***INSTANT DOWNLOAD***Solution Manual Federal Tax Research 12th Edition Sawyers, Gill

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




INTRODUCTION TO TAX PRACTICE AND ETHICS v v v v v




DISCUSSION QUESTIONS v




1-1. In the United States, the tax system is an outgrowth of the following five disciplines: law,
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accounting, economics, political science, and sociology. The environment for the tax system
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isprovided 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
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addresssuch issues as how proposed tax legislation will affect the rate of inflation or economic
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growth.Measurement of the social equity of a tax and determining whether a tax system
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discriminates against certain taxpayers are issues that are examined by sociologists and political
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v scientists.
Finally, attorneys are responsible for the interpretation of the taxation statutes, and
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accountantsensure 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 v




 Tax planning v




 Tax


litigationPage 5
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1-3. Tax compliance consists of gathering pertinent information, evaluating and classifying that
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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
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InternalRevenue Service (IRS) audit.
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1-4. Most of the tax compliance work is performed by commercial tax preparers, enrolled agents (EAs),
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attorneys, and certified public accountants (CPAs). Noncomplex individual, partnership,and
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corporate tax returns often are completed by commercial tax preparers. The preparation of more
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complex returns usually is performed by EAs, attorneys, and CPAs. The latter groups alsoprovide
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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
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examination, or who has worked for the IRS for five years and is issued a permit to represent clients
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before the IRS. CPAs and attorneys are not required to take this examination and are automatically
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admitted to practice before the IRS if they are in good standing with the appropriateprofessional
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licensing board.
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Page 5 and Circular 230
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1-5. Tax planning is the process of arranging one‘s financial affairs to minimize any tax liability. Muchof
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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
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legal bounds. In contrast, tax evasion constitutes the illegal nonpayment of a tax and cannotbe
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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
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practitionermaintains some degree of control over the potential tax liability, and the transaction may
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be modi- fied to achieve a more favorable tax treatment. In a closed transaction however, all of the
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pertinentactions have been completed, and tax planning activities may be limited to the presentation
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of the situation to the government in the most legally advantageous manner possible.
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,Federal Tax Research, 12th Edition
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Page 6 v




1-7. Tax litigation is the process of settling a dispute with the IRS in a court of law. Typically, a
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vtaxattorney handles tax litigation that progresses beyond the final IRS appeal.
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Page 6 v




1-8. CPAs serve is a support capacity in tax litigation.
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Page 6 v




1-9. Tax research consists of the resolution of unanswered taxation questions. The tax research
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vprocessincludes the following: v v v




1. Identification of pertinent issues; v v v




2. Specification of proper authorities; v v v




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




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




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1-10. Circular 230 is issued by the Treasury Department and applies to all who practice before the
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vIRS.Page 7 v v




1-11. In addition to Circular 230, CPAs must follow the AICPA‘s Code of Professional Conduct and
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vStatements on Standards for Tax Services. CPAs must also abide by the rules of the
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vappropriatestate board(s) of accountancy. v v v v




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1-12. A return preparer must obtain 18 hours of continuing education from an IRS-approved CE Provider.
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vThe hours must include a 6 credit hour Annual Federal Tax Refresher course (AFTR) that covers
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vfiling season issues and tax law updates. The AFTR course must include a knowledge-based
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vcomprehension test administered at the conclusion of the course by the CE Provider. v v v v v v v v v v v v

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Limited practice rights allow individuals to represent clients whose returns they prepared
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andsigned, but only before revenue agents, customer service representatives, and similar IRS
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employees.
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Page 10 and IRS.gov v v v




1-13. False. Only communication with the IRS concerning a taxpayer‘s rights, privileges, or liability
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isincluded. Practice before the IRS does not include representation before the Tax Court.
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Page 7 v




1-14. Section 10.2 of Subpart A of Circular 230 defines practice before the IRS as including:
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matters connected with presentation to the Internal Revenue Service or any of its officersor
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employees relating to a client‘s rights, privileges, or liabilities under laws or regulations
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administered by the Internal Revenue Service. Such presentations include thepreparation
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and filing of necessary documents, correspondence with, and communications to the
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Internal Revenue Service, and the representation of a client at conferences, hearings, and
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meetings.
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1-15. To become an EA an individual can (1) pass a test given by the IRS or (2) work for the IRS forfive
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v years. Circular 230, Subpart A, §§ 10.4 to 10.6.
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1-16. EAs must complete 72 hours of continuing education every three years (an average of 24 per
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year,with a minimum of 16 hours during any year). Circular 230, Subpart A. § 10.6.
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1-17. True. As a general rule, an individual must be an EA, attorney, or CPA to represent a client beforethe
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IRS. There are limited situations where others may represent a taxpayer; however, this fact pattern is
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not one of them. Since Leigh did not sign the return, she cannot represent the taxpayer, only Rose can.
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