Copyright © 2025 Pearson Education, Inc.
zl zl zl zl zl
C:1-1
,SOLUTION MANUAL FOR zl zl
Pearson's Federal Taxation 2026 Corporations, Partnerships, Estates, & T zl zl zl zl zl zl zl zl
rusts, 39th edition Luke E. Richardson Mitchell Franklin
zl zl zl zl zl zl zl
Chapter 1-15 zl
Chapter C:1 zl zl
Tax Research zl
Note: To complete the online research problems for this chapter, textbook users must have access
z l zl zl zl zl zl zl zl zl zl zl zl zl zl zl
to an Internet-zl zl
based tax service at their institution. Solutions are provided using CHECKPOINT, when applicable
zl zl zl zl zl zl zl zl zl zl zl zl
. In some cases, solutions using other tax services may differ.
zl zl zl zl zl zl zl zl zl zl
Discussion Questions zl
C:1-1 In a closed- z l zl zl
fact situation, the facts have occurred, and the tax advisor‘s task is to analyze them to determine the
zl zl zl zl zl zl zl zl zl zl zl zl zl zl zl zl zl zl
appropriate tax treatment. In an open- zl zl zl zl zl
fact situation, by contrast, the facts have not yet occurred, and the tax advisor‘s task is to plan for the
zl zl zl zl zl zl zl zl zl zl zl zl zl zl zl zl zl zl zl
m or shape them so as to produce a favorable tax result. p. C:1-2.
zl zl zl zl zl zl zl zl zl zl zl zl zl
C:1-
2 According to the AICPA‘s Statement on Standards for Tax Services No. 1, the tax advisor must
z l zl zl zl zl zl zl zl zl z l z l zl zl zl zl zl
promptly inform the taxpayer of the error and advise on corrective measures that should be taken. I
zl zl zl zl zl zl zl zl zl zl zl zl zl zl zl zl zl
f the taxpayer refuses to take such recommended actions, the advisor should consider resigning fro
zl zl zl zl zl zl zl zl zl zl zl zl zl zl
m the engagement. pp. C:1-31 through C:1-33.
zl zl zl zl zl zl
C:1-
3 When tax advisors speak about ―tax law,‖ they refer to the IRC as elaborated by Treasury Regulat
z l zl zl zl zl zl zl zl zl zl zl zl zl zl zl zl zl
ions and administrative pronouncements and as interpreted by federal courts. The term also include
zl zl zl zl zl zl zl zl zl zl zl zl zl
s the meaning conveyed by committee reports. p. C:1-7.
zl zl zl zl zl zl zl zl
C:1-
4 Committee reports concerning tax legislation explain the purpose behind Congress‘ proposing th
zl zl zl zl zl zl zl zl zl zl zl zl
e legislation. Transcripts of hearings reproduce the testimonies of the persons who spoke for or agai
zl zl zl zl zl zl zl zl zl zl zl zl zl zl zl
nst the proposed legislation before the Congressional committees. Committee reports are sometime
zl zl zl zl zl zl zl zl zl zl zl
s used to interpret the statute. p. C:1-7.
zl zl zl zl zl zl zl
C:1-
5 Committee reports can help resolve ambiguities in statutory language by revealing Congressional
zl zl zl zl zl zl zl zl zl zl zl zl z
intent. They are indicative of this intent. pp. C:1-7 and C:1-8.
l zl zl zl zl zl zl zl zl zl zl
C:1-
6 The Internal Revenue Code of 1986 is updated for every statutory change to Title 26 subsequent t
z l zl zl zl zl zl zl zl zl zl zl zl zl zl zl zl zl
Copyright © 2025 Pearson Education, Inc. zl zl zl zl zl
C:1-2
,o 1986. Therefore, it includes the post-
zl zl zl zl zl zl
1986 tax law changes enacted by Congress and today reflects the current state of the law. p. C:1-8.
zl zl zl zl zl zl zl zl zl zl zl zl zl zl zl zl zl
C:1-
7 No. Title 26 deals with all taxation matters, not just income taxation. It covers estate tax, gift tax,
z l zl zl zl zl zl zl zl zl zl zl zl zl zl zl zl zl zl zl
employment tax, alcohol and tobacco tax, and excise tax matters. p. C:1-8.
zl zl zl zl zl zl zl zl zl zl zl
Copyright © 2025 Pearson Education, Inc.
zl zl zl zl zl
C:1-3
, C:1-
8 a. z l Subsection (c). It discusses the tax treatment of property distributions in general (e.g., a
z l z l z l zl zl zl zl zl zl zl zl zl zl zl zl zl
mount taxable, amount applied against basis, and amount exceeding basis).
zl zl zl zl zl zl zl zl zl
b. Because Sec. 301 applies to the entire chapter, one should look throughout that entir zl zl zl zl zl zl zl zl zl zl zl zl zl
e chapter (Chapter 1 of the IRC – which covers Sec. 1 through Sec. 1400U-
zl zl zl zl zl zl zl zl zl zl zl zl zl zl
3) for any exceptions. One special rule – Sec. 301(e) –
zl zl zl zl zl zl zl zl zl zl
is found in Sec. 301. This special rule explains the tax treatment of dividends received by a 20% cor
zl zl zl zl zl zl zl zl zl zl zl zl zl zl zl zl zl zl zl
porate taxpayer. Section 301(f) indicates some of the important special rules found in other IRC sec
zl zl zl zl zl zl zl zl zl zl zl zl zl zl zl
tions.
c. Legislative. Section 301(e)(4) authorizes the issuance of Treasury Regulations as m zl zl zl zl zl zl zl zl zl zl
ay be necessary to carry out the purposes of the subsection. pp. C:1-9 through C:1-10.
zl zl zl zl zl zl zl zl zl zl zl zl zl zl
C:1-
9 Researchers should note the date on which a Treasury Regulation was adopted because the IRC
z l zl zl zl zl zl zl zl zl zl zl zl zl z l zl zl
may have been revised subsequent to that date. That is, the regulation may not interpret the current
zl zl zl zl zl zl zl zl zl zl zl zl zl zl zl zl zl
version of the IRC. Discrepancies between the IRC and the regulation occur when the Treasury Dep
zl zl zl zl zl zl zl zl zl zl zl zl zl zl zl
artment has not updated the regulation to reflect the statute as amended. p. C:1-9.
zl zl zl zl zl zl zl zl zl zl zl zl zl
C:1-
10 a. Proposed regulations are not authoritative, but they do provide guidance concernin
zl z l z l z l z l z l z l z l z l z l z l z l zl
g how the Treasury Department interprets the IRC. Temporary regulations, which are binding on th
zl zl zl zl zl zl zl zl zl zl zl zl zl zl
e taxpayer, often are issued after recent revisions to the IRC so that taxpayers and tax advisors will h
zl zl zl zl zl zl zl zl zl zl zl zl zl zl zl zl zl zl
ave guidance concerning procedural and/or computational matters. Final regulations, which are iss
zl zl zl zl zl zl zl zl zl zl zl
ued after the public has had time to comment on proposed regulations, are considered to be somewh
zl zl zl zl zl zl zl zl zl zl zl zl zl zl zl zl
at more authoritative than temporary regulations. pp. C:1-9 and C:1- 10.
zl zl zl zl zl zl zl zl zl zl
b. Interpretative regulations make the IRC‘s statutory language easier to understand an
z l z l zl zl zl zl zl zl zl zl zl zl
d apply. They also often provide computational illustrations. In the case of legislative regulations,
zl zl zl zl zl zl zl zl zl zl zl zl zl zl
Congress has delegated the rulemaking on a specific topic (either narrow or broad) to the Treasury
zl zl zl zl zl zl zl zl zl zl zl zl z l zl zl zl
Department. However, after the Mayo Foundation case, both types of regulations will have the sam zl zl zl zl zl zl zl zl zl zl zl zl zl zl
e authoritative weight. p. C:1-10.
zl zl zl zl
C:1-
11 Prior to 2011, courts gave more authority to legislative regulations than to interpretive regulation
zl zl zl zl zl zl zl zl zl zl zl zl zl zl
s. However, after the Supreme Court decision in Mayo Foundation, courts will hold both interpretiv
zl zl zl zl zl zl zl zl zl zl zl zl zl zl
e and legislative regulations to the same standard and will overturn them only in very limited cases.
zl zl zl zl zl zl zl zl zl zl zl zl zl zl zl zl zl
p. C:1-10. zl
C:1-
12 Under the legislative reenactment doctrine, a Treasury Regulation is deemed to have been endorse
zl zl zl zl zl zl zl zl zl zl zl zl zl zl
d by Congress if the regulation was finalized before a related IRC provision was amended by Cong
zl zl zl zl zl zl zl zl zl zl zl zl zl z l zl zl
ress and in the interim, Congress did not amend the statutory provision to which the regulation relat
zl zl zl zl zl zl zl zl zl zl zl zl zl zl zl zl
es. p. C:1-10. zl zl
C:1-
13 a. Revenue rulings are not as authoritative as court opinions, Treasury Regulations, or the
zl z l z l z l zl zl zl zl zl zl zl zl zl zl zl zl zl
IRC. They represent interpretations by an interested party, the IRS. p. C:1-12.
zl zl zl zl zl zl zl zl zl zl zl
Copyright © 2025 Pearson Education, Inc. zl zl zl zl zl
C:1-4
zl zl zl zl zl
C:1-1
,SOLUTION MANUAL FOR zl zl
Pearson's Federal Taxation 2026 Corporations, Partnerships, Estates, & T zl zl zl zl zl zl zl zl
rusts, 39th edition Luke E. Richardson Mitchell Franklin
zl zl zl zl zl zl zl
Chapter 1-15 zl
Chapter C:1 zl zl
Tax Research zl
Note: To complete the online research problems for this chapter, textbook users must have access
z l zl zl zl zl zl zl zl zl zl zl zl zl zl zl
to an Internet-zl zl
based tax service at their institution. Solutions are provided using CHECKPOINT, when applicable
zl zl zl zl zl zl zl zl zl zl zl zl
. In some cases, solutions using other tax services may differ.
zl zl zl zl zl zl zl zl zl zl
Discussion Questions zl
C:1-1 In a closed- z l zl zl
fact situation, the facts have occurred, and the tax advisor‘s task is to analyze them to determine the
zl zl zl zl zl zl zl zl zl zl zl zl zl zl zl zl zl zl
appropriate tax treatment. In an open- zl zl zl zl zl
fact situation, by contrast, the facts have not yet occurred, and the tax advisor‘s task is to plan for the
zl zl zl zl zl zl zl zl zl zl zl zl zl zl zl zl zl zl zl
m or shape them so as to produce a favorable tax result. p. C:1-2.
zl zl zl zl zl zl zl zl zl zl zl zl zl
C:1-
2 According to the AICPA‘s Statement on Standards for Tax Services No. 1, the tax advisor must
z l zl zl zl zl zl zl zl zl z l z l zl zl zl zl zl
promptly inform the taxpayer of the error and advise on corrective measures that should be taken. I
zl zl zl zl zl zl zl zl zl zl zl zl zl zl zl zl zl
f the taxpayer refuses to take such recommended actions, the advisor should consider resigning fro
zl zl zl zl zl zl zl zl zl zl zl zl zl zl
m the engagement. pp. C:1-31 through C:1-33.
zl zl zl zl zl zl
C:1-
3 When tax advisors speak about ―tax law,‖ they refer to the IRC as elaborated by Treasury Regulat
z l zl zl zl zl zl zl zl zl zl zl zl zl zl zl zl zl
ions and administrative pronouncements and as interpreted by federal courts. The term also include
zl zl zl zl zl zl zl zl zl zl zl zl zl
s the meaning conveyed by committee reports. p. C:1-7.
zl zl zl zl zl zl zl zl
C:1-
4 Committee reports concerning tax legislation explain the purpose behind Congress‘ proposing th
zl zl zl zl zl zl zl zl zl zl zl zl
e legislation. Transcripts of hearings reproduce the testimonies of the persons who spoke for or agai
zl zl zl zl zl zl zl zl zl zl zl zl zl zl zl
nst the proposed legislation before the Congressional committees. Committee reports are sometime
zl zl zl zl zl zl zl zl zl zl zl
s used to interpret the statute. p. C:1-7.
zl zl zl zl zl zl zl
C:1-
5 Committee reports can help resolve ambiguities in statutory language by revealing Congressional
zl zl zl zl zl zl zl zl zl zl zl zl z
intent. They are indicative of this intent. pp. C:1-7 and C:1-8.
l zl zl zl zl zl zl zl zl zl zl
C:1-
6 The Internal Revenue Code of 1986 is updated for every statutory change to Title 26 subsequent t
z l zl zl zl zl zl zl zl zl zl zl zl zl zl zl zl zl
Copyright © 2025 Pearson Education, Inc. zl zl zl zl zl
C:1-2
,o 1986. Therefore, it includes the post-
zl zl zl zl zl zl
1986 tax law changes enacted by Congress and today reflects the current state of the law. p. C:1-8.
zl zl zl zl zl zl zl zl zl zl zl zl zl zl zl zl zl
C:1-
7 No. Title 26 deals with all taxation matters, not just income taxation. It covers estate tax, gift tax,
z l zl zl zl zl zl zl zl zl zl zl zl zl zl zl zl zl zl zl
employment tax, alcohol and tobacco tax, and excise tax matters. p. C:1-8.
zl zl zl zl zl zl zl zl zl zl zl
Copyright © 2025 Pearson Education, Inc.
zl zl zl zl zl
C:1-3
, C:1-
8 a. z l Subsection (c). It discusses the tax treatment of property distributions in general (e.g., a
z l z l z l zl zl zl zl zl zl zl zl zl zl zl zl zl
mount taxable, amount applied against basis, and amount exceeding basis).
zl zl zl zl zl zl zl zl zl
b. Because Sec. 301 applies to the entire chapter, one should look throughout that entir zl zl zl zl zl zl zl zl zl zl zl zl zl
e chapter (Chapter 1 of the IRC – which covers Sec. 1 through Sec. 1400U-
zl zl zl zl zl zl zl zl zl zl zl zl zl zl
3) for any exceptions. One special rule – Sec. 301(e) –
zl zl zl zl zl zl zl zl zl zl
is found in Sec. 301. This special rule explains the tax treatment of dividends received by a 20% cor
zl zl zl zl zl zl zl zl zl zl zl zl zl zl zl zl zl zl zl
porate taxpayer. Section 301(f) indicates some of the important special rules found in other IRC sec
zl zl zl zl zl zl zl zl zl zl zl zl zl zl zl
tions.
c. Legislative. Section 301(e)(4) authorizes the issuance of Treasury Regulations as m zl zl zl zl zl zl zl zl zl zl
ay be necessary to carry out the purposes of the subsection. pp. C:1-9 through C:1-10.
zl zl zl zl zl zl zl zl zl zl zl zl zl zl
C:1-
9 Researchers should note the date on which a Treasury Regulation was adopted because the IRC
z l zl zl zl zl zl zl zl zl zl zl zl zl z l zl zl
may have been revised subsequent to that date. That is, the regulation may not interpret the current
zl zl zl zl zl zl zl zl zl zl zl zl zl zl zl zl zl
version of the IRC. Discrepancies between the IRC and the regulation occur when the Treasury Dep
zl zl zl zl zl zl zl zl zl zl zl zl zl zl zl
artment has not updated the regulation to reflect the statute as amended. p. C:1-9.
zl zl zl zl zl zl zl zl zl zl zl zl zl
C:1-
10 a. Proposed regulations are not authoritative, but they do provide guidance concernin
zl z l z l z l z l z l z l z l z l z l z l z l zl
g how the Treasury Department interprets the IRC. Temporary regulations, which are binding on th
zl zl zl zl zl zl zl zl zl zl zl zl zl zl
e taxpayer, often are issued after recent revisions to the IRC so that taxpayers and tax advisors will h
zl zl zl zl zl zl zl zl zl zl zl zl zl zl zl zl zl zl
ave guidance concerning procedural and/or computational matters. Final regulations, which are iss
zl zl zl zl zl zl zl zl zl zl zl
ued after the public has had time to comment on proposed regulations, are considered to be somewh
zl zl zl zl zl zl zl zl zl zl zl zl zl zl zl zl
at more authoritative than temporary regulations. pp. C:1-9 and C:1- 10.
zl zl zl zl zl zl zl zl zl zl
b. Interpretative regulations make the IRC‘s statutory language easier to understand an
z l z l zl zl zl zl zl zl zl zl zl zl
d apply. They also often provide computational illustrations. In the case of legislative regulations,
zl zl zl zl zl zl zl zl zl zl zl zl zl zl
Congress has delegated the rulemaking on a specific topic (either narrow or broad) to the Treasury
zl zl zl zl zl zl zl zl zl zl zl zl z l zl zl zl
Department. However, after the Mayo Foundation case, both types of regulations will have the sam zl zl zl zl zl zl zl zl zl zl zl zl zl zl
e authoritative weight. p. C:1-10.
zl zl zl zl
C:1-
11 Prior to 2011, courts gave more authority to legislative regulations than to interpretive regulation
zl zl zl zl zl zl zl zl zl zl zl zl zl zl
s. However, after the Supreme Court decision in Mayo Foundation, courts will hold both interpretiv
zl zl zl zl zl zl zl zl zl zl zl zl zl zl
e and legislative regulations to the same standard and will overturn them only in very limited cases.
zl zl zl zl zl zl zl zl zl zl zl zl zl zl zl zl zl
p. C:1-10. zl
C:1-
12 Under the legislative reenactment doctrine, a Treasury Regulation is deemed to have been endorse
zl zl zl zl zl zl zl zl zl zl zl zl zl zl
d by Congress if the regulation was finalized before a related IRC provision was amended by Cong
zl zl zl zl zl zl zl zl zl zl zl zl zl z l zl zl
ress and in the interim, Congress did not amend the statutory provision to which the regulation relat
zl zl zl zl zl zl zl zl zl zl zl zl zl zl zl zl
es. p. C:1-10. zl zl
C:1-
13 a. Revenue rulings are not as authoritative as court opinions, Treasury Regulations, or the
zl z l z l z l zl zl zl zl zl zl zl zl zl zl zl zl zl
IRC. They represent interpretations by an interested party, the IRS. p. C:1-12.
zl zl zl zl zl zl zl zl zl zl zl
Copyright © 2025 Pearson Education, Inc. zl zl zl zl zl
C:1-4
