Solution Manual For Federal Tax Research 12th Edition by Roby Sawyers, Steven Gill

Federal Tax Research, 12th Edition
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Solution manual for federal tax research 12th
edition by roby sawyers steven gill
CHAPTER 1 SD




INTRODUCTION TO TAX PRACTICE AND ETHICS SD SD SD SD SD




DISCUSSION QUESTIONS
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1-1.
In the United States, the tax system is an outgrowth of the following five disciplines: l
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aw, accounting, economics, political science, and sociology. The environment for the tax syst
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em isprovided by the principles of economics, sociology, and political science, while the legal
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and accounting fields are responsible for the system‘s interpretation and application.
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Each of these disciplines affects this country‘s tax system in a unique way. Economists address
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such issues as how proposed tax legislation will affect the rate of inflation or economic growth.
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Measurement of the social equity of a tax and determining whether a tax system discriminates
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against certain taxpayers are issues that are examined by sociologists and political scientists.
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Finally, attorneys are responsible for the interpretation of the taxation statutes, and accountantse
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nsure that these same statutes are applied consistently.
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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 SD




• Tax planning SD




• Tax litigation SD S
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1-3.
Tax compliance consists of gathering pertinent information, evaluating and classifying
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that information, and filing any necessary tax returns. Compliance also includes other function
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s necessary to satisfy governmental requirements, such as representing a client during an Intern
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alRevenue Service (IRS) audit.
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1-4.
Most of the tax compliance work is performed by commercial tax preparers, enrolled ag
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ents (EAs), attorneys, and certified public accountants (CPAs). Noncomplex individual, partner
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ship,and corporate tax returns often are completed by commercial tax preparers. The preparatio
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n of more complex returns usually is performed by EAs, attorneys, and CPAs. The latter group
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s alsoprovide tax planning services and represent their clients before the IRS.
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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 permit to
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represent clients before the IRS. CPAs and attorneys are not required to take this examination and
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SD are automatically admitted to practice before the IRS if they are in good standing with the approp
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riateprofessional licensing board.
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Page 5 and Circular 230 SD SD SD SD




1-5.
Tax planning is the process of arranging one‘s financial affairs to minimize any tax liabilit
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y. Muchof modern tax practice centers around this process, and the resulting outcome is tax avoida
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nce.
There is nothing illegal or immoral in the avoidance of taxation as long as the taxpayer remains wi
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thin legal bounds. In contrast, tax evasion constitutes the illegal nonpayment of a tax and cannotbe
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SD condoned. Activities of this sort clearly violate existing legal constraints and fall outside of the do
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main 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 tax pra
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ctitionermaintains some degree of control over the potential tax liability, and the transaction may
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be modi- SD




SD fied to achieve a more favorable tax treatment. In a closed transaction however, all of the pertinen
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tactions have been completed, and tax planning activities may be limited to the presentation of the
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Dsituation to the government in the most legally advantageous manner possible.
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,Federal Tax Research, 12th Edition
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1-7.
Tax litigation is the process of settling a dispute with the IRS in a court of law. Typicall
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y, a taxattorney handles tax litigation that progresses beyond the final IRS appeal.
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1-8. CPAs serve is a support capacity in tax litigation.
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1-9.
Tax research consists of the resolution of unanswered taxation questions. The tax research
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processincludes the following: S
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1. Identification of pertinent issues; SD SD SD




2. Specification of proper authorities; SD SD SD




3. Evaluation of the propriety of authorities; and, SD SD SD SD SD SD




4. Application of authorities to a specific situation. SD SD SD SD SD SD




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1-10.


Circular 230 is issued by the Treasury Department and applies to all who practice before t
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he IRS.Page 7
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1-11.
In addition to Circular 230, CPAs must follow the AICPA‘s Code of Professional Cond
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uct and Statements on Standards for Tax Services. CPAs must also abide by the rules of the ap
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propriatestate board(s) of accountancy. S
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1-12. A return preparer must obtain 18 hours of continuing education from an IRS-
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approved CE Provider. The hours must include a 6 credit hour Annual Federal Tax Refresher cou
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rse (AFTR) that covers filing season issues and tax law updates. The AFTR course must include a
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knowledge-

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based comprehension test administered at the conclusion of the course by the CE Provider.
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