Final answer:
The statement 'All exceptions to a Code section are addressed within that same section' is incorrect as exceptions can be spread across various sections of the complex and frequently updated Internal Revenue Code. Tax researchers face difficulties due to conflicting sections, differing definitions, and modifications to financial amounts within the Code.
Step-by-step explanation:
The incorrect statement regarding the reasons tax researchers may have difficulty interpreting the Internal Revenue Code is that all exceptions to a Code section are addressed within that same section. This is not always the case, as the Internal Revenue Code is vast and intricate, with numerous provisions that can be spread across different sections. Furthermore, the Code is subject to frequent changes and updates, which can make locating and interpreting all the applicable rules for a particular situation challenging.
Code sections can indeed appear to conflict, and definitions used within the Code may differ significantly from their common usage. In addition, phrases within the Code often do modify percentage or dollar amounts, adding another layer of complexity to tax research. It is the combination of these factors, along with ever-evolving tax law, that contributes to the difficulties faced when trying to accurately decipher tax obligations.
Understanding the tax code's complexity is particularly important for economists, as they strive to represent its effects on the economy in a simplified manner that still captures the necessary details for effective analysis. While challenging, simplifying the tax code helps in assessing its impact on behavior such as consumer spending, saving, and employment levels, which are crucial for creating economic models and predicting outcomes.