Federalc d Taxc d Research,c d 13thc d Ed Pagec d 1-
itio 1
TH
TEST BANK TAX RESEARCH 13 EDITION BY ROB
cd cd cd cd cd cd cd
Y SAWYERS, STEVEN GILL CHAPTERS1-13
cd cd cd cd
, Pagec d 1- SOLUTIONSc d MANUA
2 L
CHAPTER 1 cd
INTRODUCTION TO TAX PRACTICE AND ETHICS
cd cd cd cd cd
DISCUSSIONcdQUESTIONS
1-1.
IncdthecdUnitedcdStates,cdthecdtaxcdsystemcdiscdancdoutgrowthcdofcdthecdfollowingcdfivecddisci
plines:cdlaw,cdaccounting,cdeconomics,cdpoliticalcdscience,cdandcdsociology.cdThecdenvironmentcdfo
rcdthecdtaxcdsycdstemcdisprovidedcdbycdthecdprinciplescdofcdeconomics,cdsociology,cdandcdpoliticalcdsci
ence,cdwhilecdthecdlecdgalcdandcdaccountingcdfieldscdarecdresponsiblecdforcdthecdsystem‘scdinterpretati
oncdandcdapplication.
Eachcdofcdthesecddisciplinescdaffectscdthiscdcountry‘scdtaxcdsystemcdingacduniquecdway.cdEconomistscd
addrecdsssuchcdissuescdascdhowcdproposedcdtaxcdlegislationcdwillcdaffectcdthecdratecdofcdinflationcdorge
conomiccdgrocdwth.Measurementcdofcdthecdsocialcdequitycdofcdacdtaxcdandcddeterminingcdwhethercdacd
taxcdsystemcddiscrimicdnatescdagainstcdcertaincdtaxpayerscdarecdissuescdthatcdarecdexaminedcdbycdsoci
ologistscdandcdpoliticalcdsciencdtists.
Finally,cdattorneyscdarecdresponsiblecdforgthecdinterpretationcdofcdthecdtaxationcdstatutes,cdandcdacco
untantcdsensurecdthatcdthesecdsamecdstatutescdarecdappliedcdconsistently.****8880()
Pagecd 4
1-2. Thecdothercd majorgcategoriescdofgtaxcdpracticecdincd additioncd tocdtaxcdresearchcd arecdascdfollows:
• Taxcdcompliance
• Taxcd planning
• Taxcdlitigati
ocdnPagecd5
1-3.
Taxcdcompliancecdconsistscdofcdgatheringcdpertinentcdinformation,cdevaluatingcdandcdclassif
yingcdthatcdinformation,cdandcdfilingcdanycdnecessarycdtaxcdreturns.cdCompliancecdalsocdincludescdot
hergfuncticdonscdnecessarycdtocdsatisfycdgovernmentalcdrequirements,cdsuchcdascdrepresentingcdacdcli
entcdduringcdancdIncdternalRevenuecdServicecd(IRS)cdaudit.
,Federalc d Taxc d Research,c d 13thc d Ed Pagec d 1-
itio 3
Pagecd 5
1-4.
Mostcdofcdthecdtaxcdcompliancecdworkcdiscdperformedcdbycdcommercialcdtaxcdpreparers,cdenroll
edcdagentscd(EAs),cdattorneys,cdandcdcertifiedcdpubliccdaccountantscd(CPAs).cdNoncomplexcdindividua
l,cdparcdtnership,andcdcorporatecdtaxcdreturnscdoftencdarecdcompletedcdbycdcommercialcdtaxcdpreparers.cd
ThecdprepcdarationcdofcdmorecdcomplexcdreturnscdusuallycdiscdperformedcdbycdEAs,cdattorneys,cdandcdC
PAs.cdThecdlattercdgroupscdalsoprovidecdtaxcdplanningcdservicescdandcdrepresentcdtheircdclientscdbeforec
dthecdIRS.
Anc d EAc d isc d onec d whoc d isc d admittedc d toc d practicec d beforec d thec d IRSc d bygpassingc d ac d specialc d IRS
-
cd administeredcdexamination,cdorgwhocdhascdworkedcdforgthecdIRScdforcdfivecdyearscdandcdiscdissuedcdacd
permitcdtc d ocd representcd clientscd beforecd thecdIRS.cd CPAscd andcd attorneyscd arecd notcdrequiredc d tocd ta
kecd thiscdexamination
andcdarecdautomaticallycdadmittedcdtocdpracticecdbeforecdthecdIRScdifcdtheycdarecdincdgoodgstandingcdwithcdthec
a ppropriateprofessionalcdlicensingcdboard.
d cd
Pagecd 5cd andcd Circularc d 230
1-5.
Taxcdplanningcdiscdthecdprocesscdofcdarrangingcdone‘scdfinancialcdaffairscdtocdminimizecdanycdta
xcdliabilcdity.cdMuchofcdmoderncdtaxcdpracticecdcenterscdaroundcdthiscdprocess,cdandcdthecdresultingcdout
comecdiscdtaxcdavcdoidance.
Therecdiscdnothingcdillegalcdorcdimmoralcdincdthecdavoidancecdofcdtaxationcdascdlongcdascdthecdtaxpayercdr
emainscdwithincdlegalcdbounds.cdIncdcontrast,cdtaxcdevasioncdconstitutescdthecdillegalcdnonpaymentcdofcd
acdtaxcdandcdcanncdotbecdcondoned.cdActivitiescdofcdthiscdsortcdclearlycdviolatecdexistingcdlegalcdconstrai
ntscdandgfallcdoutsidecdofcdthecddomaingofcdthecdprofessionalcdtaxcdpractitioner.
Pagecd 6
1-6.
Incdancdopencdtaxcdplanningcdsituation,cdthecdtransactioncdiscdnotcdyetcdcomplete;cdtherefore,cdthe
cd taxcdpcdractitionergmaintainscdsomecddegreecdofcdcontrolcdovercdthecdpotentialcdtaxcdliability,cdandcdthecd
transactioncdmcdaycdbecdmodi-
, Pagec d 1- SOLUTIONSc d MANUA
fie 4 ed,cdandcdtaxcdplanningcdactivitiescdmaycdbecdlimitedcdtocdthecdpresentationcdofcdtheLcdsituationcdtocdthecdgo
dcdt vernmentcdincdthecdmostcdlegallycdadvantageouscdmannercdpossible.
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itio 1
TH
TEST BANK TAX RESEARCH 13 EDITION BY ROB
cd cd cd cd cd cd cd
Y SAWYERS, STEVEN GILL CHAPTERS1-13
cd cd cd cd
, Pagec d 1- SOLUTIONSc d MANUA
2 L
CHAPTER 1 cd
INTRODUCTION TO TAX PRACTICE AND ETHICS
cd cd cd cd cd
DISCUSSIONcdQUESTIONS
1-1.
IncdthecdUnitedcdStates,cdthecdtaxcdsystemcdiscdancdoutgrowthcdofcdthecdfollowingcdfivecddisci
plines:cdlaw,cdaccounting,cdeconomics,cdpoliticalcdscience,cdandcdsociology.cdThecdenvironmentcdfo
rcdthecdtaxcdsycdstemcdisprovidedcdbycdthecdprinciplescdofcdeconomics,cdsociology,cdandcdpoliticalcdsci
ence,cdwhilecdthecdlecdgalcdandcdaccountingcdfieldscdarecdresponsiblecdforcdthecdsystem‘scdinterpretati
oncdandcdapplication.
Eachcdofcdthesecddisciplinescdaffectscdthiscdcountry‘scdtaxcdsystemcdingacduniquecdway.cdEconomistscd
addrecdsssuchcdissuescdascdhowcdproposedcdtaxcdlegislationcdwillcdaffectcdthecdratecdofcdinflationcdorge
conomiccdgrocdwth.Measurementcdofcdthecdsocialcdequitycdofcdacdtaxcdandcddeterminingcdwhethercdacd
taxcdsystemcddiscrimicdnatescdagainstcdcertaincdtaxpayerscdarecdissuescdthatcdarecdexaminedcdbycdsoci
ologistscdandcdpoliticalcdsciencdtists.
Finally,cdattorneyscdarecdresponsiblecdforgthecdinterpretationcdofcdthecdtaxationcdstatutes,cdandcdacco
untantcdsensurecdthatcdthesecdsamecdstatutescdarecdappliedcdconsistently.****8880()
Pagecd 4
1-2. Thecdothercd majorgcategoriescdofgtaxcdpracticecdincd additioncd tocdtaxcdresearchcd arecdascdfollows:
• Taxcdcompliance
• Taxcd planning
• Taxcdlitigati
ocdnPagecd5
1-3.
Taxcdcompliancecdconsistscdofcdgatheringcdpertinentcdinformation,cdevaluatingcdandcdclassif
yingcdthatcdinformation,cdandcdfilingcdanycdnecessarycdtaxcdreturns.cdCompliancecdalsocdincludescdot
hergfuncticdonscdnecessarycdtocdsatisfycdgovernmentalcdrequirements,cdsuchcdascdrepresentingcdacdcli
entcdduringcdancdIncdternalRevenuecdServicecd(IRS)cdaudit.
,Federalc d Taxc d Research,c d 13thc d Ed Pagec d 1-
itio 3
Pagecd 5
1-4.
Mostcdofcdthecdtaxcdcompliancecdworkcdiscdperformedcdbycdcommercialcdtaxcdpreparers,cdenroll
edcdagentscd(EAs),cdattorneys,cdandcdcertifiedcdpubliccdaccountantscd(CPAs).cdNoncomplexcdindividua
l,cdparcdtnership,andcdcorporatecdtaxcdreturnscdoftencdarecdcompletedcdbycdcommercialcdtaxcdpreparers.cd
ThecdprepcdarationcdofcdmorecdcomplexcdreturnscdusuallycdiscdperformedcdbycdEAs,cdattorneys,cdandcdC
PAs.cdThecdlattercdgroupscdalsoprovidecdtaxcdplanningcdservicescdandcdrepresentcdtheircdclientscdbeforec
dthecdIRS.
Anc d EAc d isc d onec d whoc d isc d admittedc d toc d practicec d beforec d thec d IRSc d bygpassingc d ac d specialc d IRS
-
cd administeredcdexamination,cdorgwhocdhascdworkedcdforgthecdIRScdforcdfivecdyearscdandcdiscdissuedcdacd
permitcdtc d ocd representcd clientscd beforecd thecdIRS.cd CPAscd andcd attorneyscd arecd notcdrequiredc d tocd ta
kecd thiscdexamination
andcdarecdautomaticallycdadmittedcdtocdpracticecdbeforecdthecdIRScdifcdtheycdarecdincdgoodgstandingcdwithcdthec
a ppropriateprofessionalcdlicensingcdboard.
d cd
Pagecd 5cd andcd Circularc d 230
1-5.
Taxcdplanningcdiscdthecdprocesscdofcdarrangingcdone‘scdfinancialcdaffairscdtocdminimizecdanycdta
xcdliabilcdity.cdMuchofcdmoderncdtaxcdpracticecdcenterscdaroundcdthiscdprocess,cdandcdthecdresultingcdout
comecdiscdtaxcdavcdoidance.
Therecdiscdnothingcdillegalcdorcdimmoralcdincdthecdavoidancecdofcdtaxationcdascdlongcdascdthecdtaxpayercdr
emainscdwithincdlegalcdbounds.cdIncdcontrast,cdtaxcdevasioncdconstitutescdthecdillegalcdnonpaymentcdofcd
acdtaxcdandcdcanncdotbecdcondoned.cdActivitiescdofcdthiscdsortcdclearlycdviolatecdexistingcdlegalcdconstrai
ntscdandgfallcdoutsidecdofcdthecddomaingofcdthecdprofessionalcdtaxcdpractitioner.
Pagecd 6
1-6.
Incdancdopencdtaxcdplanningcdsituation,cdthecdtransactioncdiscdnotcdyetcdcomplete;cdtherefore,cdthe
cd taxcdpcdractitionergmaintainscdsomecddegreecdofcdcontrolcdovercdthecdpotentialcdtaxcdliability,cdandcdthecd
transactioncdmcdaycdbecdmodi-
, Pagec d 1- SOLUTIONSc d MANUA
fie 4 ed,cdandcdtaxcdplanningcdactivitiescdmaycdbecdlimitedcdtocdthecdpresentationcdofcdtheLcdsituationcdtocdthecdgo
dcdt vernmentcdincdthecdmostcdlegallycdadvantageouscdmannercdpossible.
ocda
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cd cda
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recd
fav
ora
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cd tre
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cd Inc
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