Federal Tax Research 12th Edition by Roby Sawyers, Steven Gill Test Bank ||all chapters!!!

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


CHAPTER 1
INTRODUCTION TO TAX PRACTICE AND ETHICS



DISCUSSION QUESTIONSXD




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 ispr
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ovided by the principles of economics, sociology, and political science, while the legal and accou
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nting fields areresponsible 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 addresssuc
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h issues as how proposed tax legislation will affect the rate of inflation or economic growth.Measur
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ement of the social equity of a tax and determining whether a tax system discriminates against certa
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in taxpayers are issues that are examined bysociologists and political scientists.
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Finally, attorneys are responsible for the interpretation of the taxation statutes, and accountantsens
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ure 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 XD




 Tax planning XD




 Tax litigation XD X
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1-3.
Tax compliance consists of gathering pertinent information, evaluating and classifying tha
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t information, and filing any necessary tax returns. Compliance also includes other functions neces
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sary to satisfy governmental requirements, such as representing a client during an InternalRevenue
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XD Service (IRS) audit. XD XD

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1-4.
Most of the tax compliance work is performed by commercial tax preparers, enrolled agent
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s (EAs), attorneys, and certified public accountants (CPAs). Noncomplex individual, partnership,a
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nd 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 t
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ax 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-
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administered examination, or who has worked for the IRS for five years and is issued a permit to repre XD XD XD XD XD XD XD XD XD XD XD XD XD XD XD XD XD XD




sent clients before the IRS. CPAs and attorneys are not required to take this examination and are auto
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matically admitted to practice before the IRS if they are in good standing with the appropriateprofessi
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onal licensing board. XD XD




Page 5 and Circular 230 XD XD XD XD




1-5.
Tax planning is the process of arranging one‘s financial affairs to minimize any tax liability.
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Muchof 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 condon
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ed. Activities of this sort clearly violate existing legal constraints and fall outside of the domain of the
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professional tax practitioner. XD XD




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1-6.
In an open tax planning situation, the transaction is not yet complete; therefore, the tax practiti
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onermaintains some degree of control over the potential tax liability, and the transaction may be modi-
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XD fied to achieve a more favorable tax treatment. In a closed transaction however, all of the pertinentacti
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ons have been completed, and tax planning activities may be limited to the presentation of the situatio
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n to the government in the most legallyadvantageous manner possible.
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,Federal Tax Research, 12th Edition
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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 t
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axattorneyhandles tax litigation that progresses beyond the final IRS appeal.
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1-8. CPAs serve is a support capacityin tax litigation.
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1-9.
Taxresearch consists of the resolution of unanswered taxation questions. The taxresearch pro
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cessincludes the following:
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1. Identification of pertinent issues; XD XD XD




2. Specification of proper authorities; XD XD XD




3. Evaluation of the proprietyof authorities; and, XD XD XD XD XD XD




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




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1-10.


Circular 230 is issued bythe TreasuryDepartment and applies to all who practice before the I
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RS.Page 7 X
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1-11.
In addition to Circular 230, CPAs must follow the AICPA‘s Code of Professional Conduct
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and Statements on Standards for Tax Services. CPAs must also abide by the rules of the appropriat
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estate board(s) of accountancy.
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1-12. A return preparer must obtain 18 hours of continuing education from an IRS-
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approved CE Provider. The hours must include a 6 credit hour Annual Federal Tax Refresher course (
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AFTR) that covers filing season issues and tax law updates. The AFTR course must include a knowled
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ge-based comprehension test administered at the conclusion of the course bythe CE Provider.
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Limited practice rights allow individuals to represent clients whose returns they prepared andsigne
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d, but only before revenue agents, customer service representatives, and similar IRS employees.
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Page 10 and IRS.gov XD XD XD




1-13.
False. Onlycommunication with the IRS concerning a taxpayer‘s rights, privileges, or liabili
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tyisincluded. Practice before the IRS does not include representation before the Tax Court.
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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 e
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mployees relating to a client‘s rights, privileges, or liabilities under laws or regulations admi
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nistered by the Internal Revenue Service. Such presentations include thepreparation and fili
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ng of necessary documents, correspondence with, and communications to the Internal Reve
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nue Service, and the representation of a client at conferences, hearings, and meetings.
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1-15.
To become an EA an individual can (1) pass a test given bythe IRS or (2) work for the IRS f
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orfive 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 y
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ear,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 bef
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orethe IRS. There are limited situations where others may represent a taxpayer; however, this fact patt
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ern is not one of them. Since Leigh did not sign the return, she cannot represent the taxpayer, onlyRos
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e can.
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