Solution Manual For Federal Tax Research, 13th Edition by Roby Sawyers, Steven Gill, Verified Chapters 1 - 13, Complete Newest Version

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

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CHAPTER 1 rm




INTRODUCTION TO TAX PRACTICE AND ETHICS rm rm rm rm rm




DISCUSSION QUESTIONS
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1-1. In the United States, the tax system is an outgrowth of the following five disciplines: law,
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rm accounting, economics, political science, and sociology. The environment for the tax system
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rm isprovided by the principles of economics, sociology, and political science, while the legal
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rm and accounting fields are responsible for the system‘s interpretation and application.
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Each of these disciplines affects this country‘s tax system in a unique way. Economists
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rm addresssuch issues as how proposed tax legislation will affect the rate of inflation or economic
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rm growth.Measurement of the social equity of a tax and determining whether a tax system
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rm discriminates against certain taxpayers are issues that are examined by sociologists and
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rm political scientists. rm




Finally, attorneys are responsible for the interpretation of the taxation statutes, and accountants
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ensure 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 rm




• Tax planning rm




• Tax


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1-3. Tax compliance consists of gathering pertinent information, evaluating and classifying that
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rm information, and filing any necessary tax returns. Compliance also includes other functions
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rm necessary to satisfy governmental requirements, such as representing a client during an
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rm InternalRevenue Service (IRS) audit.
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,Federal Tax Research, 13th Edition
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1-4. Most of the tax compliance work is performed by commercial tax preparers, enrolled agents
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rm (EAs), attorneys, and certified public accountants (CPAs). Noncomplex individual,
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rm partnership,and corporate tax returns often are completed by commercial tax preparers. The
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rm preparation of more complex returns usually is performed by EAs, attorneys, and CPAs. The
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rm latter groups alsoprovide 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-administered
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rm examination, or who has worked for the IRS for five years and is issued a permit to represent
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rm clients before the IRS. CPAs and attorneys are not required to take this examination and are
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rm automatically admitted to practice before the IRS if they are in good standing with the
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rm appropriateprofessional licensing board. rm rm rm




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 liability.
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rm Muchof modern tax practice centers around this process, and the resulting outcome is tax
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avoidance.
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There is nothing illegal or immoral in the avoidance of taxation as long as the taxpayer remains
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rm within legal bounds. In contrast, tax evasion constitutes the illegal nonpayment of a tax and
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rm cannotbe condoned. Activities of this sort clearly violate existing legal constraints and fall
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rm outside 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 tax
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rm practitionermaintains some degree of control over the potential tax liability, and the transaction
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rm may be modi- fied to achieve a more favorable tax treatment. In a closed transaction however, all
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rm of the pertinentactions have been completed, and tax planning activities may be limited to the
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rm presentation of the situation to the government in the most legally advantageous manner possible.
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1-7. Tax litigation is the process of settling a dispute with the IRS in a court of law. Typically, a tax
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attorney handles tax litigation that progresses beyond the final IRS appeal.
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1-8. CPAs serve is a support capacity in tax litigation.
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1-9. Tax research consists of the resolution of unanswered taxation questions. The tax research process
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includes the following:
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1. Identification of pertinent issues; rm rm rm




2. Specification of proper authorities; rm rm rm




3. Evaluation of the propriety of authorities; and, rm rm rm rm rm rm




4. Application of authorities to a specific situation. rm rm rm rm rm rm




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1-10. Circular 230 is issued by the Treasury Department and applies to all who practice before the IRS.
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1-11. In addition to Circular 230, CPAs must follow the AICPA‘s Code of Professional Conduct and
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rm Statements on Standards for Tax Services. CPAs must also abide by the rules of the
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rm appropriatestate board(s) of accountancy.
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1-12. A return preparer must obtain 18 hours of continuing education from an IRS-approved CE
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rm Provider. The hours must include a 6 credit hour Annual Federal Tax Refresher course (AFTR)
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rm that covers filing season issues and tax law updates. The AFTR course must include a
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rm knowledge-based comprehension test administered at the conclusion of the course by the CE
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rm Provider.