Federal Tax Research, 13th Edition Page 1-1
Solution Manual Federal Tax Research
13th Edition by Roby Sawyers, Steven Gill
Chapters 1 -13
,Page 1-2
hj SOLUTIONS MANUAL
hj
CHAPTER 1
INTRODUCTION TO TAX PRACTICE AND ETHICS
DISCUSSION QUESTIONS
1-1. In the United States, the tax system is an outgrowth of the following five disciplines: law,
accounting, economics, political science, and sociology. The environment for the tax system is
provided by the principles of economics, sociology, and political science, while the legal and
accounting fields are responsible for the system‘s interpretation and application.
Each of these disciplines affects this country‘s tax system in a unique way. Economists address
such issues as how proposed tax legislation will affect the rate of inflation or economic growth.
Measurement of the social equity of a tax and determining whether a tax system discriminates
against certain taxpayers are issues that are examined by sociologists and political scientists.
Finally, attorneys are responsible for the interpretation of the taxation statutes, and accountants
ensure that these same statutes are applied consistently.****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 litigation
Page 5
1-3. Tax compliance consists of gathering pertinent information, evaluating and classifying that
information, and filing any necessary tax returns. Compliance also includes other functions
necessary to satisfy governmental requirements, such as representing a client during an Internal
Revenue Service (IRS) audit.
,Federal Tax Research, 13th Edition
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Page 5 hj
1-4.
Most of the tax compliance work is performed by commercial tax preparers, enrolled a
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gents (EAs), attorneys, and certified public accountants (CPAs). Noncomplex individual, partner
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ship, and corporate tax returns often are completed by commercial tax preparers. The preparatio
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n of more complex returns usually is performed by EAs, attorneys, and CPAs. The latter groups a
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lso provide tax planning services and represent their clients before the IRS.
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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 permit to re
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present clients before the IRS. CPAs and attorneys are not required to take this examination and ar
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e automatically admitted to practice before the IRS if they are in good standing with the appropriate
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professional licensing board. hj hj
Page 5 and Circular 230 hj hj hj hj
1-5.
Tax planning is the process of arranging one‘s financial affairs to minimize any tax liabilit
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y. Much of modern tax practice centers around this process, and the resulting outcome is tax avoid
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ance.
There is nothing illegal or immoral in the avoidance of taxation as long as the taxpayer remains wit
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hin legal bounds. In contrast, tax evasion constitutes the illegal nonpayment of a tax and cannot be c
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ondoned. Activities of this sort clearly violate existing legal constraints and fall outside of the dom
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ain of the professional tax practitioner.
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Page 6 hj
1-6.
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, Page 1-4
hj SOLUTIONS MANUAL
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anner cpossible.
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Solution Manual Federal Tax Research
13th Edition by Roby Sawyers, Steven Gill
Chapters 1 -13
,Page 1-2
hj SOLUTIONS MANUAL
hj
CHAPTER 1
INTRODUCTION TO TAX PRACTICE AND ETHICS
DISCUSSION QUESTIONS
1-1. In the United States, the tax system is an outgrowth of the following five disciplines: law,
accounting, economics, political science, and sociology. The environment for the tax system is
provided by the principles of economics, sociology, and political science, while the legal and
accounting fields are responsible for the system‘s interpretation and application.
Each of these disciplines affects this country‘s tax system in a unique way. Economists address
such issues as how proposed tax legislation will affect the rate of inflation or economic growth.
Measurement of the social equity of a tax and determining whether a tax system discriminates
against certain taxpayers are issues that are examined by sociologists and political scientists.
Finally, attorneys are responsible for the interpretation of the taxation statutes, and accountants
ensure that these same statutes are applied consistently.****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 litigation
Page 5
1-3. Tax compliance consists of gathering pertinent information, evaluating and classifying that
information, and filing any necessary tax returns. Compliance also includes other functions
necessary to satisfy governmental requirements, such as representing a client during an Internal
Revenue Service (IRS) audit.
,Federal Tax Research, 13th Edition
hj hj hj hj Page 1-3 hj
Page 5 hj
1-4.
Most of the tax compliance work is performed by commercial tax preparers, enrolled a
hj hj hj hj hj hj hj hj hj hj hj hj hj
gents (EAs), attorneys, and certified public accountants (CPAs). Noncomplex individual, partner
hj hj hj hj hj hj hj hj hj hj
ship, and corporate tax returns often are completed by commercial tax preparers. The preparatio
hj hj hj hj hj hj hj hj hj hj hj hj hj
n of more complex returns usually is performed by EAs, attorneys, and CPAs. The latter groups a
hj hj hj hj hj hj hj hj hj hj hj hj hj hj hj hj
lso provide tax planning services and represent their clients before the IRS.
hj hj hj hj hj hj hj hj hj hj hj
An EA is one who is admitted to practice before the IRS by passing a special IRS-
hj hj hj hj hj hj hj hj hj hj hj hj hj hj hj hj
administered examination, or who has worked for the IRS for five years and is issued a permit to re
hj hj hj hj hj hj hj hj hj hj hj hj hj hj hj hj hj hj
present clients before the IRS. CPAs and attorneys are not required to take this examination and ar
hj hj hj hj hj hj hj hj hj hj hj hj hj hj hj hj
e automatically admitted to practice before the IRS if they are in good standing with the appropriate
hj hj hj hj hj hj hj hj hj hj hj hj hj hj hj hj hj
professional licensing board. hj hj
Page 5 and Circular 230 hj hj hj hj
1-5.
Tax planning is the process of arranging one‘s financial affairs to minimize any tax liabilit
hj hj hj hj hj hj hj hj hj hj hj hj hj hj
y. Much of modern tax practice centers around this process, and the resulting outcome is tax avoid
hj hj hj hj hj hj hj hj hj hj hj hj hj hj hj hj
ance.
There is nothing illegal or immoral in the avoidance of taxation as long as the taxpayer remains wit
hj hj hj hj hj hj hj hj hj hj hj hj hj hj hj hj hj
hin legal bounds. In contrast, tax evasion constitutes the illegal nonpayment of a tax and cannot be c
hj hj hj hj hj hj hj hj hj hj hj hj hj hj hj hj hj
ondoned. Activities of this sort clearly violate existing legal constraints and fall outside of the dom
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ain of the professional tax practitioner.
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Page 6 hj
1-6.
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he ctax cpractitionercmaintains csome cdegree cof ccontrol cover cthe cpotential ctax cliability, cand
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cthe ctransaction cmay cbe cmodi-
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cthe cpertinentcactions chave cbeen ccompleted, cand ctax cplanning cactivities cmay cbe climited cto
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cthe cpresentation cof cthe csituation cto cthe cgovernment cin cthe cmost clegally cadvantageous cm
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, Page 1-4
hj SOLUTIONS MANUAL
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anner cpossible.
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