Solution Manual for CCH Federal Taxation 2021 Comprehensive Topics, 21st Edition by W. Brian Dowis, 9780808054054, Covering Chapters 1-. Includes Rationales

FederalrTaxrResearch,r12thrEdition Pager1-1

Solution Manual Federal Tax Research 12th Edition by Roby Sawyers, Steven Gill
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CHAPTER 1 r



INTRODUCTION TO TAX PRACTICE AND ETHICS
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DISCUSSIONrQUESTIONS


1-1.
InrtherUnitedrStates,rthertaxrsystemrisranroutgrowthrofrtherfollowingrfiverdisciplines:rla
w,raccounting,reconomics,rpoliticalrscience,randrsociology.rTherenvironmentrforrthertaxrsystemris
r providedrbyrtherprinciplesrofreconomics,rsociology,randrpoliticalrscience,rwhilertherlegalrandracc
ountingrfieldsrarerresponsiblerforrthersystem‘srinterpretationrandrapplication.


Eachrofrtheserdisciplinesraffectsrthisrcountry‘srtaxrsystemrinraruniquerway.rEconomistsraddressrsuc
hrissuesrasrhowrproposedrtaxrlegislationrwillraffectrtherraterofrinflationrorreconomicrgrowth.rMeasu
rementrofrthersocialrequityrofrartaxrandrdeterminingrwhetherrartaxrsystemrdiscriminatesragainstrcer
tainrtaxpayersrarerissuesrthatrarerexaminedrbyrsociologistsrandrpoliticalrscientists.
Finally,rattorneysrarerresponsiblerforrtherinterpretationrofrthertaxationrstatutes,randraccountantsren
surerthatrthesersamerstatutesrarerappliedrconsistently.


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1-2. Therotherrmajorrcategoriesrofrtaxrpracticerinradditionrtortaxrresearchrarerasrfollows:


• Taxrcompliance
• Taxrplanning
• Taxrlitigation


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1-3.
Taxrcompliancerconsistsrofrgatheringrpertinentrinformation,revaluatingrandrclassifyingrt
hatrinformation,randrfilingranyrnecessaryrtaxrreturns.rComplianceralsorincludesrotherrfunctionsrne
cessaryrtorsatisfyrgovernmentalrrequirements,rsuchrasrrepresentingrarclientrduringranrInternalrReve
nuerServicer(IRS)raudit.

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1-4.
Mostrofrthertaxrcompliancerworkrisrperformedrbyrcommercialrtaxrpreparers,renrolledrage
ntsr(EAs),rattorneys,randrcertifiedrpublicraccountantsr(CPAs).rNoncomplexrindividual,rpartnershi
p,randrcorporatertaxrreturnsroftenrarercompletedrbyrcommercialrtaxrpreparers.rTherpreparationrofr
morercomplexrreturnsrusuallyrisrperformedrbyrEAs,rattorneys,randrCPAs.rTherlatterrgroupsralsorpr
ovidertaxrplanningrservicesrandrrepresentrtheirrclientsrbeforertherIRS.


AnrEArisronerwhorisradmittedrtorpracticerbeforertherIRSrbyrpassingrarspecialrIRS-
administeredrexamination,rorrwhorhasrworkedrforrtherIRSrforrfiveryearsrandrisrissuedrarpermitrtorrepr
esentrclientsrbeforertherIRS.rCPAsrandrattorneysrarernotrrequiredrtortakerthisrexaminationrandrareraut
omaticallyradmittedrtorpracticerbeforertherIRSrifrtheyrarerinrgoodrstandingrwithrtherappropriaterprofes
sionalrlicensingrboard.


Pager5randrCircularr230




1-5.
Taxrplanningrisrtherprocessrofrarrangingrone‘srfinancialraffairsrtorminimizeranyrtaxrliability.r
Muchrofrmodernrtaxrpracticercentersraroundrthisrprocess,randrtherresultingroutcomerisrtaxravoidance.
Thererisrnothingrillegalrorrimmoralrinrtheravoidancerofrtaxationrasrlongrasrthertaxpayerrremainsrwithi
nrlegalrbounds.rInrcontrast,rtaxrevasionrconstitutesrtherillegalrnonpaymentrofrartaxrandrcannotrbercond
oned.rActivitiesrofrthisrsortrclearlyrviolaterexistingrlegalrconstraintsrandrfallroutsiderofrtherdomainrofrt
herprofessionalrtaxrpractitioner.


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1-6.
Inranropenrtaxrplanningrsituation,rthertransactionrisrnotryetrcomplete;rtherefore,rthertaxrpracti
tionerrmaintainsrsomerdegreerofrcontrolroverrtherpotentialrtaxrliability,randrthertransactionrmayrbermo
di-
r fiedrtorachieverarmorerfavorablertaxrtreatment.rInrarclosedrtransactionrhowever,rallrofrtherpertinentract
ionsrhaverbeenrcompleted,randrtaxrplanningractivitiesrmayrberlimitedrtortherpresentationrofrthersituati
onrtorthergovernmentrinrthermostrlegallyradvantageousrmannerrpossible.

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1-7.
TaxrlitigationrisrtherprocessrofrsettlingrardisputerwithrtherIRSrinrarcourtrofrlaw.rTypically,r
artaxrattorneyrhandlesrtaxrlitigationrthatrprogressesrbeyondrtherfinalrIRSrappeal.


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1-8. CPAsrserverisrarsupportrcapacityrinrtaxrlitigation.


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1-9.
Taxrresearchrconsistsrofrtherresolutionrofrunansweredrtaxationrquestions.rThertaxrresearchrp
rocessrincludesrtherfollowing:


1. Identificationrofrpertinentrissues;
2. Specificationrofrproperrauthorities;
3. Evaluationrofrtherproprietyrofrauthorities;rand,
4. Applicationrofrauthoritiesrtorarspecificrsituation.


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1-10.


Circularr230risrissuedrbyrtherTreasuryrDepartmentrandrappliesrtorallrwhorpracticerbeforerth


erIRS.rPager7


1-11.
InradditionrtorCircularr230,rCPAsrmustrfollowrtherAICPA‘srCoderofrProfessionalrCondu
ctrandrStatementsronrStandardsrforrTaxrServices.rCPAsrmustralsorabiderbyrtherrulesrofrtherappropri
aterstaterboard(s)rofraccountancy.


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1-12. Arreturnrpreparerrmustrobtainr18rhoursrofrcontinuingreducationrfromranrIRS-
approvedrCErProvider.rTherhoursrmustrincluderar6rcreditrhourrAnnualrFederalrTaxrRefresherrcourser
(AFTR)rthatrcoversrfilingrseasonrissuesrandrtaxrlawrupdates.rTherAFTRrcoursermustrincluderarknowl
edge-rbasedrcomprehensionrtestradministeredratrtherconclusionrofrthercourserbyrtherCErProvider.

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Limitedrpracticerrightsrallowrindividualsrtorrepresentrclientsrwhoserreturnsrtheyrpreparedrandrsign
ed,rbutronlyrbeforerrevenueragents,rcustomerrservicerrepresentatives,randrsimilarrIRSremployees.
Pager10randrIRS.gov


1-13.
False.rOnlyrcommunicationrwithrtherIRSrconcerningrartaxpayer‘srrights,rprivileges,rorrliab
ilityrisrincluded.rPracticerbeforertherIRSrdoesrnotrincluderrepresentationrbeforertherTaxrCourt.


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1-14. Sectionr10.2rofrSubpartrArofrCircularr230rdefinesrpracticerbeforertherIRSrasrincluding:


mattersrconnectedrwithrpresentationrtortherInternalrRevenuerServicerorranyrofritsrofficersrorr
employeesrrelatingrtorarclient‘srrights,rprivileges,rorrliabilitiesrunderrlawsrorrregulationsrad
ministeredrbyrtherInternalrRevenuerService.rSuchrpresentationsrincludertherpreparationrandr
filingrofrnecessaryrdocuments,rcorrespondencerwith,randrcommunicationsrtortherInternalrR
evenuerService,randrtherrepresentationrofrarclientratrconferences,rhearings,randrmeetings.


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1-15.
TorbecomeranrEAranrindividualrcanr(1)rpassrartestrgivenrbyrtherIRSrorr(2)rworkrforrtherIR
Srforrfiveryears.rCircularr230,rSubpartrA,r§§r10.4rtor10.6.


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1-16.
EAsrmustrcompleter72rhoursrofrcontinuingreducationreveryrthreeryearsr(anraveragerofr24rper
r year,rwithrarminimumrofr16rhoursrduringranyryear).rCircularr230,rSubpartrA.r§r10.6.


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1-17.
True.rAsrargeneralrrule,ranrindividualrmustrberanrEA,rattorney,rorrCPArtorrepresentrarclientrb
eforertherIRS.rThererarerlimitedrsituationsrwhererothersrmayrrepresentrartaxpayer;rhowever,rthisrfactr
patternrisrnotronerofrthem.rSincerLeighrdidrnotrsignrtherreturn,rshercannotrrepresentrthertaxpayer,ronly
r Rosercan.