Federal Tax Research 13th Edition by Roby Sawyers & Steven Gill – Chapters 1–13 Solution Manual and Practice Answers

FederalgTaxgResearch,g13thgEditio Pageg1-1
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Solution Manual Federal Tax Research
13th Edition by Roby Sawyers, Steven Gill
Chapters 1 -13

,Pageg1-2 SOLUTIONSgMANUAL




CHAPTERg1
INTRODUCTIONgTOgTAXgPRACTICEgANDgETHICS



DISCUSSIONgQUESTIONS


1-1.
IngthegUnitedgStates,gthegtaxgsystemgisgangoutgrowthgofgthegfollowinggfivegdisciplines:
glaw,gaccounting,geconomics,gpoliticalgscience,gandgsociology.gThegenvironmentgforgthegtaxgsy
stemgisgprovidedgbygthegprinciplesgofgeconomics,gsociology,gandgpoliticalgscience,gwhilegthegle
galgandgaccountinggfieldsgaregresponsiblegforg thegsystem‘sginterpretationg andgapplication.


Eachgofgthesegdisciplinesgaffectsgthisgcountry‘sgtaxgsystemgingaguniquegway.gEconomistsgaddre
ssgsuchgissuesgasghowgproposedgtaxglegislationgwillgaffectgthegrategofginflationgorgeconomicggro
wth.gMeasurementgofgthegsocialgequitygofgagtaxgandgdetermininggwhethergagtaxgsystemgdiscrimi
natesgagainstgcertaingtaxpayersgaregissuesgthatgaregexaminedgbygsociologistsgandgpoliticalgscien
tists.

Finally,gattorneysgaregresponsiblegforgtheginterpretationgofgthegtaxationgstatutes,gandgaccountant
sgensuregthatgthesegsamegstatutesgaregappliedgconsistently.****8880()
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1-2. Thegothergmajorgcategoriesgofgtaxgpracticegingadditiongtogtaxgresearchgaregasgfollows:


• Taxgcompliance
• Taxgplanning
• Taxglitigatio


ngPageg5


1-3.
Taxgcompliancegconsistsgofggatheringgpertinentginformation,gevaluatinggandgclassifying
gthatginformation,gandgfilingganygnecessarygtaxgreturns.gCompliancegalsogincludesgothergfuncti
onsgnecessarygtogsatisfyggovernmentalgrequirements,gsuchgasgrepresentinggagclientgduringgangIn
ternalgRevenuegServiceg(IRS)gaudit.

,FederalgTaxgResearch,g13thgEditio Pageg1-3
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1-4.
Mostgofgthegtaxgcompliancegworkgisgperformedgbygcommercialgtaxgpreparers,genrolledg
agentsg(EAs),gattorneys,gandgcertifiedgpublicgaccountantsg(CPAs).gNoncomplexgindividual,gpar
tnership,gandgcorporategtaxgreturnsgoftengaregcompletedgbygcommercialgtaxgpreparers.gThegprep
arationgofgmoregcomplexgreturnsgusuallygisgperformedgbygEAs,gattorneys,gandgCPAs.gTheglatter
ggroupsgalsogprovidegtaxgplanninggservicesgandgrepresentgtheirgclientsgbeforegthegIRS.


AngEAgisgonegwhogisgadmittedgtogpracticegbeforegthegIRSgbygpassinggagspecialgIRS-
administeredgexamination,gorgwhoghasgworkedgforgthegIRSgforgfivegyearsgandgisgissuedgagpermitgt
ogrepresentgclientsgbeforegthegIRS.gCPAsgandgattorneysgaregnotgrequiredgtogtakegthisgexaminationg
andgaregautomaticallygadmittedgtogpracticegbeforegthegIRSgifgtheygareginggoodgstandinggwithgthega
ppropriategprofessionalglicensinggboard.


Pageg5gandgCircularg230




1-5.
Taxgplanninggisgthegprocessgofgarranginggone‘sgfinancialgaffairsgtogminimizeganygtaxgliabil
ity.gMuchgofgmoderngtaxgpracticegcentersgaroundgthisgprocess,gandgthegresultinggoutcomegisgtaxgav
oidance.
Theregisgnothinggillegalgorgimmoralgingthegavoidancegofgtaxationgasglonggasgthegtaxpayergremainsg
withinglegalgbounds.gIngcontrast,gtaxgevasiongconstitutesgthegillegalgnonpaymentgofgagtaxgandgcann
otgbegcondoned.gActivitiesgofgthisgsortgclearlygviolategexistingglegalgconstraintsgandgfallgoutsidegofg
thegdomaingofgthegprofessionalgtaxgpractitioner.


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1-6.
Ingangopengtaxgplanninggsituation,gthegtransactiongisgnotgyetgcomplete;gtherefore,gthegtaxgp
ractitionergmaintainsgsomegdegreegofgcontrolgovergthegpotentialgtaxgliability,gandgthegtransactiongm
aygbegmodi-
gfiedgtogachievegagmoregfavorablegtaxgtreatment.gIngagclosedgtransactionghowever,gallgofgthegpertin
entgactionsghavegbeengcompleted,gandgtaxgplanninggactivitiesgmaygbeglimitedgtogthegpresentationgof
gthegsituationgtogtheggovernmentgingthegmostglegallygadvantageousgmannergpossible.

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1-7.
TaxglitigationgisgthegprocessgofgsettlinggagdisputegwithgthegIRSgingagcourtgofglaw.gTypic
ally,gagtaxgattorneyghandlesgtaxglitigationgthatgprogressesgbeyondgthegfinalgIRSgappeal.


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1-8. CPAsgservegisgagsupportgcapacitygingtaxglitigation.


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1-9.
Taxgresearchgconsistsgofgthegresolutiongofgunansweredgtaxationgquestions.g Thegtaxgresearc
hgprocessgincludesgthegfollowing:


1. Identificationgofgpertinentgissues;
2. Specificationgofgpropergauthorities;
3. Evaluationgofgthegproprietygofgauthorities;gand,
4. Applicationgofgauthoritiesgtogagspecificgsituation.


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1-10.


Circularg230gisgissuedgbygthegTreasurygDepartmentgandgappliesgtogallgwhogpracticegbefor


egthegIRS.gPageg7


1-11.
IngadditiongtogCircularg230,gCPAsgmustgfollowgthegAICPA‘sgCodegofgProfessionalgCo
nductgandgStatementsgongStandardsgforgTaxgServices.gCPAsgmustgalsogabidegbygthegrulesgofgth
egappropriategstategboard(s)gofgaccountancy.


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1-12. Agreturngpreparergmustgobtaing18ghoursgofgcontinuinggeducationgfromgangIRS-
approvedgCEgProvider.gTheghoursgmustgincludegag6gcreditghourgAnnualgFederalgTaxgRefreshergco
urseg(AFTR)gthatgcoversgfilinggseasongissuesgandgtaxglawgupdates.gThegAFTRgcoursegmustginclud
egagknowledge-