on
Solution6Manual6Federal6Tax6Research
613th6Edition6by6Roby6Sawyers,6Steven6G
ill6Chapters616-13
,Page61-2 SOLUTIONS6MANUA
L
CHAPTER61
INTRODUCTION6TO6TAX6PRACTICE6AND6ETHICS
DISCUSSION6QUESTIONS
1-1.
In6the6United6States,6the6tax6system6is6an6outgrowth6of6the6following6five6disci
plines:6law,6accounting,6economics,6political6science,6and6sociology.6The6environment6f
or6the6tax6system6is6provided6by6the6principles6of6economics,6sociology,6and6political6s
cience,6while6the6legal6and6accounting6fields6are6responsible6for6the6system‘s6interpreta
tion6and6application.
Each6of6these6disciplines6affects6this6country‘s6tax6system6in6a6unique6way.6Economists
6address6such6issues6as6how6proposed6tax6legislation6will6affect6the6rate6of6inflation6or6
economic6growth.6Measurement6of6the6social6equity6of6a6tax6and6determining6whether6a
6tax6system6discriminates6against6certain6taxpayers6are6issues6that6are6examined6by6soci
ologists6and6political6scientists.
Finally,6attorneys6are6responsible6for6the6interpretation6of6the6taxation6statutes,6and6acco
untants6ensure6that6these6same6statutes6are6applied6consistently.****8880()
Page64
1-2. The6other6major6categories6of6tax6practice6in6addition6to6tax6research6are6as6follows:
Tax6compliance
Tax6planning
Tax6litigatio
n6Page65
1-3.
Tax6compliance6consists6of6gathering6pertinent6information,6evaluating6and6classif
ying6that6information,6and6filing6any6necessary6tax6returns.6Compliance6also6includes6ot
her6functions6necessary6to6satisfy6governmental6requirements,6such6as6representing6a6cli
ent6during6an6Internal6Revenue6Service6(IRS)6audit.
,Federal6Tax6Research,613th6Editi Page61-3
on
Page65
1-4.
Most6of6the6tax6compliance6work6is6performed6by6commercial6tax6preparers,6enr
olled6agents6(EAs),6attorneys,6and6certified6public6accountants6(CPAs).6Noncomplex6indi
vidual,6partnership,6and6corporate6tax6returns6often6are6completed6by6commercial6tax6pre
parers.6The6preparation6of6more6complex6returns6usually6is6performed6by6EAs,6attorneys
,6and6CPAs.6The6latter6groups6also6provide6tax6planning6services6and6represent6their6clie
nts6before6the6IRS.
An6EA6is6one6who6is6admitted6to6practice6before6the6IRS6by6passing6a6special6IRS-
administered6examination,6or6who6has6worked6for6the6IRS6for6five6years6and6is6issued6a6
permit6to6represent6clients6before6the6IRS.6CPAs6and6attorneys6are6not6required6to6take6th
is6examination6and6are6automatically6admitted6to6practice6before6the6IRS6if6they6are6in6go
od6standing6with6the6appropriate6professional6licensing6board.
Page656and6Circular6230
1-5.
Tax6planning6is6the6process6of6arranging6one‘s6financial6affairs6to6minimize6any6ta
x6liability.6Much6of6modern6tax6practice6centers6around6this6process,6and6the6resulting6outc
ome6is6tax6avoidance.
There6is6nothing6illegal6or6immoral6in6the6avoidance6of6taxation6as6long6as6the6taxpayer6r
emains6within6legal6bounds.6In6contrast,6tax6evasion6constitutes6the6illegal6nonpayment6of6
a6tax6and6cannot6be6condoned.6Activities6of6this6sort6clearly6violate6existing6legal6constrain
ts6and6fall6outside6of6the6domain6of6the6professional6tax6practitioner.
Page66
1-6.
In6an6open6tax6planning6situation,6the6transaction6is6not6yet6complete;6therefore,6the
6tax6practitioner6maintains6some6degree6of6control6over6the6potential6tax6liability,6and6the6t
ransaction6may6be6modi-
6fied6to6achieve6a6more6favorable6tax6treatment.6In6a6closed6transaction6however,6all6of6th
e6pertinent6actions6have6been6completed,6and6tax6planning6activities6may6be6limited6to6the
, Page61-4 SOLUTIONS6MANUA
L
6presentation6of6the6situation6to6the6government6in6the6most6legally6advantageous6manner6
possible.