Solution Manual Federal Tax Research 12th Edition Sawyers, Gill|ISBN: 9780357366387|Newest version 2025

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

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CHAPTER 1 VP




INTRODUCTION TO TAX PRACTICE AND ETHICS VP VP VP VP VP




DISCUSSION QUESTIONS
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1-1.
In the United States, the tax system is an outgrowth of the following five disciplin
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es: law, accounting, economics, political science, and sociology. The environment for the t
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ax system isprovided by the principles of economics, sociology, and political science, whil
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e the legal and accounting fields are responsible for the system‘s interpretation and applic
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ation.


Each of these disciplines affects this country‘s tax system in a unique way. Economists ad
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dresssuch issues as how proposed tax legislation will affect the rate of inflation or economi
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c growth.Measurement of the social equity of a tax and determining whether a tax system
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discriminates against certain taxpayers are issues that are examined by sociologists and poli
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tical scientists.
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Finally, attorneys are responsible for the interpretation of the taxation statutes, and accounta
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ntsensure that these same statutes are applied consistently.****8880()
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1-2. The other major categories of tax practice in addition to tax research are as follows:
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 Tax compliance VP




 Tax planning VP




 Tax litigatio VP




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1-3.
Tax compliance consists of gathering pertinent information, evaluating and classifyi
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ng that information, and filing any necessary tax returns. Compliance also includes other f
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unctions necessary to satisfy governmental requirements, such as representing a client duri
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ng an InternalRevenue Service (IRS) audit.
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1-4.
Most of the tax compliance work is performed by commercial tax preparers, enrolle
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d agents (EAs), attorneys, and certified public accountants (CPAs). Noncomplex individual,
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VP partnership,and corporate tax returns often are completed by commercial tax preparers. Th
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e preparation of more complex returns usually is performed by EAs, attorneys, and CPAs.
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The latter groups alsoprovide tax planning services and represent their clients before the IR
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S.


An EA is one who is admitted to practice before the IRS by passing a special IRS-
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administered examination, or who has worked for the IRS for five years and is issued a perm
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it to represent clients before the IRS. CPAs and attorneys are not required to take this exami
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nation and are automatically admitted to practice before the IRS if they are in good standing
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with the appropriateprofessional licensing board.
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Page 5 and Circular 230
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1-5.
Tax planning is the process of arranging one‘s financial affairs to minimize any tax li
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ability. Muchof modern tax practice centers around this process, and the resulting outcome is t
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ax avoidance.
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There is nothing illegal or immoral in the avoidance of taxation as long as the taxpayer remai
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ns within legal bounds. In contrast, tax evasion constitutes the illegal nonpayment of a tax an
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d cannotbe condoned. Activities of this sort clearly violate existing legal constraints and fall o
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utside of the domain of the professional tax practitioner.
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1-6.
In an open tax planning situation, the transaction is not yet complete; therefore, the ta
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x practitionermaintains some degree of control over the potential tax liability, and the transact
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ion may be modi-
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VP fied to achieve a more favorable tax treatment. In a closed transaction however, all of the pe
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rtinentactions have been completed, and tax planning activities may be limited to the presentat
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VP SOLUTIONS MANUAL
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ion of the situation to the government in the most legally advantageous manner possible.
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