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

Federal Tax Research, 13th Edition
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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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CHAPTER 1 g




INTRODUCTION TO TAX PRACTICE AND ETHICS g g g g g




DISCUSSION QUESTIONS
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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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Finally, attorneys are responsible for the interpretation of the taxation statutes, and
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accountantsensure 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:
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 Tax compliance g




 Tax planning g




 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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,Federal Tax Research, 13th Edition
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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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gattorneys, and certified public accountants (CPAs). Noncomplex individual, partnership,and
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gcorporate tax returns often are completed by commercial tax preparers. The preparation of more
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gcomplex returns usually is performed by EAs, attorneys, and CPAs. The latter groups alsoprovide
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gtax 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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gexamination, or who has worked for the IRS for five years and is issued a permit to represent clients
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gbefore the IRS. CPAs and attorneys are not required to take this examination and are automatically
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gadmitted to practice before the IRS if they are in good standing with the appropriateprofessional
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glicensing board. g




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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gmodern 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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glegal bounds. In contrast, tax evasion constitutes the illegal nonpayment of a tax and cannotbe
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gcondoned. Activities of this sort clearly violate existing legal constraints and fall outside of the
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gdomain 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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gpractitionermaintains some degree of control over the potential tax liability, and the transaction may
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gbe modi- fied to achieve a more favorable tax treatment. In a closed transaction however, all of the
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gpertinentactions have been completed, and tax planning activities may be limited to the presentation
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gof the situation to the government in the most legally advantageous manner possible.
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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
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taxattorney 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
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processincludes the following:
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1. Identification of pertinent issues; g g g




2. Specification of proper authorities; g g g




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




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




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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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IRS.Page 7
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1-11. In addition to Circular 230, CPAs must follow the AICPA‘s Code of Professional Conduct and
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Statements on Standards for Tax Services. CPAs must also abide by the rules of the
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appropriatestate 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.
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The hours must include a 6 credit hour Annual Federal Tax Refresher course (AFTR) that covers
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filing season issues and tax law updates. The AFTR course must include a knowledge-based
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comprehension test administered at the conclusion of the course by the CE Provider.
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