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

Federal Tax Research, 12th Editi
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on

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




INTRODUCTION TO TAX PRACTICE AND ETHICS HD HD HD HD HD




DISCUSSION QUESTIONS
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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 t
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he tax system isprovided 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
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application.
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Each of these disciplines affects this country‘s tax system in a unique way. Economists a
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ddresssuch issues as how proposed tax legislation will affect the rate of inflation or econo
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mic growth.Measurement of the social equity of a tax and determining whether a tax syst
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em discriminates against certain taxpayers are issues that are examined by sociologists an
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d political scientists.
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Finally, attorneys are responsible for the interpretation of the taxation statutes, and accoun
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tantsensure 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
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• Tax planningHD




• Tax litigatio
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1-3.
Tax compliance consists of gathering pertinent information, evaluating and classify
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ing that information, and filing any necessary tax returns. Compliance also
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functions necessary to satisfy governmental requirements, such as representing a client d
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uring an InternalRevenue Service (IRS) audit.
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Page 5 HD




1-4.
Most of the tax compliance work is performed by commercial tax preparers, enroll
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ed agents (EAs), attorneys, and certified public accountants (CPAs). Noncomplex individu
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al, 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 CP
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As. The latter groups alsoprovide tax planning services and represent their clients before t
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he IRS. HD




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 ex
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amination and are automatically admitted to practice before the IRS if they are in good stan
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ding with the appropriateprofessional 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 l
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iability. Muchof 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 rem
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ains within legal bounds. In contrast, tax evasion constitutes the illegal nonpayment of a tax
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and cannotbe condoned. Activities of this sort clearly violate existing legal constraints and f
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all 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 t
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ax practitionermaintains some degree of control over the potential tax liability, and the trans
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action may be modi- HD HD HD




HD 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 pres
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entation of the situation to the government in the most legally advantageous
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.