1
SOLUTION MANUAL Federal Tax Research 13th Edition By
Roby Sawyers, Steven Gill Chapters 1 - 13
pg. 1
, 2
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 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.****8880()
Page 4
1-2. The other major categories of tax practice in addition to tax research are as
follows:
• Tax compliance
• Tax planning
pg. 2
,3
• 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 internal revenue
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, and 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 also provide 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 appropriate professional licensing board.
Page 5 and circular 230
pg. 3
, 4
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 tax
treatment. In a closed transaction however, all of the pertinent actions
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 6
1-7. Tax litigation is the process of settling a dispute with the irs in a court
of law. Typically, a tax
pg. 4
SOLUTION MANUAL Federal Tax Research 13th Edition By
Roby Sawyers, Steven Gill Chapters 1 - 13
pg. 1
, 2
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 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.****8880()
Page 4
1-2. The other major categories of tax practice in addition to tax research are as
follows:
• Tax compliance
• Tax planning
pg. 2
,3
• 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 internal revenue
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, and 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 also provide 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 appropriate professional licensing board.
Page 5 and circular 230
pg. 3
, 4
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 tax
treatment. In a closed transaction however, all of the pertinent actions
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 6
1-7. Tax litigation is the process of settling a dispute with the irs in a court
of law. Typically, a tax
pg. 4
