FederalooTaxooResearch,oo12thoo Pageoo1-1
Edition
Solution Manual Federal Tax Research 12th Edition by Roby Sawyers, Steven Gill
CHAPTERoo1
INTRODUCTIONooTOooTAXooPRACTICEooANDooETHICS
DISCUSSIONooQUESTIONS
1-1.
InootheooUnitedooStates,ootheootaxoosystemooisooanoooutgrowthooofootheoofollowingoo
fiveoodisciplines:oolaw,ooaccounting,ooeconomics,oopoliticalooscience,ooandoosociology.ooThe
ooenvironmentooforootheootaxoosystemooisooprovidedoobyootheooprinciplesooofooeconomics,oos
ociology,ooandoopoliticalooscience,oowhileootheoolegalooandooaccountingoofieldsooareoorespon
sibleooforoo theoosystem‘soointerpretationoo andooapplication.
Eachooofootheseoodisciplinesooaffectsoothisoocountry‘sootaxoosystemooinooaoouniqueooway.ooE
conomistsooaddressoosuchooissuesooasoohowooproposedootaxoolegislationoowillooaffectootheoorat
eooofooinflationooorooeconomicoogrowth.ooMeasurementooofootheoosocialooequityooofooaootaxoo
andoodeterminingoowhetherooaootaxoosystemoodiscriminatesooagainstoocertainootaxpayersooare
ooissuesoothatooareooexaminedoobyoosociologistsooandoopoliticalooscientists.
Finally,ooattorneysooareooresponsibleooforootheoointerpretationooofootheootaxationoostatutes,ooa
ndooaccountantsooensureoothatootheseoosameoostatutesooareooappliedooconsistently.
Pageoo4
1-2.
Theoootheroomajoroocategoriesooofootaxoopracticeooinooadditionootoootaxooresearchooareooasoofollows
:
Taxoocompliance
Taxooplanning
Taxoolitigati
onooPageoo5
1-3.
Taxoocomplianceooconsistsooofoogatheringoopertinentooinformation,ooevaluatingooando
oclassifyingoothatooinformation,ooandoofilingooanyoonecessaryootaxooreturns.ooComplianceooal
,Pageoo1-2 SOLUTIONSooMANUA
L
soooincludesoootheroofunctionsoonecessaryootooosatisfyoogovernmentaloorequirements, oosuchoo
asoorepresentingooaooclientooduringooanooInternalooRevenueooServiceoo(IRS)ooaudit.
,FederalooTaxooResearch,oo12thoo Pageoo1-3
Edition
Pageoo5
1-4.
Mostooofootheootaxoocomplianceooworkooisooperformedoobyoocommercialootaxooprepar
ers,ooenrolledooagentsoo(EAs),ooattorneys,ooandoocertifiedoopublicooaccountantsoo(CPAs).ooNo
ncomplexooindividual,oopartnership,ooandoocorporateootaxooreturnsoooftenooareoocompletedooby
oocommercialootaxoopreparers.ooTheoopreparationooofoomoreoocomplexooreturnsoousuallyooisoo
performedoobyooEAs,ooattorneys,ooandooCPAs.ooTheoolatteroogroupsooalsoooprovideootaxooplan
ningooservicesooandoorepresentootheirooclientsoobeforeootheooIRS.
AnooEAooisoooneoowhoooisooadmittedootooopracticeoobeforeootheooIRSoobyoopassingooaoospecial
ooIRS-
administeredooexamination,oooroowhooohasooworkedooforootheooIRSooforoofiveooyearsooandooiso
oissuedooaoopermitootooorepresentooclientsoobeforeootheooIRS.ooCPAsooandooattorneysooareoonot
oorequiredootoootakeoothisooexaminationooandooareooautomaticallyooadmittedootooopracticeoobefo
reootheooIRSooifootheyooareooinoogoodoostandingoowithootheooappropriateooprofessionaloolicensing
ooboard.
Pageoo5ooandooCircularoo230
1-5.
Taxooplanningooisootheooprocessooofooarrangingooone‘soofinancialooaffairsootooominimize
ooanyootaxooliability.ooMuchooofoomodernootaxoopracticeoocentersooaroundoothisooprocess,ooandoot
heooresultingoooutcomeooisootaxooavoidance.
Thereooisoonothingooillegalooorooimmoralooinootheooavoidanceooofootaxationooasoolongooasootheoo
taxpayerooremainsoowithinoolegaloobounds.ooInoocontrast,ootaxooevasionooconstitutesootheooillega
loononpaymentooofooaootaxooandoocannotoobeoocondoned.ooActivitiesooofoothisoosortooclearlyoovio
lateooexistingoolegalooconstraintsooandoofalloooutsideooofootheoodomainooofootheooprofessionaloot
axoopractitioner.
Pageoo6
1-6.
Inooanooopenootaxooplanningoosituation,ootheootransactionooisoonotooyetoocomplete;oother
efore,ootheootaxoopractitioneroomaintainsoosomeoodegreeooofoocontroloooverootheoopotentialootaxoo
, Pageoo1-4 SOLUTIONSooMANUA
liability,ooandootheootransactionoomayoobeoomodi- L
oofiedootoooachieveooaoomoreoofavorableootaxootreatment.ooInooaooclosedootransactionoohowever,
ooallooofootheoopertinentooactionsoohaveoobeenoocompleted,ooandootaxooplanningooactivitiesoomayo
obeoolimitedootoootheoopresentationooofootheoosituationootoootheoogovernmentooinootheoomostoole
gallyooadvantageousoo manneroo possible.
Edition
Solution Manual Federal Tax Research 12th Edition by Roby Sawyers, Steven Gill
CHAPTERoo1
INTRODUCTIONooTOooTAXooPRACTICEooANDooETHICS
DISCUSSIONooQUESTIONS
1-1.
InootheooUnitedooStates,ootheootaxoosystemooisooanoooutgrowthooofootheoofollowingoo
fiveoodisciplines:oolaw,ooaccounting,ooeconomics,oopoliticalooscience,ooandoosociology.ooThe
ooenvironmentooforootheootaxoosystemooisooprovidedoobyootheooprinciplesooofooeconomics,oos
ociology,ooandoopoliticalooscience,oowhileootheoolegalooandooaccountingoofieldsooareoorespon
sibleooforoo theoosystem‘soointerpretationoo andooapplication.
Eachooofootheseoodisciplinesooaffectsoothisoocountry‘sootaxoosystemooinooaoouniqueooway.ooE
conomistsooaddressoosuchooissuesooasoohowooproposedootaxoolegislationoowillooaffectootheoorat
eooofooinflationooorooeconomicoogrowth.ooMeasurementooofootheoosocialooequityooofooaootaxoo
andoodeterminingoowhetherooaootaxoosystemoodiscriminatesooagainstoocertainootaxpayersooare
ooissuesoothatooareooexaminedoobyoosociologistsooandoopoliticalooscientists.
Finally,ooattorneysooareooresponsibleooforootheoointerpretationooofootheootaxationoostatutes,ooa
ndooaccountantsooensureoothatootheseoosameoostatutesooareooappliedooconsistently.
Pageoo4
1-2.
Theoootheroomajoroocategoriesooofootaxoopracticeooinooadditionootoootaxooresearchooareooasoofollows
:
Taxoocompliance
Taxooplanning
Taxoolitigati
onooPageoo5
1-3.
Taxoocomplianceooconsistsooofoogatheringoopertinentooinformation,ooevaluatingooando
oclassifyingoothatooinformation,ooandoofilingooanyoonecessaryootaxooreturns.ooComplianceooal
,Pageoo1-2 SOLUTIONSooMANUA
L
soooincludesoootheroofunctionsoonecessaryootooosatisfyoogovernmentaloorequirements, oosuchoo
asoorepresentingooaooclientooduringooanooInternalooRevenueooServiceoo(IRS)ooaudit.
,FederalooTaxooResearch,oo12thoo Pageoo1-3
Edition
Pageoo5
1-4.
Mostooofootheootaxoocomplianceooworkooisooperformedoobyoocommercialootaxooprepar
ers,ooenrolledooagentsoo(EAs),ooattorneys,ooandoocertifiedoopublicooaccountantsoo(CPAs).ooNo
ncomplexooindividual,oopartnership,ooandoocorporateootaxooreturnsoooftenooareoocompletedooby
oocommercialootaxoopreparers.ooTheoopreparationooofoomoreoocomplexooreturnsoousuallyooisoo
performedoobyooEAs,ooattorneys,ooandooCPAs.ooTheoolatteroogroupsooalsoooprovideootaxooplan
ningooservicesooandoorepresentootheirooclientsoobeforeootheooIRS.
AnooEAooisoooneoowhoooisooadmittedootooopracticeoobeforeootheooIRSoobyoopassingooaoospecial
ooIRS-
administeredooexamination,oooroowhooohasooworkedooforootheooIRSooforoofiveooyearsooandooiso
oissuedooaoopermitootooorepresentooclientsoobeforeootheooIRS.ooCPAsooandooattorneysooareoonot
oorequiredootoootakeoothisooexaminationooandooareooautomaticallyooadmittedootooopracticeoobefo
reootheooIRSooifootheyooareooinoogoodoostandingoowithootheooappropriateooprofessionaloolicensing
ooboard.
Pageoo5ooandooCircularoo230
1-5.
Taxooplanningooisootheooprocessooofooarrangingooone‘soofinancialooaffairsootooominimize
ooanyootaxooliability.ooMuchooofoomodernootaxoopracticeoocentersooaroundoothisooprocess,ooandoot
heooresultingoooutcomeooisootaxooavoidance.
Thereooisoonothingooillegalooorooimmoralooinootheooavoidanceooofootaxationooasoolongooasootheoo
taxpayerooremainsoowithinoolegaloobounds.ooInoocontrast,ootaxooevasionooconstitutesootheooillega
loononpaymentooofooaootaxooandoocannotoobeoocondoned.ooActivitiesooofoothisoosortooclearlyoovio
lateooexistingoolegalooconstraintsooandoofalloooutsideooofootheoodomainooofootheooprofessionaloot
axoopractitioner.
Pageoo6
1-6.
Inooanooopenootaxooplanningoosituation,ootheootransactionooisoonotooyetoocomplete;oother
efore,ootheootaxoopractitioneroomaintainsoosomeoodegreeooofoocontroloooverootheoopotentialootaxoo
, Pageoo1-4 SOLUTIONSooMANUA
liability,ooandootheootransactionoomayoobeoomodi- L
oofiedootoooachieveooaoomoreoofavorableootaxootreatment.ooInooaooclosedootransactionoohowever,
ooallooofootheoopertinentooactionsoohaveoobeenoocompleted,ooandootaxooplanningooactivitiesoomayo
obeoolimitedootoootheoopresentationooofootheoosituationootoootheoogovernmentooinootheoomostoole
gallyooadvantageousoo manneroo possible.
