Solution Manual Federal Tax Research
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tt 13th Edition by Roby Sawyers, Steven Gill
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Chapters 1 -13
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,Page 1-2 SOLUTIONS
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 Isprovided 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 Addressttsuch 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 Accountantsttensure 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
Litigationttpage
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 Internalttrevenue Service (Irs) Audit.
, Page 5
1-4. Most Of The Tax Compliance Work Is Performed By Commercial Tax Preparers,
Enrolled Agents (Eas), Attorneys, And Certified Public Accountants (Cpas).
Noncomplex Individual, Partnership,Ttand Corporate Tax Returns Often Are Completed
By Commercial Tax Preparers. The Preparation Of More Complex Returns Usually Is
Performed By Eas, Attorneys, And Cpas. The Latter Groups Alsottprovide Tax Planning
Services And Represent Their Clients Before The Irs.
An Ea Is One Who Is Admitted To Practice Before The Irs By Passing A Special Irs-
Administered Examination, Or Who Has Worked For The Irs For Five Years And Is
Issued A Permit To Represent Clients Before The Irs. Cpas And Attorneys Are Not
Required To Take This Examination And Are Automatically Admitted To Practice Before
The Irs If They Are In Good Standing With The Appropriatettprofessional Licensing Board.
Page 5 And Circular 230
1-5. Tax Planning Is The Process Of Arranging One‘S Financial Affairs To Minimize Any
Tax Liability. Muchttof 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
Taxpayer Remains Within Legal Bounds. In Contrast, Tax Evasion Constitutes The
Illegal Nonpayment Of A Tax And Cannotbe Condoned. Activities Of This Sort Clearly
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 Yet Complete; Therefore,
The Tax Practitionerttmaintains Some Degree Of Control Over The Potential Tax
Liability, And The Transaction May 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 May Be Limited To The Presentation Of The
Situation To The Government In The Most Legally Advantageous Manner Possible.
, Page 1-4 SOLUTIONS
Page 6
1-7. Tax Litigation Is The Process Of Settling A Dispute With The Irs In A Court Of
Law. Typically, A Taxattorney Handles Tax Litigation That Progresses Beyond
The Final Irs Appeal.
Page 6
1-8. Cpas Serve Is A Support Capacity In Tax Litigation.
Page 6
1-9. Tax Research Consists Of The Resolution Of Unanswered Taxation Questions. The Tax
Research Processttincludes The Following:
1. Identification Of Pertinent Issues;
2. Specification Of Proper Authorities;
3. Evaluation Of The Propriety Of Authorities; And,
4. Application Of Authorities To A Specific Situation.
Page 6
1-10. Circular 230 Is Issued By The Treasury Department And Applies To All Who Practice
Before The Irs.Ttpage 7
1-11. In Addition To Circular 230, Cpas Must Follow The Aicpa‘S Code Of Professional
Conduct And Statements On Standards For Tax Services. Cpas Must Also Abide By
The Rules Of The Appropriatettstate Board(S) Of Accountancy.
Page 7
1-12. A Return Preparer Must Obtain 18 Hours Of Continuing Education From An Irs-
Approved Ce Provider. The Hours Must Include A 6 Credit Hour Annual Federal Tax
Refresher Course (Aftr) That Covers Filing Season Issues And Tax Law Updates. The Aftr
Course Must Include A Knowledge-Ttbased Comprehension Test Administered At The
Conclusion Of The Course By The Ce Provider.
tt tt tt tt
tt 13th Edition by Roby Sawyers, Steven Gill
tt tt tt tt tt tt
Chapters 1 -13
tt tt tt
,Page 1-2 SOLUTIONS
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 Isprovided 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 Addressttsuch 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 Accountantsttensure 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
Litigationttpage
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 Internalttrevenue Service (Irs) Audit.
, Page 5
1-4. Most Of The Tax Compliance Work Is Performed By Commercial Tax Preparers,
Enrolled Agents (Eas), Attorneys, And Certified Public Accountants (Cpas).
Noncomplex Individual, Partnership,Ttand Corporate Tax Returns Often Are Completed
By Commercial Tax Preparers. The Preparation Of More Complex Returns Usually Is
Performed By Eas, Attorneys, And Cpas. The Latter Groups Alsottprovide Tax Planning
Services And Represent Their Clients Before The Irs.
An Ea Is One Who Is Admitted To Practice Before The Irs By Passing A Special Irs-
Administered Examination, Or Who Has Worked For The Irs For Five Years And Is
Issued A Permit To Represent Clients Before The Irs. Cpas And Attorneys Are Not
Required To Take This Examination And Are Automatically Admitted To Practice Before
The Irs If They Are In Good Standing With The Appropriatettprofessional Licensing Board.
Page 5 And Circular 230
1-5. Tax Planning Is The Process Of Arranging One‘S Financial Affairs To Minimize Any
Tax Liability. Muchttof 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
Taxpayer Remains Within Legal Bounds. In Contrast, Tax Evasion Constitutes The
Illegal Nonpayment Of A Tax And Cannotbe Condoned. Activities Of This Sort Clearly
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 Yet Complete; Therefore,
The Tax Practitionerttmaintains Some Degree Of Control Over The Potential Tax
Liability, And The Transaction May 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 May Be Limited To The Presentation Of The
Situation To The Government In The Most Legally Advantageous Manner Possible.
, Page 1-4 SOLUTIONS
Page 6
1-7. Tax Litigation Is The Process Of Settling A Dispute With The Irs In A Court Of
Law. Typically, A Taxattorney Handles Tax Litigation That Progresses Beyond
The Final Irs Appeal.
Page 6
1-8. Cpas Serve Is A Support Capacity In Tax Litigation.
Page 6
1-9. Tax Research Consists Of The Resolution Of Unanswered Taxation Questions. The Tax
Research Processttincludes The Following:
1. Identification Of Pertinent Issues;
2. Specification Of Proper Authorities;
3. Evaluation Of The Propriety Of Authorities; And,
4. Application Of Authorities To A Specific Situation.
Page 6
1-10. Circular 230 Is Issued By The Treasury Department And Applies To All Who Practice
Before The Irs.Ttpage 7
1-11. In Addition To Circular 230, Cpas Must Follow The Aicpa‘S Code Of Professional
Conduct And Statements On Standards For Tax Services. Cpas Must Also Abide By
The Rules Of The Appropriatettstate Board(S) Of Accountancy.
Page 7
1-12. A Return Preparer Must Obtain 18 Hours Of Continuing Education From An Irs-
Approved Ce Provider. The Hours Must Include A 6 Credit Hour Annual Federal Tax
Refresher Course (Aftr) That Covers Filing Season Issues And Tax Law Updates. The Aftr
Course Must Include A Knowledge-Ttbased Comprehension Test Administered At The
Conclusion Of The Course By The Ce Provider.
