Solution Manual For Federal Tax Research, 13th Edition by Roby Sawyers, Steven Gill, Verified Chapters 1 - 13, Complete Newest Version

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Solution Manual Federal Tax Research 12th Edition by Roby Sawyers, Steven Gill
CHAPTER 1 22




INTRODUCTION TO TAX PRACTICE AND ETHICS 22 22 22 22 22




DISCUSSION QUESTIONS 22




1-1.
In the United States, the tax system is an outgrowth of the following five discipl
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ines: law, accounting, economics, political science, and sociology. The environment for the
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tax system is provided by the principles of economics, sociology, and political science,
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while the legal and accounting fields are responsible for the system‘s interpretation and a
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pplication.


Each of these disciplines affects this country‘s tax system in a unique way. Economists add
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ress such issues as how proposed tax legislation will affect the rate of inflation or economi
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c growth. Measurement of the social equity of a tax and determining whether a tax syste
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m discriminates against certain taxpayers are issues that are examined by sociologists and
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political scientists. 22



Finally, attorneys are responsible for the interpretation of the taxation statutes, and accounta
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nts ensure 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 22



 Tax planning 22



 Tax litigatio 22




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1-3.
Tax compliance consists of gathering pertinent information, evaluating and classif
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ying that information, and filing any necessary tax returns. Compliance also includes other
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22 functions necessary to satisfy governmental requirements, such as representing a client duri
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ng an Internal Revenue Service (IRS) audit.
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Page 5 22




1-4.
Most of the tax compliance work is performed by commercial tax preparers, enrol
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led agents (EAs), attorneys, and certified public accountants (CPAs). Noncomplex individua
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l, partnership, and corporate tax returns often are completed by commercial tax preparers.
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The preparation of more complex returns usually is performed by EAs, attorneys, and CPA
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s. The latter groups also provide tax planning services and represent their clients before the
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22 IRS.


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 per
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mit to represent clients before the IRS. CPAs and attorneys are not required to take this exa
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mination and are automatically admitted to practice before the IRS if they are in good standin
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g with the appropriate professional 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 li
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ability. Much of modern tax practice centers around this process, and the resulting outcome i
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s tax avoidance.
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There is nothing illegal or immoral in the avoidance of taxation as long as the taxpayer rema
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ins within legal bounds. In contrast, tax evasion constitutes the illegal nonpayment of a tax an
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d cannot be condoned. Activities of this sort clearly violate existing legal constraints and fall
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2 outside of the 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 ta
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x practitioner maintains some degree of control over the potential tax liability, and the transac
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tion may be modi-
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22 fied to achieve a more favorable tax treatment. In a closed transaction however, all of the pe
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rtinent actions have been completed, and tax planning activities may be limited to the present
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, Page221-4 SOLUTIONS22MANUAL
ation of the situation to the government in the most legally advantageous manner possible.
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