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

FederaljTaxjResearch,j13thjEdition Pagej1-1


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

,Pagej1-2 SOLUTIONSjMANUAL




CHAPTER 1 j



INTRODUCTION TO TAX PRACTICE AND ETHICS
j j j j j




DISCUSSIONjQUESTIONS


1-1.
InjthejUnitedjStates,jthejtaxjsystemjisjanjoutgrowthjofjthejfollowingjfivejdisciplines:jlaw,ja
ccounting,jeconomics,jpoliticaljscience,jandjsociology.jThejenvironmentjforjthejtaxjsystemjisjpro
videdjbyjthejprinciplesjofjeconomics,jsociology,jandjpoliticaljscience,jwhilejthejlegaljandjaccount
ingjfieldsjarejresponsiblejforjthejsystem‘sjinterpretationjandjapplication.


Eachjofjthesejdisciplinesjaffectsjthisjcountry‘sjtaxjsystemjinjajuniquejway.jEconomistsjaddressjsuc
hjissuesjasjhowjproposedjtaxjlegislationjwilljaffectjthejratejofjinflationjorjeconomicjgrowth.jMeasur
ementjofjthejsocialjequityjofjajtaxjandjdeterminingjwhetherjajtaxjsystemjdiscriminatesjagainstjcerta
injtaxpayersjarejissuesjthatjarejexaminedjbyjsociologistsjandjpoliticaljscientists.

Finally,jattorneysjarejresponsiblejforjthejinterpretationjofjthejtaxationjstatutes,jandjaccountantsjens
urejthatjthesejsamejstatutesjarejappliedjconsistently.****8880()
Pagej4


1-2. Thejotherjmajorjcategoriesjofjtaxjpracticejinjadditionjtojtaxjresearchjarejasjfollows:


 Taxjcompliance
 Taxjplanning
 Taxjlitigationj


Pagej5


1-3.
Taxjcompliancejconsistsjofjgatheringjpertinentjinformation,jevaluatingjandjclassifyingjtha
tjinformation,jandjfilingjanyjnecessaryjtaxjreturns.jCompliancejalsojincludesjotherjfunctionsjneces
saryjtojsatisfyjgovernmentaljrequirements,jsuchjasjrepresentingjajclientjduringjanjInternaljRevenue
Servicej(IRS)jaudit.
j

,FederaljTaxjResearch,j13thjEdition Pagej1-3



Pagej5


1-4.
Mostjofjthejtaxjcompliancejworkjisjperformedjbyjcommercialjtaxjpreparers,jenrolledjagent
sj(EAs),jattorneys,jandjcertifiedjpublicjaccountantsj(CPAs).jNoncomplexjindividual,jpartnership,ja
ndjcorporatejtaxjreturnsjoftenjarejcompletedjbyjcommercialjtaxjpreparers.jThejpreparationjofjmorej
complexjreturnsjusuallyjisjperformedjbyjEAs,jattorneys,jandjCPAs.jThejlatterjgroupsjalsojprovidejt
axjplanningjservicesjandjrepresentjtheirjclientsjbeforejthejIRS.


AnjEAjisjonejwhojisjadmittedjtojpracticejbeforejthejIRSjbyjpassingjajspecialjIRS-
administeredjexamination,jorjwhojhasjworkedjforjthejIRSjforjfivejyearsjandjisjissuedjajpermitjtojrepre
sentjclientsjbeforejthejIRS.jCPAsjandjattorneysjarejnotjrequiredjtojtakejthisjexaminationjandjarejauto
maticallyjadmittedjtojpracticejbeforejthejIRSjifjtheyjarejinjgoodjstandingjwithjthejappropriatejprofessi
onaljlicensingjboard.


Pagej5jandjCircularj230




1-5.
Taxjplanningjisjthejprocessjofjarrangingjone‘sjfinancialjaffairsjtojminimizejanyjtaxjliability.jM
uchjofjmodernjtaxjpracticejcentersjaroundjthisjprocess,jandjthejresultingjoutcomejisjtaxjavoidance.
Therejisjnothingjillegaljorjimmoraljinjthejavoidancejofjtaxationjasjlongjasjthejtaxpayerjremainsjwithinjl
egaljbounds.jInjcontrast,jtaxjevasionjconstitutesjthejillegaljnonpaymentjofjajtaxjandjcannotjbejcondone
d.jActivitiesjofjthisjsortjclearlyjviolatejexistingjlegaljconstraintsjandjfalljoutsidejofjthejdomainjofjthejpr
ofessionaljtaxjpractitioner.


Pagej6


1-6.
Injanjopenjtaxjplanningjsituation,jthejtransactionjisjnotjyetjcomplete;jtherefore,jthejtaxjpractiti
onerjmaintainsjsomejdegreejofjcontroljoverjthejpotentialjtaxjliability,jandjthejtransactionjmayjbejmodi-
j fiedjtojachievejajmorejfavorablejtaxjtreatment.jInjajclosedjtransactionjhowever,jalljofjthejpertinentjacti
onsjhavejbeenjcompleted,jandjtaxjplanningjactivitiesjmayjbejlimitedjtojthejpresentationjofjthejsituation
jtojthejgovernmentjinjthejmostjlegallyjadvantageousjmannerjpossible.

, Pagej1-4 SOLUTIONSjMANUAL

Pagej6


1-7.
TaxjlitigationjisjthejprocessjofjsettlingjajdisputejwithjthejIRSjinjajcourtjofjlaw.jTypically,jajt
axjattorneyjhandlesjtaxjlitigationjthatjprogressesjbeyondjthejfinaljIRSjappeal.


Pagej6


1-8. CPAsjservejisjajsupportjcapacityjinjtaxjlitigation.


Pagej6


1-9.
Taxjresearchjconsistsjofjthejresolutionjofjunansweredjtaxationjquestions.jThejtaxjresearchjpro
cessjincludesjthejfollowing:


1. Identificationjofjpertinentjissues;
2. Specificationjofjproperjauthorities;
3. Evaluationjofjthejproprietyjofjauthorities;jand,
4. Applicationjofjauthoritiesjtojajspecificjsituation.


Pagej6


1-10.


Circularj230jisjissuedjbyjthejTreasuryjDepartmentjandjappliesjtojalljwhojpracticejbeforejthejI


RS.jPagej7


1-11.
InjadditionjtojCircularj230,jCPAsjmustjfollowjthejAICPA‘sjCodejofjProfessionaljConductj
andjStatementsjonjStandardsjforjTaxjServices.jCPAsjmustjalsojabidejbyjthejrulesjofjthejappropriatej
statejboard(s)jofjaccountancy.


Pagej7


1-12. Ajreturnjpreparerjmustjobtainj18jhoursjofjcontinuingjeducationjfromjanjIRS-
approvedjCEjProvider.jThejhoursjmustjincludejaj6jcreditjhourjAnnualjFederaljTaxjRefresherjcoursej(
AFTR)jthatjcoversjfilingjseasonjissuesjandjtaxjlawjupdates.jThejAFTRjcoursejmustjincludejajknowled
ge-jbasedjcomprehensionjtestjadministeredjatjthejconclusionjofjthejcoursejbyjthejCEjProvider.