Federal Tax Research, 13th
my my my Page 1-1
my
Edition
my
Solution Manual Federal Tax Research
my my my my
my 13th Edition by Roby Sawyers, Steven Gill
my my my my my my
my Chapters 1 -13 my my
,Page 1-2
my SOLUTIONS
MANUAL
my
CHAPTER 1 my
INTRODUCTION TO TAX PRACTICE AND ETHICS my my my my my
DISCUSSION QUESTIONS
my
1-1. In the United States, the tax system is an outgrowth of the following five disciplines:
my my my my my my my my my my my my my my
my law, accounting, economics, political science, and sociology. The environment for the
my my my my my my my my my my
my tax system isprovided by the principles of economics, sociology, and political science,
my my m
y my my my my my my my my my
my while the legal and accounting fields are responsible for the system‘s interpretation and
my my my my my my my my my my my my
my application.
Each of these disciplines affects this country‘s tax system in a unique way. Economists
my my my my my my my my my my my my my
my addresssuch issues as how proposed tax legislation will affect the rate of inflation or
m
y my my my my my my my my my my my my my
my economic growth.Measurement of the social equity of a tax and determining whether a
my m
y my my my my my my my my my my my
my tax system discriminates against certain taxpayers are issues that are examined by
my my my my my my my my my my my
sociologists and political scientists.
my my my my
Finally, attorneys are responsible for the interpretation of the taxation statutes, and
my my my my my my my my my my my
accountantsensure that these same statutes are applied consistently.****8880()
my m
y my my my my my my my
Page 4 my
1-2. The other major categories of tax practice in addition to tax research are as follows:
my my my my my my my my my my my my my my
Tax compliance
my
Tax planning
my
Tax
my litigationPage 5 m
y my
1-3. Tax compliance consists of gathering pertinent information, evaluating and classifying
my my my my my my my my my
my that information, and filing any necessary tax returns. Compliance also includes other
my my my my my my my my my my my
my functions necessary to satisfy governmental requirements, such as representing a client
my my my my my my my my my my
my during an InternalRevenue Service (IRS) audit.
my my m
y my my my
,Federal Tax Research, 13th
my my my Page 1-3 my
Edition
my
Page 5 my
1-4. Most of the tax compliance work is performed by commercial tax preparers, enrolled
my my my my my my my my my my my my
my agents (EAs), attorneys, and certified public accountants (CPAs). Noncomplex individual,
my my my my my my my my my
my partnership,and corporate tax returns often are completed by commercial tax preparers.
m
y my my my my my my my my my my
my The preparation of more complex returns usually is performed by EAs, attorneys, and
my my my my my my my my my my my my
my CPAs. The latter groups alsoprovide tax planning services and represent their clients
my my my my m
y my my my my my my my
before the IRS.
my my my
An EA is one who is admitted to practice before the IRS by passing a special IRS-
my my my my my my my my my my my my my my my my
administered examination, or who has worked for the IRS for five years and is issued a
my my my my my my my my my my my my my my my
my permit to represent clients before the IRS. CPAs and attorneys are not required to take
my my my my my my my my my my my my my my
my this examination and are automatically admitted to practice before the IRS if they are in
my my my my my my my my my my my my my my
my good standing with the appropriateprofessional licensing board.
my my my my m
y my my
Page 5 and Circular 230
my my my my
1-5. Tax planning is the process of arranging one‘s financial affairs to minimize any tax
my my my my my my my my my my my my my
my liability. Muchof modern tax practice centers around this process, and the resulting outcome
my m
y my my my my my my my my my my my
my is tax avoidance.
my my
There is nothing illegal or immoral in the avoidance of taxation as long as the taxpayer
my my my my my my my my my my my my my my my
my remains within legal bounds. In contrast, tax evasion constitutes the illegal nonpayment of
my my my my my my my my my my my my
my a tax and cannotbe condoned. Activities of this sort clearly violate existing legal
my my my m
y my my my my my my my my my
my constraints and fall outside of the domain of the professional tax practitioner.
my my my my my my my my my my my
Page 6 my
1-6. In an open tax planning situation, the transaction is not yet complete; therefore, the tax
my my my my my my my my my my my my my my
my practitionermaintains some degree of control over the potential tax liability, and the
m
y my my my my my my my my my my my
my transaction may be modi- fied to achieve a more favorable tax treatment. In a closed
my my my my my my my my my my my my my my
my transaction however, all of the pertinentactions have been completed, and tax planning
my my my my my m
y my my my my my my
my activities may be limited to the presentation of the situation to the government in the most
my my my my my my my my my my my my my my my
my legally advantageous manner possible.
my my my
, Page 1-4
my SOLUTIONS
MANUAL
my
Page 6 my
1-7. Tax litigation is the process of settling a dispute with the IRS in a court of law.
my my my my my my my my my my my my my my my my
my Typically, a taxattorney handles tax litigation that progresses beyond the final IRS
my my m
y my my my my my my my my my
my appeal.
Page 6 my
1-8. CPAs serve is a support capacity in tax litigation.
my my my my my my my my
Page 6 my
1-9. Tax research consists of the resolution of unanswered taxation questions. The tax research
my my my my my my my my my my my my
my processincludes the following:
m
y my my
1. Identification of pertinent issues; my my my
2. Specification of proper authorities; my my my
3. Evaluation of the propriety of authorities; and,
my my my my my my
4. Application of authorities to a specific situation.
my my my my my my
Page 6 my
1-10. Circular 230 is issued by the Treasury Department and applies to all who practice before
my my my my my my my my my my my my my my
my the IRS.Page 7
my m
y my
1-11. In addition to Circular 230, CPAs must follow the AICPA‘s Code of Professional
my my my my my my my my my my my my
my Conduct and Statements on Standards for Tax Services. CPAs must also abide by the
my my my my my my my my my my my my my
my rules of the appropriatestate board(s) of accountancy.
my my my m
y my my my
Page 7 my
1-12. A return preparer must obtain 18 hours of continuing education from an IRS-approved CE
my my my my my my my my my my my my my
my Provider. The hours must include a 6 credit hour Annual Federal Tax Refresher course
my my my my my my my my my my my my my
my (AFTR) that covers filing season issues and tax law updates. The AFTR course must
my my my my my my my my my my my my my
include a knowledge-based comprehension test administered at the conclusion of the course
my my my m
y my my my my my my my my my
by the CE Provider.
my my my my
my my my Page 1-1
my
Edition
my
Solution Manual Federal Tax Research
my my my my
my 13th Edition by Roby Sawyers, Steven Gill
my my my my my my
my Chapters 1 -13 my my
,Page 1-2
my SOLUTIONS
MANUAL
my
CHAPTER 1 my
INTRODUCTION TO TAX PRACTICE AND ETHICS my my my my my
DISCUSSION QUESTIONS
my
1-1. In the United States, the tax system is an outgrowth of the following five disciplines:
my my my my my my my my my my my my my my
my law, accounting, economics, political science, and sociology. The environment for the
my my my my my my my my my my
my tax system isprovided by the principles of economics, sociology, and political science,
my my m
y my my my my my my my my my
my while the legal and accounting fields are responsible for the system‘s interpretation and
my my my my my my my my my my my my
my application.
Each of these disciplines affects this country‘s tax system in a unique way. Economists
my my my my my my my my my my my my my
my addresssuch issues as how proposed tax legislation will affect the rate of inflation or
m
y my my my my my my my my my my my my my
my economic growth.Measurement of the social equity of a tax and determining whether a
my m
y my my my my my my my my my my my
my tax system discriminates against certain taxpayers are issues that are examined by
my my my my my my my my my my my
sociologists and political scientists.
my my my my
Finally, attorneys are responsible for the interpretation of the taxation statutes, and
my my my my my my my my my my my
accountantsensure that these same statutes are applied consistently.****8880()
my m
y my my my my my my my
Page 4 my
1-2. The other major categories of tax practice in addition to tax research are as follows:
my my my my my my my my my my my my my my
Tax compliance
my
Tax planning
my
Tax
my litigationPage 5 m
y my
1-3. Tax compliance consists of gathering pertinent information, evaluating and classifying
my my my my my my my my my
my that information, and filing any necessary tax returns. Compliance also includes other
my my my my my my my my my my my
my functions necessary to satisfy governmental requirements, such as representing a client
my my my my my my my my my my
my during an InternalRevenue Service (IRS) audit.
my my m
y my my my
,Federal Tax Research, 13th
my my my Page 1-3 my
Edition
my
Page 5 my
1-4. Most of the tax compliance work is performed by commercial tax preparers, enrolled
my my my my my my my my my my my my
my agents (EAs), attorneys, and certified public accountants (CPAs). Noncomplex individual,
my my my my my my my my my
my partnership,and corporate tax returns often are completed by commercial tax preparers.
m
y my my my my my my my my my my
my The preparation of more complex returns usually is performed by EAs, attorneys, and
my my my my my my my my my my my my
my CPAs. The latter groups alsoprovide tax planning services and represent their clients
my my my my m
y my my my my my my my
before the IRS.
my my my
An EA is one who is admitted to practice before the IRS by passing a special IRS-
my my my my my my my my my my my my my my my my
administered examination, or who has worked for the IRS for five years and is issued a
my my my my my my my my my my my my my my my
my permit to represent clients before the IRS. CPAs and attorneys are not required to take
my my my my my my my my my my my my my my
my this examination and are automatically admitted to practice before the IRS if they are in
my my my my my my my my my my my my my my
my good standing with the appropriateprofessional licensing board.
my my my my m
y my my
Page 5 and Circular 230
my my my my
1-5. Tax planning is the process of arranging one‘s financial affairs to minimize any tax
my my my my my my my my my my my my my
my liability. Muchof modern tax practice centers around this process, and the resulting outcome
my m
y my my my my my my my my my my my
my is tax avoidance.
my my
There is nothing illegal or immoral in the avoidance of taxation as long as the taxpayer
my my my my my my my my my my my my my my my
my remains within legal bounds. In contrast, tax evasion constitutes the illegal nonpayment of
my my my my my my my my my my my my
my a tax and cannotbe condoned. Activities of this sort clearly violate existing legal
my my my m
y my my my my my my my my my
my constraints and fall outside of the domain of the professional tax practitioner.
my my my my my my my my my my my
Page 6 my
1-6. In an open tax planning situation, the transaction is not yet complete; therefore, the tax
my my my my my my my my my my my my my my
my practitionermaintains some degree of control over the potential tax liability, and the
m
y my my my my my my my my my my my
my transaction may be modi- fied to achieve a more favorable tax treatment. In a closed
my my my my my my my my my my my my my my
my transaction however, all of the pertinentactions have been completed, and tax planning
my my my my my m
y my my my my my my
my activities may be limited to the presentation of the situation to the government in the most
my my my my my my my my my my my my my my my
my legally advantageous manner possible.
my my my
, Page 1-4
my SOLUTIONS
MANUAL
my
Page 6 my
1-7. Tax litigation is the process of settling a dispute with the IRS in a court of law.
my my my my my my my my my my my my my my my my
my Typically, a taxattorney handles tax litigation that progresses beyond the final IRS
my my m
y my my my my my my my my my
my appeal.
Page 6 my
1-8. CPAs serve is a support capacity in tax litigation.
my my my my my my my my
Page 6 my
1-9. Tax research consists of the resolution of unanswered taxation questions. The tax research
my my my my my my my my my my my my
my processincludes the following:
m
y my my
1. Identification of pertinent issues; my my my
2. Specification of proper authorities; my my my
3. Evaluation of the propriety of authorities; and,
my my my my my my
4. Application of authorities to a specific situation.
my my my my my my
Page 6 my
1-10. Circular 230 is issued by the Treasury Department and applies to all who practice before
my my my my my my my my my my my my my my
my the IRS.Page 7
my m
y my
1-11. In addition to Circular 230, CPAs must follow the AICPA‘s Code of Professional
my my my my my my my my my my my my
my Conduct and Statements on Standards for Tax Services. CPAs must also abide by the
my my my my my my my my my my my my my
my rules of the appropriatestate board(s) of accountancy.
my my my m
y my my my
Page 7 my
1-12. A return preparer must obtain 18 hours of continuing education from an IRS-approved CE
my my my my my my my my my my my my my
my Provider. The hours must include a 6 credit hour Annual Federal Tax Refresher course
my my my my my my my my my my my my my
my (AFTR) that covers filing season issues and tax law updates. The AFTR course must
my my my my my my my my my my my my my
include a knowledge-based comprehension test administered at the conclusion of the course
my my my m
y my my my my my my my my my
by the CE Provider.
my my my my
