Solution Manual for Federal Tax Research (Edition by Roby Sawyers & Steven Gill)

Federal Tax Research, 13th Editio
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Solution Manual Federal Tax Research
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Ws 13th Edition by Roby Sawyers, Steven Gill Cha
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pters 1 -13 Ws Ws

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CHAPTER 1 Ws




INTRODUCTION TO TAX PRACTICE AND ETHICS Ws Ws Ws Ws Ws




DISCUSSION QUESTIONS
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1-1.
In the United States, the tax system is an outgrowth of the following five discipli
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nes: law, accounting, economics, political science, and sociology. The environment for th
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e tax system is provided by the principles of economics, sociology, and political science,
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while the legal and accounting fields are responsible for the system‘s interpretation and a
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pplication.


Each of these disciplines affects this country‘s tax system in a unique way. Economists ad
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dress such issues as how proposed tax legislation will affect the rate of inflation or econom
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ic growth. Measurement of the social equity of a tax and determining whether a tax syste
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m discriminates against certain taxpayers are issues that are examined by sociologists and
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political scientists. Ws




Finally, attorneys are responsible for the interpretation of the taxation statutes, and account
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ants 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 Ws




• Tax planning Ws




• Tax litigatio Ws




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1-3.
Tax compliance consists of gathering pertinent information, evaluating and classifyi
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ng that information, and filing any necessary tax returns. Compliance also includes other f
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unctions necessary to satisfy governmental requirements, such as representing a client duri
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ng an Internal Revenue Service (IRS) audit.
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1-4.
Most of the tax compliance work is performed by commercial tax preparers, enroll
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ed agents (EAs), attorneys, and certified public accountants (CPAs). Noncomplex individua
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l, partnership, and corporate tax returns often are completed by commercial tax preparers. T
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he preparation of more complex returns usually is performed by EAs, attorneys, and CPAs
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. The latter groups also provide tax planning services and represent their clients before the I
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RS.


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 per
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mit to represent clients before the IRS. CPAs and attorneys are not required to take this exa
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mination and are automatically admitted to practice before the IRS if they are in good standi
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ng with the appropriate professional licensing board.
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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 li
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ability. Much of modern tax practice centers around this process, and the resulting outcome is
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tax avoidance.
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There is nothing illegal or immoral in the avoidance of taxation as long as the taxpayer rema
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ins within legal bounds. In contrast, tax evasion constitutes the illegal nonpayment of a tax a
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nd cannot be condoned. Activities of this sort clearly violate existing legal constraints and fall
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Ws 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 ta
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x practitioner maintains some degree of control over the potential tax liability, and the transac
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tion may be modi-
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Ws fied to achieve a more favorable tax treatment. In a closed transaction however, all of the p
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ertinent actions have been completed, and tax planning activities may be limited to the present
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Ws SOLUTIONS MANUAL
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ation of the situation to the government in the most legally advantageous manner possible.
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