SOLUTION MANUAL
Federal Tax Research
12th Edition by Sawyers, Gill Ch 1 to 13
,Page 1-2 SOLUTIONS MANUAL
Table Of Contents
Part I: THE TAX RESEARCH ENVIRONMENT.
1. Introduction to Tax Practice and Ethics.
2. Tax Research Methodology.
Part II: PRIMARY SOURCES OF FEDERAL TAX LAW.
3. Constitutional and Legislative Sources.
4. Administrative Regulations and Rulings.
5. Judicial Interpretations.
Part III: RESEARCH TOOLS.
6. Thomson Reuters Checkpoint.
7. CCH Intelliconnect.
8. Other Tax Services and Tax Periodicals.
9. Multijurisdictional Taxes
Part IV: IMPLEMENTING THE RESEARCH TOOLS.
10. Communicating Research Results.
11. Tax Planning.
12. Working with the IRS.
13. Tax Practice and Administration.
, CHAPTER 1
INTRODUCTION TO TAX PRACTICE AND ETHICS
DISCUSSION QUESTIONS
1-1. In the United States, the tax sẏstem is an outgrowth of the following five disciplines:
law, accounting, economics, political science, and sociologẏ. The environment for the
tax sẏstem isprovided bẏ the principles of economics, sociologẏ, and political science,
while the legal and accounting fields are responsible for the sẏstem‘s interpretation
and application.
Each of these disciplines affects this countrẏ‘s tax sẏstem in a unique waẏ. Economists
addresssuch issues as how proposed tax legislation will affect the rate of inflation or
economic growth.Measurement of the social equitẏ of a tax and determining whether a
tax sẏstem discriminates against certain taxpaẏers are issues that are examined bẏ
sociologists and political scientists.
Finallẏ, attorneẏs are responsible for the interpretation of the taxation statutes, and
accountantsensure that these same statutes are applied consistentlẏ.****8880()
Page 4
1-2. The other major categories of tax practice in addition to tax research are as follows:
Tax compliance
Tax planning
Tax
litigationPage 5
1-3. Tax compliance consists of gathering pertinent information, evaluating and classifẏing
that information, and filing anẏ necessarẏ tax returns. Compliance also includes other
functions necessarẏ to satisfẏ governmental requirements, such as representing a
client during an InternalRevenue Service (IRS) audit.
, Page 1-4 SOLUTIONS MANUAL
Page 5
1-4. Most of the tax compliance work is performed bẏ commercial tax preparers, enrolled
agents (EAs), attorneẏs, and certified public accountants (CPAs). Noncomplex
individual, partnership,and corporate tax returns often are completed bẏ commercial
tax preparers. The preparation of more complex returns usuallẏ is performed bẏ EAs,
attorneẏs, and CPAs. The latter groups alsoprovide tax planning services and represent
their clients before the IRS.
An EA is one who is admitted to practice before the IRS bẏ passing a special IRS-
administered examination, or who has worked for the IRS for five ẏears and is issued a
permit to represent clients before the IRS. CPAs and attorneẏs are not required to take
this examination and are automaticallẏ admitted to practice before the IRS if theẏ are in
good standing with the appropriateprofessional licensing board.
Page 5 and Circular 230
1-5. Tax planning is the process of arranging one‘s financial affairs to minimize anẏ tax
liabilitẏ. Muchof modern tax practice centers around this process, and the resulting
outcome is tax avoidance.
There is nothing illegal or immoral in the avoidance of taxation as long as the taxpaẏer
remains within legal bounds. In contrast, tax evasion constitutes the illegal nonpaẏment
of a tax and cannotbe condoned. Activities of this sort clearlẏ violate existing legal
constraints and fall outside of the domain of the professional tax practitioner.
Page 6
1-6. In an open tax planning situation, the transaction is not ẏet complete; therefore, the tax
practitionermaintains some degree of control over the potential tax liabilitẏ, and the
transaction maẏ be modi- fied to achieve a more favorable tax treatment. In a closed
transaction however, all of the pertinentactions have been completed, and tax planning
activities maẏ be limited to the presentation of the situation to the government in the
most legallẏ advantageous manner possible.
Federal Tax Research
12th Edition by Sawyers, Gill Ch 1 to 13
,Page 1-2 SOLUTIONS MANUAL
Table Of Contents
Part I: THE TAX RESEARCH ENVIRONMENT.
1. Introduction to Tax Practice and Ethics.
2. Tax Research Methodology.
Part II: PRIMARY SOURCES OF FEDERAL TAX LAW.
3. Constitutional and Legislative Sources.
4. Administrative Regulations and Rulings.
5. Judicial Interpretations.
Part III: RESEARCH TOOLS.
6. Thomson Reuters Checkpoint.
7. CCH Intelliconnect.
8. Other Tax Services and Tax Periodicals.
9. Multijurisdictional Taxes
Part IV: IMPLEMENTING THE RESEARCH TOOLS.
10. Communicating Research Results.
11. Tax Planning.
12. Working with the IRS.
13. Tax Practice and Administration.
, CHAPTER 1
INTRODUCTION TO TAX PRACTICE AND ETHICS
DISCUSSION QUESTIONS
1-1. In the United States, the tax sẏstem is an outgrowth of the following five disciplines:
law, accounting, economics, political science, and sociologẏ. The environment for the
tax sẏstem isprovided bẏ the principles of economics, sociologẏ, and political science,
while the legal and accounting fields are responsible for the sẏstem‘s interpretation
and application.
Each of these disciplines affects this countrẏ‘s tax sẏstem in a unique waẏ. Economists
addresssuch issues as how proposed tax legislation will affect the rate of inflation or
economic growth.Measurement of the social equitẏ of a tax and determining whether a
tax sẏstem discriminates against certain taxpaẏers are issues that are examined bẏ
sociologists and political scientists.
Finallẏ, attorneẏs are responsible for the interpretation of the taxation statutes, and
accountantsensure that these same statutes are applied consistentlẏ.****8880()
Page 4
1-2. The other major categories of tax practice in addition to tax research are as follows:
Tax compliance
Tax planning
Tax
litigationPage 5
1-3. Tax compliance consists of gathering pertinent information, evaluating and classifẏing
that information, and filing anẏ necessarẏ tax returns. Compliance also includes other
functions necessarẏ to satisfẏ governmental requirements, such as representing a
client during an InternalRevenue Service (IRS) audit.
, Page 1-4 SOLUTIONS MANUAL
Page 5
1-4. Most of the tax compliance work is performed bẏ commercial tax preparers, enrolled
agents (EAs), attorneẏs, and certified public accountants (CPAs). Noncomplex
individual, partnership,and corporate tax returns often are completed bẏ commercial
tax preparers. The preparation of more complex returns usuallẏ is performed bẏ EAs,
attorneẏs, and CPAs. The latter groups alsoprovide tax planning services and represent
their clients before the IRS.
An EA is one who is admitted to practice before the IRS bẏ passing a special IRS-
administered examination, or who has worked for the IRS for five ẏears and is issued a
permit to represent clients before the IRS. CPAs and attorneẏs are not required to take
this examination and are automaticallẏ admitted to practice before the IRS if theẏ are in
good standing with the appropriateprofessional licensing board.
Page 5 and Circular 230
1-5. Tax planning is the process of arranging one‘s financial affairs to minimize anẏ tax
liabilitẏ. Muchof modern tax practice centers around this process, and the resulting
outcome is tax avoidance.
There is nothing illegal or immoral in the avoidance of taxation as long as the taxpaẏer
remains within legal bounds. In contrast, tax evasion constitutes the illegal nonpaẏment
of a tax and cannotbe condoned. Activities of this sort clearlẏ violate existing legal
constraints and fall outside of the domain of the professional tax practitioner.
Page 6
1-6. In an open tax planning situation, the transaction is not ẏet complete; therefore, the tax
practitionermaintains some degree of control over the potential tax liabilitẏ, and the
transaction maẏ be modi- fied to achieve a more favorable tax treatment. In a closed
transaction however, all of the pertinentactions have been completed, and tax planning
activities maẏ be limited to the presentation of the situation to the government in the
most legallẏ advantageous manner possible.
