Federal,Tax,Research,,13th,Editio Page,1-1
n
Solution,Manual,Federal,Tax,Research
,13th,Edition,by,Roby,Sawyers,,Steven,Gill,Cha
pters,1,-13
,Page,1-2 SOLUTIONS,MANUAL
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,sy
stem,is,provided,by,the,principles,of,economics,,sociology,,and,political,science,,while,the,le
gal,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,addre
ss,such,issues,as,how,proposed,tax,legislation,will,affect,the,rate,of,inflation,or,economic,gro
wth.,Measurement,of,the,social,equity,of,a,tax,and,determining,whether,a,tax,system,discrimi
nates,against,certain,taxpayers,are,issues,that,are,examined,by,sociologists,and,political,scien
tists.
Finally,,attorneys,are,responsible,for,the,interpretation,of,the,taxation,statutes,,and,accountant
s,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
Tax,litigatio
n,Page,5
1-3.
Tax,compliance,consists,of,gathering,pertinent,information,,evaluating,and,classifying
,Federal,Tax,Research,,13th,Editio Page,1-3
n ,that,information,,and,filing,any,necessary,tax,returns.,Compliance,also,includes,other,functi
ons,necessary,to,satisfy,governmental,requirements,,such,as,representing,a,client,during,an,In
ternal,Revenue,Service,(IRS),audit.
, Page,1-4 SOLUTIONS,MANUAL
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,,par
tnership,,and,corporate,tax,returns,often,are,completed,by,commercial,tax,preparers.,The,prep
aration,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,t
o,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,a
ppropriate,professional,licensing,board.
Page,5,and,Circular,230
1-5.
Tax,planning,is,the,process,of,arranging,one‘s,financial,affairs,to,minimize,any,tax,liabil
ity.,Much,of,modern,tax,practice,centers,around,this,process,,and,the,resulting,outcome,is,tax,av
oidance.
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,cann
ot,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,p
ractitioner,maintains,some,degree,of,control,over,the,potential,tax,liability,,and,the,transaction,m
n
Solution,Manual,Federal,Tax,Research
,13th,Edition,by,Roby,Sawyers,,Steven,Gill,Cha
pters,1,-13
,Page,1-2 SOLUTIONS,MANUAL
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,sy
stem,is,provided,by,the,principles,of,economics,,sociology,,and,political,science,,while,the,le
gal,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,addre
ss,such,issues,as,how,proposed,tax,legislation,will,affect,the,rate,of,inflation,or,economic,gro
wth.,Measurement,of,the,social,equity,of,a,tax,and,determining,whether,a,tax,system,discrimi
nates,against,certain,taxpayers,are,issues,that,are,examined,by,sociologists,and,political,scien
tists.
Finally,,attorneys,are,responsible,for,the,interpretation,of,the,taxation,statutes,,and,accountant
s,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
Tax,litigatio
n,Page,5
1-3.
Tax,compliance,consists,of,gathering,pertinent,information,,evaluating,and,classifying
,Federal,Tax,Research,,13th,Editio Page,1-3
n ,that,information,,and,filing,any,necessary,tax,returns.,Compliance,also,includes,other,functi
ons,necessary,to,satisfy,governmental,requirements,,such,as,representing,a,client,during,an,In
ternal,Revenue,Service,(IRS),audit.
, Page,1-4 SOLUTIONS,MANUAL
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,,par
tnership,,and,corporate,tax,returns,often,are,completed,by,commercial,tax,preparers.,The,prep
aration,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,t
o,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,a
ppropriate,professional,licensing,board.
Page,5,and,Circular,230
1-5.
Tax,planning,is,the,process,of,arranging,one‘s,financial,affairs,to,minimize,any,tax,liabil
ity.,Much,of,modern,tax,practice,centers,around,this,process,,and,the,resulting,outcome,is,tax,av
oidance.
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,cann
ot,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,p
ractitioner,maintains,some,degree,of,control,over,the,potential,tax,liability,,and,the,transaction,m
