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

Federal |Tax |Research, |13th |Edition Page |1-1


Solution Manual Federal Tax Research
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13th Edition by Roby Sawyers, Steven Gill
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Chapters 1 -13
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,Page |1-2 SOLUTIONS |MANUAL




CHAPTER 1 |



INTRODUCTION TO TAX PRACTICE AND ETHICS
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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
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provided |by |the |principles |of |economics, |sociology, |and |political |science, |while |the |legal |and
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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
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 |accountants
ensure |that |these |same |statutes |are |applied |consistently.****8880()
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1-2. The |other |major |categories |of |tax |practice |in |addition |to |tax |research |are |as |follows:


 Tax |compliance
 Tax |planning
 Tax |litigation


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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
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necessary |to |satisfy |governmental |requirements, |such |as |representing |a |client |during |an |Internal
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Revenue |Service |(IRS) |audit.
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,Federal |Tax |Research, |13th |Edition Page |1-3



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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,
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and |corporate |tax |returns |often |are |completed |by |commercial |tax |preparers. |The |preparation |of
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| 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.
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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
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clients |before |the |IRS. |CPAs |and |attorneys |are |not |required |to |take |this |examination |and |are
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automatically |admitted |to |practice |before |the |IRS |if |they |are |in |good |standing |with |the |appropriate
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professional |licensing |board.
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Page |5 |and |Circular |230




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.
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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
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domain |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 |practitioner
maintains |some |degree |of |control |over |the |potential |tax |liability, |and |the |transaction |may |be |modi-
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| 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
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situation |to |the |government |in |the |most |legally |advantageous |manner | possible.
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, Page |1-4 SOLUTIONS |MANUAL

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1-7. Tax |litigation |is |the |process |of |settling |a |dispute |with |the |IRS |in |a |court |of |law. |Typically, |a |tax
attorney |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 |process
includes |the |following:
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1. Identification |of |pertinent |issues;
2. Specification |of |proper |authorities;
3. Evaluation |of |the |propriety |of |authorities; |and,
4. Application |of |authorities |to |a |specific |situation.


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1-10. Circular |230 |is |issued |by |the |Treasury |Department |and |applies |to |all |who |practice |before |the |IRS.


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1-11. In |addition |to |Circular |230, |CPAs |must |follow |the |AICPA‘s |Code |of |Professional |Conduct |and
Statements |on |Standards |for |Tax |Services. |CPAs |must |also |abide |by |the |rules |of |the |appropriate
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state |board(s) |of |accountancy.
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1-12. A |return |preparer |must |obtain |18 |hours |of |continuing |education |from |an |IRS-approved |CE
Provider. |The |hours |must |include |a |6 |credit |hour |Annual |Federal |Tax |Refresher |course |(AFTR)
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that |covers |filing |season |issues |and |tax |law |updates. |The |AFTR |course |must |include |a |knowledge-
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based |comprehension |test |administered |at |the |conclusion | of |the |course |by |the |CE |Provider.
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