SOLUTION MANUAL FOR Federal Tax Research 11th Edition
by Roby Sawyers, Steven Gill
,Part I: The Tax Research Environment
Chapter 1: Introduction to Tax Practice and Ethics
➢ Percentage of individual taxpayers e-filed tax returns
▪ 90%
❖ Percentage of tax research is online based
❖ Almost 100%
❖ Elements of Taxation
❖ Accounting, economics, law, political processes, societal concerns
❖ Tax environment
❖ Economics, sociology, and political sciences.
❖ Practice of taxation
❖ Applying tax laws, regulations, and judicial rulings to specific transactions
❖ Goal is to determine tax consequence to taxpayer
❖ Can be practiced by cpas, tax attorneys, enrolled agents, and others
❖ Taxation definition
❖ Process of collecting revenue from citizens to fund government operations
❖ Elements of tax practice
❖ Tax research
❖ Tax compliance
❖ Tax planning
❖ Tax litigation
❖ Tax research
❖ Analyze and determine answers to tax problems
❖ Three elements of tax research
❖ Tax compliance
❖ Tax planning
❖ Tax litigation
,❖ Tax compliance
❖ The preparation and filing of tax returns and includes maintaining adequate books and records
❖ Tax planning
❖ Seeking legal ways to reduce, eliminate, or defer income taxes (tax avoidance & tax evasion) (minimize tax liabil
❖ Two categories of tax planning
❖ Open transactions
❖ Closed transactions
❖ Open transactions
❖ Plan for pending future transactions (best option)
❖ Closed transactions
❖ Plan for how to best present past transactions
❖ Tax litigation
❖ Settling disputes with the IRS in court
❖ Attorneys usually handle litigation beyond initial appeal of an IRS audit
❖ Cpas must follow the rules of Circular 230. In addition, cpas in tax practice are subject to two other sets of ethica
rules. Give the name and the issuer of both these sets of rules.
❖ AICPA Code of Professional conduct
❖ Statements on Standards for Tax Services
❖ Leigh, who is not a Circular 230 practitioner, is employed by Rose, a CPA. One of Rose's clients has been notified
that the IRS has selected his or her 2018 income tax return for audit. Rose had prepared the return and signed it
preparer. Rose has been called out of town on a family emergency and would like for Leigh to represent the clie
Leigh cannot represent the client even if she has Rose's written authority to do so and has the client's power of
attorney. True or false? Explain your answer. (IRS adapted)
❖ True. As a general rule, an individual must be an enrolled agent, attorney, or CPA to represent a client before th
IRS. There are limited situations where others may represent a taxpayer; however, this fact pattern is not one of
them. Since Leigh did not sign the return, she cannot represent the taxpayer, only Rose can.
❖ Jane's mother resides in a nursing home and cannot travel. There is a problem with the mother's prior-year tax
return, and the IRS needs to discuss the matter with her at the local IRS office. Is it possible for Jane to handle th
matter without having to hire professional tax representation?
❖ A family member can represent her
❖ May Circular 230 practitioners advertise on television? On the Internet
, ❖ As long as it is not misleading, fake or deceptive there are essentially no restrictions on advertisement
❖ If a tax practitioner finds an error in a prior year's tax return, what action (if any) must he or she take under
Circular 230?
❖ Advise the client to promptly fix the fact of the error, omission or noncompliance
❖ Is a tax practitioner required to adhere to the best-practices standard under Circular 230 § 10.33?
❖ Not required to adhere, they are merely guidelines
❖ What are the four best practices under Circular 230 § 10.33
❖ Clearly communicate the terms of engagement to client
❖ Responsible for assessing the reasonableness underlying any representation and assumption and determination
the facts
❖ Required to advice the client about the conclusion reached
❖ Required to act with integrity
❖ A practitioner cannot give written advice under Circular 230 § 10.37 in which situations?
❖ If the practitioner providing the advice is:· Unreliable· Incompetent· Unqualified· Conflicted
❖ A compensated individual who prepares or assists with the preparation of all or substantially all of a tax return o
claim for refund must have a PTIN. What is a PTIN, and which individual(s) are required to obtain one?
❖ PTIN: Preparer tax identification number
❖ A PTIN must be obtained by all paid tax preparers
❖ How does the term "the unauthorized practice of law" apply to cpas?
❖ Cpas are in little danger of entering into the unauthorized practice of law as long as they avoid providing genera
legal services. The issue that arises is not whether cpas are rendering legal services, but how much legal service
provided. Because of the lack of guidelines on this issue, the federal agencies seem to have taken a lead in
attempting to solve this problem.
❖ Which of the following statements is unacceptable under the AICPA Code of Professional Conduct for a CPA in
public practice?
➢ Julie Adams, CPA, Fluency in Chinese
➢ Julie Adams, CPA, MBA, Big State University, 2010
➢ Julie Adams, CPA, Free Initial Consultation
➢ Julie Adams, CPA, I Always Win IRS Audits
➢ Julie Adams, CPA, I Always Win IRS Audits
by Roby Sawyers, Steven Gill
,Part I: The Tax Research Environment
Chapter 1: Introduction to Tax Practice and Ethics
➢ Percentage of individual taxpayers e-filed tax returns
▪ 90%
❖ Percentage of tax research is online based
❖ Almost 100%
❖ Elements of Taxation
❖ Accounting, economics, law, political processes, societal concerns
❖ Tax environment
❖ Economics, sociology, and political sciences.
❖ Practice of taxation
❖ Applying tax laws, regulations, and judicial rulings to specific transactions
❖ Goal is to determine tax consequence to taxpayer
❖ Can be practiced by cpas, tax attorneys, enrolled agents, and others
❖ Taxation definition
❖ Process of collecting revenue from citizens to fund government operations
❖ Elements of tax practice
❖ Tax research
❖ Tax compliance
❖ Tax planning
❖ Tax litigation
❖ Tax research
❖ Analyze and determine answers to tax problems
❖ Three elements of tax research
❖ Tax compliance
❖ Tax planning
❖ Tax litigation
,❖ Tax compliance
❖ The preparation and filing of tax returns and includes maintaining adequate books and records
❖ Tax planning
❖ Seeking legal ways to reduce, eliminate, or defer income taxes (tax avoidance & tax evasion) (minimize tax liabil
❖ Two categories of tax planning
❖ Open transactions
❖ Closed transactions
❖ Open transactions
❖ Plan for pending future transactions (best option)
❖ Closed transactions
❖ Plan for how to best present past transactions
❖ Tax litigation
❖ Settling disputes with the IRS in court
❖ Attorneys usually handle litigation beyond initial appeal of an IRS audit
❖ Cpas must follow the rules of Circular 230. In addition, cpas in tax practice are subject to two other sets of ethica
rules. Give the name and the issuer of both these sets of rules.
❖ AICPA Code of Professional conduct
❖ Statements on Standards for Tax Services
❖ Leigh, who is not a Circular 230 practitioner, is employed by Rose, a CPA. One of Rose's clients has been notified
that the IRS has selected his or her 2018 income tax return for audit. Rose had prepared the return and signed it
preparer. Rose has been called out of town on a family emergency and would like for Leigh to represent the clie
Leigh cannot represent the client even if she has Rose's written authority to do so and has the client's power of
attorney. True or false? Explain your answer. (IRS adapted)
❖ True. As a general rule, an individual must be an enrolled agent, attorney, or CPA to represent a client before th
IRS. There are limited situations where others may represent a taxpayer; however, this fact pattern is not one of
them. Since Leigh did not sign the return, she cannot represent the taxpayer, only Rose can.
❖ Jane's mother resides in a nursing home and cannot travel. There is a problem with the mother's prior-year tax
return, and the IRS needs to discuss the matter with her at the local IRS office. Is it possible for Jane to handle th
matter without having to hire professional tax representation?
❖ A family member can represent her
❖ May Circular 230 practitioners advertise on television? On the Internet
, ❖ As long as it is not misleading, fake or deceptive there are essentially no restrictions on advertisement
❖ If a tax practitioner finds an error in a prior year's tax return, what action (if any) must he or she take under
Circular 230?
❖ Advise the client to promptly fix the fact of the error, omission or noncompliance
❖ Is a tax practitioner required to adhere to the best-practices standard under Circular 230 § 10.33?
❖ Not required to adhere, they are merely guidelines
❖ What are the four best practices under Circular 230 § 10.33
❖ Clearly communicate the terms of engagement to client
❖ Responsible for assessing the reasonableness underlying any representation and assumption and determination
the facts
❖ Required to advice the client about the conclusion reached
❖ Required to act with integrity
❖ A practitioner cannot give written advice under Circular 230 § 10.37 in which situations?
❖ If the practitioner providing the advice is:· Unreliable· Incompetent· Unqualified· Conflicted
❖ A compensated individual who prepares or assists with the preparation of all or substantially all of a tax return o
claim for refund must have a PTIN. What is a PTIN, and which individual(s) are required to obtain one?
❖ PTIN: Preparer tax identification number
❖ A PTIN must be obtained by all paid tax preparers
❖ How does the term "the unauthorized practice of law" apply to cpas?
❖ Cpas are in little danger of entering into the unauthorized practice of law as long as they avoid providing genera
legal services. The issue that arises is not whether cpas are rendering legal services, but how much legal service
provided. Because of the lack of guidelines on this issue, the federal agencies seem to have taken a lead in
attempting to solve this problem.
❖ Which of the following statements is unacceptable under the AICPA Code of Professional Conduct for a CPA in
public practice?
➢ Julie Adams, CPA, Fluency in Chinese
➢ Julie Adams, CPA, MBA, Big State University, 2010
➢ Julie Adams, CPA, Free Initial Consultation
➢ Julie Adams, CPA, I Always Win IRS Audits
➢ Julie Adams, CPA, I Always Win IRS Audits
