Federal Tax Research
th
(12 Edition)
Roby Sawyers,
Steven Gill
Study Guide
2026
,Federal Tax Research, 11th Edition Page 1-1
CHAPTER 1
AN 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 is
provided 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 address
such 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 accountants
ensure that these same statutes are applied consistently.
Page 4
1-2. The other major categories of tax practice in addition to tax research are:
• tax compliance
• tax planning
• tax litigation
Page 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 IRS audit.
Page 5
1-4. Most of the tax compliance work is performed by commercial tax preparers, enrolled agents,
attorneys, and CPAs. Noncomplex individual, partnership, and corporate tax returns often are
completed by commercial tax preparers. The preparation of more complex returns usually is
performed by enrolled agents, attorneys, and CPAs. The latter groups also provide tax planning
services and represent their clients before the IRS.
An enrolled agent 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
appropriate professional licensing board.
Page 5 and Circular 230
,Page 1-2 SOLUTIONS MANUAL
1-5. Tax planning is the process of arranging one's financial affairs to minimize any tax liability. Much
of 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 cannot
be 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 practitioner
maintains some degree of control over the potential tax liability, and the transaction may be modi-
fied to achieve a more favorable ltax ltreatment. lIn la lclosed ltransaction lhowever, lall lof lthe
lpertinent lactions lhave lbeen lcompleted, land ltax lplanning lactivities lmay lbe llimited lto lthe
lpresentation lof lthe lsituation lto lthe lgovernment lin lthe lmost llegally ladvantageous lmanner
lpossible.
Page l6
1-7. Tax llitigation lis lthe lprocess lof lsettling la ldispute lwith lthe lIRS lin la lcourt lof llaw.
lTypically, la ltax lattorney lhandles ltax llitigation lthat lprogresses lbeyond lthe lfinal lIRS
lappeal.
Page l6
1-8. CPAs lserve lis la lsupport lcapacity lin ltax llitigation.
Page l6
1-9. Tax lresearch lconsists lof lthe lresolution lof lunanswered ltaxation lquestions. lThe ltax lresearch
lprocess lincludes lthe lfollowing:
1. Identification lof lpertinent lissues;
2. Specification lof lproper lauthorities;
3. Evaluation lof lthe lpropriety lof lauthorities; land,
4. Application lof lauthorities lto la lspecific lsituation.
Page l6
1-10. Circular l230 lis lissued lby lthe lTreasury lDepartment land lapplies lto lall lwho lpractice lbefore
lthe lIRS. lPage l7
1-11. In laddition lto lCircular l230, lCPAs lmust lfollow lthe lAICPA's lCode lof lProfessional
lConduct land lStatements lon lStandards lfor lTax lServices. lCPAs lmust lalso labide lby lthe
lrules lof lthe lappropriate lstate lboard(s) lof laccountancy.
Page l7
1-12. A lreturn lpreparer lmust lobtain l18 lhours lof lcontinuing leducation lfrom lan lIRS-approved lCE
lProvider. lThe lhours lmust linclude la l6 lcredit lhour lAnnual lFederal lTax lRefresher lcourse
l(AFTR) lthat lcovers lfiling lseason lissues land ltax llaw lupdates. lThe lAFTR lcourse lmust
linclude la lknowledge- lbased lcomprehension ltest ladministered lat lthe lconclusion lof lthe lcourse
lby lthe lCE lProvider.
Limited lpractice lrights lallow lindividuals lto lrepresent lclients lwhose lreturns lthey lprepared
land lsigned, lbut lonly lbefore lrevenue lagents, lcustomer lservice lrepresentatives, land lsimilar
lIRS lemployees.
, Federal Tax Research, 11th Edition Page 1-3
Page l10 land lIRS.gov
1-13. False. lOnly lcommunication lwith lthe lIRS lconcerning la ltaxpayer's lrights, lprivileges, lor
lliability lis lincluded. lPractice lbefore lthe lIRS ldoes lnot linclude lrepresentation lbefore lthe
lTax lCourt.
Page l7
1-14. Section l10.2 lof lSubpart lA lof lCircular l230 ldefines lpractice lbefore lthe lIRS las lincluding:
matters lconnected lwith lpresentation lto lthe lInternal lRevenue lService lor lany lof lits
lofficers lor lemployees lrelating lto la lclient's lrights, lprivileges, lor lliabilities lunder
llaws lor lregulations ladministered lby lthe lInternal lRevenue lService. lSuch lpresentations
linclude lthe lpreparation land lfiling lof lnecessary ldocuments, lcorrespondence lwith,
land lcommunications lto lthe lInternal lRevenue lService, land lthe lrepresentation lof la
lclient lat lconferences, lhearings, land lmeetings.
Page l7
1-15. To lbecome lan lEnrolled lAgent lan lindividual lcan l(1) lpass la ltest lgiven lby lthe lIRS lor l(2)
lwork lfor lthe lIRS lfor lfive lyears. lCircular l230, lSubpart lA, lSecs. l10.4 lto l10.6.
Page l9
1-16. Enrolled lAgents lmust lcomplete l72 lhours lof lContinuing lEducation levery lthree lyears l(an
laverage lof l24 lper lyear, lwith la lminimum lof l16 lhours lduring lany lyear.). lCircular l230,
lSubpart lA. l§10.6.
Page l9
1-17. True. lAs la lgeneral lrule, lan lindividual lmust lbe lan lenrolled lagent, lattorney, lor lCPA lto
lrepresent la lclient lbefore lthe lIRS. lThere lare llimited lsituations lwhere lothers lmay lrepresent
la ltaxpayer; lhowever, lthis lfact lpattern lis lnot lone lof lthem. lSince lLeigh ldid lnot lsign lthe
lreturn, lshe lcannot lrepresent lthe ltaxpayer, lonly lRose lcan.
Pages l10-11
1-18. The lnames lof lorganizations lthat lcan lbe lrepresented lby lregular lfull-time lemployees lare
lfound lin lCircular l230, l§10.7(c). lA lregular lfull-time lemployee lcan lrepresent lthe lemployer
l(individual lemployer). lA lregular lfull-time lemployee lof la lpartnership lmay lrepresent lthe
lpartnership. lAlso, la lregular lfull-time lemployee lof la ltrust, lreceivership, lguardianship, lor
lestate lmay lrepresent lthe ltrust, lreceivership, lguardianship, lor lestate. lFurthermore, la lregular
lfull-time lemployee lof la lgovernmental lunit, lagency, lor lauthority lmay lrepresent lthe
lgovernmental lunit, lagency, lor lauthority lin lthe lcourse lof lhis lor lher lofficial lduties.
Page l10
1-19. Yes. lCircular l230, lSubpart lA, lSec. l10.7.
Page l10
1-20. True. lA lpractitioner lmay lbe lsuspended lor ldisbarred lfrom lpractice lbefore lthe lIRS lif lhe
Page 12
th
(12 Edition)
Roby Sawyers,
Steven Gill
Study Guide
2026
,Federal Tax Research, 11th Edition Page 1-1
CHAPTER 1
AN 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 is
provided 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 address
such 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 accountants
ensure that these same statutes are applied consistently.
Page 4
1-2. The other major categories of tax practice in addition to tax research are:
• tax compliance
• tax planning
• tax litigation
Page 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 IRS audit.
Page 5
1-4. Most of the tax compliance work is performed by commercial tax preparers, enrolled agents,
attorneys, and CPAs. Noncomplex individual, partnership, and corporate tax returns often are
completed by commercial tax preparers. The preparation of more complex returns usually is
performed by enrolled agents, attorneys, and CPAs. The latter groups also provide tax planning
services and represent their clients before the IRS.
An enrolled agent 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
appropriate professional licensing board.
Page 5 and Circular 230
,Page 1-2 SOLUTIONS MANUAL
1-5. Tax planning is the process of arranging one's financial affairs to minimize any tax liability. Much
of 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 cannot
be 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 practitioner
maintains some degree of control over the potential tax liability, and the transaction may be modi-
fied to achieve a more favorable ltax ltreatment. lIn la lclosed ltransaction lhowever, lall lof lthe
lpertinent lactions lhave lbeen lcompleted, land ltax lplanning lactivities lmay lbe llimited lto lthe
lpresentation lof lthe lsituation lto lthe lgovernment lin lthe lmost llegally ladvantageous lmanner
lpossible.
Page l6
1-7. Tax llitigation lis lthe lprocess lof lsettling la ldispute lwith lthe lIRS lin la lcourt lof llaw.
lTypically, la ltax lattorney lhandles ltax llitigation lthat lprogresses lbeyond lthe lfinal lIRS
lappeal.
Page l6
1-8. CPAs lserve lis la lsupport lcapacity lin ltax llitigation.
Page l6
1-9. Tax lresearch lconsists lof lthe lresolution lof lunanswered ltaxation lquestions. lThe ltax lresearch
lprocess lincludes lthe lfollowing:
1. Identification lof lpertinent lissues;
2. Specification lof lproper lauthorities;
3. Evaluation lof lthe lpropriety lof lauthorities; land,
4. Application lof lauthorities lto la lspecific lsituation.
Page l6
1-10. Circular l230 lis lissued lby lthe lTreasury lDepartment land lapplies lto lall lwho lpractice lbefore
lthe lIRS. lPage l7
1-11. In laddition lto lCircular l230, lCPAs lmust lfollow lthe lAICPA's lCode lof lProfessional
lConduct land lStatements lon lStandards lfor lTax lServices. lCPAs lmust lalso labide lby lthe
lrules lof lthe lappropriate lstate lboard(s) lof laccountancy.
Page l7
1-12. A lreturn lpreparer lmust lobtain l18 lhours lof lcontinuing leducation lfrom lan lIRS-approved lCE
lProvider. lThe lhours lmust linclude la l6 lcredit lhour lAnnual lFederal lTax lRefresher lcourse
l(AFTR) lthat lcovers lfiling lseason lissues land ltax llaw lupdates. lThe lAFTR lcourse lmust
linclude la lknowledge- lbased lcomprehension ltest ladministered lat lthe lconclusion lof lthe lcourse
lby lthe lCE lProvider.
Limited lpractice lrights lallow lindividuals lto lrepresent lclients lwhose lreturns lthey lprepared
land lsigned, lbut lonly lbefore lrevenue lagents, lcustomer lservice lrepresentatives, land lsimilar
lIRS lemployees.
, Federal Tax Research, 11th Edition Page 1-3
Page l10 land lIRS.gov
1-13. False. lOnly lcommunication lwith lthe lIRS lconcerning la ltaxpayer's lrights, lprivileges, lor
lliability lis lincluded. lPractice lbefore lthe lIRS ldoes lnot linclude lrepresentation lbefore lthe
lTax lCourt.
Page l7
1-14. Section l10.2 lof lSubpart lA lof lCircular l230 ldefines lpractice lbefore lthe lIRS las lincluding:
matters lconnected lwith lpresentation lto lthe lInternal lRevenue lService lor lany lof lits
lofficers lor lemployees lrelating lto la lclient's lrights, lprivileges, lor lliabilities lunder
llaws lor lregulations ladministered lby lthe lInternal lRevenue lService. lSuch lpresentations
linclude lthe lpreparation land lfiling lof lnecessary ldocuments, lcorrespondence lwith,
land lcommunications lto lthe lInternal lRevenue lService, land lthe lrepresentation lof la
lclient lat lconferences, lhearings, land lmeetings.
Page l7
1-15. To lbecome lan lEnrolled lAgent lan lindividual lcan l(1) lpass la ltest lgiven lby lthe lIRS lor l(2)
lwork lfor lthe lIRS lfor lfive lyears. lCircular l230, lSubpart lA, lSecs. l10.4 lto l10.6.
Page l9
1-16. Enrolled lAgents lmust lcomplete l72 lhours lof lContinuing lEducation levery lthree lyears l(an
laverage lof l24 lper lyear, lwith la lminimum lof l16 lhours lduring lany lyear.). lCircular l230,
lSubpart lA. l§10.6.
Page l9
1-17. True. lAs la lgeneral lrule, lan lindividual lmust lbe lan lenrolled lagent, lattorney, lor lCPA lto
lrepresent la lclient lbefore lthe lIRS. lThere lare llimited lsituations lwhere lothers lmay lrepresent
la ltaxpayer; lhowever, lthis lfact lpattern lis lnot lone lof lthem. lSince lLeigh ldid lnot lsign lthe
lreturn, lshe lcannot lrepresent lthe ltaxpayer, lonly lRose lcan.
Pages l10-11
1-18. The lnames lof lorganizations lthat lcan lbe lrepresented lby lregular lfull-time lemployees lare
lfound lin lCircular l230, l§10.7(c). lA lregular lfull-time lemployee lcan lrepresent lthe lemployer
l(individual lemployer). lA lregular lfull-time lemployee lof la lpartnership lmay lrepresent lthe
lpartnership. lAlso, la lregular lfull-time lemployee lof la ltrust, lreceivership, lguardianship, lor
lestate lmay lrepresent lthe ltrust, lreceivership, lguardianship, lor lestate. lFurthermore, la lregular
lfull-time lemployee lof la lgovernmental lunit, lagency, lor lauthority lmay lrepresent lthe
lgovernmental lunit, lagency, lor lauthority lin lthe lcourse lof lhis lor lher lofficial lduties.
Page l10
1-19. Yes. lCircular l230, lSubpart lA, lSec. l10.7.
Page l10
1-20. True. lA lpractitioner lmay lbe lsuspended lor ldisbarred lfrom lpractice lbefore lthe lIRS lif lhe
Page 12
