwise meet all requirements, §151(a) allows individuals to deduct personal and dependency
exemptions.
Note that the dependent clauses  in the examples above, “since the ability to pay tax is generally inversely related to family size” and “if they otherwise meet all requirements,” cannot stand alone as separate sentences. Commas separate a dependent clause from the independent clause only when the former introduces the sentence.

Commas follow an introductory element  preceding the independent clause. Introductory elements may be short or lengthy. In either case, using a comma separates the sentence’s introduction from its main idea and, thus, makes the sentence easier to read.

Comma Rule 3: <Introductory element>, <independent clause>.
Example 3a: When organized abroad, a corporation not conducting business in the United States is taxable only on U.S. source income.
Example 3b: During the most recent taxable year, the corporation redeemed 80 percent of its own stock and paid no tax.
Transitional expressions are special types of introductory elements. A comma follows transitional expressions at the beginning of a sentence (the natural location for transitions). Transitional expressions, however, may occur later in the sentence and, in these cases, often are offset with commas, but not always. When in doubt, start the sentence with the transitional expression and use a comma.
Comma Rule 4: <Transitional expression>, <independent clause>.
Example 4a: For example, Section 403(b) contributions can avoid taxation for many years.
Example 4b: Section 403(b) contributions, however, can avoid taxation for many years.
Example 4c: First, determine whether the merger is a taxable transaction.
Example 4d: Determine whether the merger is a taxable transaction first.
Example 4e: Thus, the exchange of life insurance policies is a nontaxable transaction.
Example 4f: The exchange of life insurance policies, thus, is a nontaxable transaction.
Example 4g: Also, the adjusted basis of the owner’s interest in the partnership is increased.
Example 4h: The adjusted basis of the owner’s interest in the partnership also is increased.
Essential clauses and phrases must follow the words they modify and, thus, never introduce the sentence. They are not offset with commas. The word “that” often introduces essential clauses and phrases.
Comma Rule 5: <Independent… <essential clause or phrase> …clause>.

<Independent clause> <essential clause or phrase>.

Example 5a: Individuals that otherwise meet all requirements can deduct personal and dependency exemptions under §151(a).
Example 5b: Gross income includes all income that is otherwise excluded.
Example 5c: The corporation that experienced six straight years of net operating losses sold its holding in Starburst, Inc.

Example 5d: Most U.S. citizens who establish foreign residency can exclude some of their earned income. (Note that “who establish foreign residency” is an essential clause.)

Another common sentence structure consists of an independent clause and a nonessential clause or phrase. Use commas to offset nonessential clauses or phrases unless they follow the independent clause. The word “which” often introduces nonessential clauses and phrases.
Comma Rule 6: <Nonessential clause or phrase>, <independent clause>.

<Independent…, <nonessential clause or phrase>, …clause>.

<Independent clause> <nonessential clause or phrase>.

Example 6a: If they otherwise meet all requirements, §151(a) allows individuals to deduct personal and dependency exemptions. (Cf., example 5a.)
Example 6b: Section 151(a) allows individuals, if they otherwise meet all requirements, to deduct personal and dependency exemptions. (Cf., example 5a.)
Example 6c: Section 151(a) allows individuals to deduct personal and dependency exemptions if they otherwise meet all requirements. (Cf., example 5a.)
Example 6d: Unless otherwise excluded, gross income includes all income from whatever source derived. (Cf., example 5b.)

Example 6e: Gross income includes all income, unless otherwise excluded, from whatever source derived. (Cf., example 5b.)

Example 6f: Gross income includes all income from whatever source derived unless otherwise excluded. (Cf., example 5b.)

Example 6g: Nova Corporation, which experienced six straight years of net operating losses, sold its holding in Starburst, Inc. (Cf., example 5c.)

Special types of nonessential clauses and phrases  merit separate attention. Offset nonessential appositives, contrasting elements, and geographical clarifications with commas. Also, the year portion of dates generally should be offset with commas when it follows the month and day; no comma is used when the day is omitted.

Example 6h: Dividends, a form of gross income, are subject to withholding under §1441 when paid to a nonresident alien.
Example 6i: The CEO’s pension, a targeted benefit arrangement, operates partly as a defined contribution and partly as a defined benefit plan.
Example 6j: Snuggles Enterprises, a limited liability company, established a cafeteria plan for its employees.
Example 6k: The Code, not the Supreme Court, is the ultimate tax authority.
Example 6l: The IRS, not the taxpayer, has the burden of proof in fraud cases.
Example 6m: The free trade zone in Colon, Panama, is one of the world’s largest.
Example 6n: The municipal securities that Memphis, Tennessee, issued were private activity bonds.
Example 6o: February 25, 1913, was the day three-fourths of the states ratified the U.S. Constitution to permit an individual income tax law.
Example 6p: Congress enacted the IRS Restructuring and Reform Act of 1998 on July 22, 1998, because of alleged abuses.
Example 6q: Congress enacted the IRS Restructuring and Reform Act in July 1998 because of alleged abuses.
Commas separate three or more words, phrases, or clauses that appear as a series. Though everyone does not agree, omitting the comma after the next-to-the-last item in the series can be confusing at times, so most experienced writers routinely include it. Thus, we strongly recommend that you include the final comma just before the conjunction.
Comma Rule 7: <Independent… item, item, <conjunction> item …clause>.
Example 7a: Business expenses are deductible only if ordinary, necessary, and reasonable.
Example 7b: Under §1361(b)(1), a small business corporation is a domestic corporation that does not have more than 75 shareholders, any corporate owners, any nonresident alien shareholders, or more than one class of stock.
No discussion of commas would be complete without some mention of when commas are not needed. Two instances already have been mentioned. Comma Rule 2 indicated that no comma should separate an independent and dependent clause when the independent clause  comes first in the sentence. Also, Comma Rule 5 clarifies that commas should not offset essential clauses and phrases. The overzealous use of commas is just as distracting as omitting commas where they are needed. Instances of comma zealotry are mentioned below.

Commas should never separate two independent clauses that a conjunction does not join. The result of a comma splice is a run-on sentence. To correct the comma splice, see Comma Rule 1. ( NOT! means the comma’s use is inappropriate.)

Comma Rule 8: <Independent clause>, <independent clause>. NOT!
Example 8a:

Section 162 permits taxpayers to deduct trade or business expenses, §165 allows losses to be deducted. NOT! (Cf., example 1a.)

Example 8b: Gross income includes all income from whatever source derived, the Code excludes certain items such as life insurance proceeds. NOT! (Cf., example 1b.)
Do not insert commas between subjects and verbs. When the subject is lengthy, some writers feel they must precede the verb with a comma, but such use only confuses the reader. Careful attention to the sentence structure can dispel the temptation to include a comma in this situation.
Comma Rule 9: <Independent… subject, verb …clause>. NOT!
Example 9a: The captive insurance company organized and operated in Bermuda, earned $40 million of Subpart F income. NOT!
Example 9b:

The adjusted basis for determining gain or loss from a sale or exchange, depends on how the property was acquired. NOT!

Another common mistake is to separate the two nouns in a compound subject or object. Similarly, a comma should not separate the two verbs (or predicates) in a compound predicate.
Comma Rule 10: <Independent… noun, <conjunction> noun …clause>. NOT!

<Independent… verb, <conjunction> verb …clause>. NOT!

Example 10a:

The IRS collected information about the multinational corporation based in Sweden, and its Belgian distribution center. NOT!
Example 10b: Global Harvest, Inc. manufactures prefabricated barns in the United States, and sells them to farmers in East Africa. NOT!

Semicolons

Writers occasionally insert semicolons where they are inappropriate. More often, writers neglect to use semicolons where they clearly belong, sometimes using a comma instead. Generally, you should use a semicolon between independent clauses within a sentence if a coordinating conjunction does not separate them. A semicolon is particularly appropriate when the message of one clause is in sharp contrast with that of the second clause or when the second clause clarifies the first.

Semicolon Rule 1:

<Independent clause>; <independent clause>.
Example 1a: Contributions to traditional IRAs are deductible; contributions to Roth IRAs are not.
Example 1b: The effective tax rate is an average measure of tax burden; the marginal tax rate is used for decision making.
Semicolons also are used between independent clauses that a transitional expression joins.
Semicolon Rule 2: <Independent clause>; <transitional expression>, <independent clause>.
Example 2a: Tax credits are no longer allowed for political donations; however, charitable contributions continue to be deductible.
Example 2b: Gambling and wagering income is taxable; thus, the $300 won in Friday night’s poker game should be reported.
As discussed earlier, in Comma Rule 7, commas generally separate the different words, phrases, or clauses in a series.  However, when the items within the series contain “internal” commas, semicolons should be used to separate the items. Using semicolons avoids the confusion that otherwise might result from too many commas.
Semicolon Rule 3: <Independent… it,em; it,em; <conjunction> it,em …clause>.
Example 3a:

IRS regional offices are located in Atlanta, Georgia; Dallas, Texas; New York, New York; and San Francisco, California.
Example 3b: The effective tax researcher must establish the facts; locate, interpret, and apply tax authority to the facts; reach conclusions; and make recommendations.

Quotation Marks

Quotation marks enclose the exact words of a speaker, book, or other source. Book chapters and journal articles also are placed in quotes. These rules are familiar to most. However, some writers are confused about how quotation marks should be used with other punctuation marks.

Quotation Rule 1: Periods and commas generally are placed inside closing quotation marks.
Example 1a: CIR v. Glenshaw Glass Company (S.Ct., 1955) defined income as “undeniable accessions to wealth, clearly realized, and over which the taxpayers have complete dominion.”
Example 1b: Though the client asserted that the travel expenses to Japan were “ordinary and necessary,” he never has conducted business outside Iowa.
Quotation Rule 2: Semicolons and colons are placed outside closing quotation marks.
Example 2a: CIR v. Duberstein (S.Ct., 1960) clarified that a gift must proceed from a “detached and disinterested generosity”; otherwise, it is gross income to the recipient.
Example 2b: The following business expenses are “ordinary and necessary”: salaries to officers, rental of the premises, and depreciation of equipment.
Quotation Rule 3: Question and exclamation marks go inside the closing quotation mark if they punctuate only the quote and outside if they punctuate the whole sentence.
Example 3a: The question for the actuary to answer is: “Does this retirement plan meet the minimum funding standards?”
Example 3b: Under §162(f), is the payment a “fine or similar penalty paid to a government for the violation of any law”?

Apostrophes

Generally, apostrophes are used to show possession.

Apostrophe Rule 1: Add ’s to make either a plural noun not ending in s or a singular noun possessive. Add only an apostrophe to a plural noun already ending in s. For singular nouns ending with an s, sh, or z sound, add either an apostrophe or an ’s.
Example 1a: The shareholder exchanged Omega’s stock for Beta’s stock tax-free.
Example 1b: The affiliated corporations’ consolidated tax return incorrectly allowed group losses to be deducted in full.
Example 1c: Our client could not benefit from the lifetime learning credit for his children’s tuition because his adjusted gross income was too high.
Example 1d: Memories of Professor Larkins’ tax exam will never leave me.
Example 1e:

I will not soon forget Professor Larkins’s emphasis on writing skills for tax professionals.

Contractions often sound like other words. As a result, some people confuse the two. The confusion is especially understandable since apostrophes in contractions indicate missing letters, not the possessive form as in Apostrophe Rule 1. In fact, the word that sounds the same may be a possessive noun even though it contains no apostrophe! Here are three examples that cause confusion:

Contraction (with Meaning)
it’s (it is)
who’s (who is)
you’re (you are)

Sound-Alike Possessive
its
whose
your

Apostrophe Rule 2:

Use an apostrophe to show where letters are omitted in a contraction.
Example 2a: If it’s a substantially disproportionate distribution, §302 allows the redemption to be treated as an exchange.
Example 2b: You’re not entitled to deduct your mortgage interest on all four vacation homes.
Example 2c:

The corporation redeemed its stock from 16 percent of its shareholders.

Sometimes the apostrophe is used to form plurals, but only in limited situations.
Apostrophe Rule 3: Use an apostrophe to pluralize letters, numbers, abbreviations ending with a period, and abbreviations with a final s. Do not use an apostrophe to pluralize years and abbreviations without periods (unless ending in s).
Example 3a: Rapid tax law changes characterized the 1980s.
Example 3b: The Code contains many Subpart A’s.
Example 3c: The social security number contained so many 5’s that I typed it incorrectly.
Example 3d: All our clients have six-figure AGIs.
Example 3e: All our clients have six-figure A.G.I.’s.


After reviewing this lesson, please take the punctuation self-tests. These tests should help you recognize and correct instances of incorrect punctuation in your own writing.

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Glossary: Parts of a Sentence

Appositive: A noun adjacent to another noun that identifies, explains, describes, or renames the latter (e.g., Randy Smith, a SALT expert). Can be an essential clause or phrase,  but it is usually nonessential.
Clause: Group of words within a sentence containing a subject and predicate (verb).
Coordinating Conjunction: Word that connects words, phrases, or clauses (i.e., and, but, for, nor, or, so, yet).
Dependent Clause: Clause  that cannot stand alone as a separate sentence; it depends on the rest of the sentence for its support. If extracted from its sentence, a dependent clause would be a sentence fragment or an incomplete sentence. Also known as subordinate clause. A dependent clause can be essential or nonessential.
Essential Clause or Phrase: Dependent clause or phrase that follows and limits the words it modifies. An essential part of the sentence that cannot be omitted without changing or distorting the reader’s understanding of the independent clause. Essential clauses or phrases are not offset with commas.
Independent Clause: Clause that, if extracted from the sentence, would form a separate, free-standing sentence by itself. Also known as main clause. All sentences have at least one independent clause, and sometimes the entire sentence is an independent clause.
Introductory Element: Clause, phrase, or word that precedes the independent clause. A transitional expression is a special type of introductory element. Generally followed by comma.
Nonessential Clause or Phrase: Dependent clause or phrase that can be omitted without changing or distorting the reader’s understanding of the independent clause. Sometimes called a parenthetical element, interrupter, or nonrestrictive clause and phrase. Generally offset with commas. A transitional expression is a special type of nonessential clause or phrase.
Phrase: Group of words within a sentence that does not contain a subject and predicate (verb). Any group of words that is not a clause. A phrase can be essential or nonessential.
Transitional Expression: Word or short phrase that links sentences and smoothes the reader’s movement between sentences. Such expressions are used to contrast (e.g., however), compare (e.g., similarly), conclude (e.g., thus), summarize (e.g., for example), express purpose (e.g., for this reason), continue with an additional point (e.g., also), or place a thought in the context of time or place (e.g., later). A special type of introductory element. Generally offset with commas when introducing a sentence.