Federalm Taxm Research 13th Pagem 1-
, 1
Solution Manual Federal Tax Research
tt tt tt tt
tt 13th Edition by Roby Sawyers, Steven Gill
tt
m tt
m tt
m tt tt
m tt
m
tt Chapters 1 -13 tt mtt
,Pagem 1- SOLUTIONS
2
CHAPTER 1 m
INTRODUCTION TO TAX PRACTICE AND ETHICS
m m m m m
DISCUSSION m QUESTIONS
1-1.
In m them United m States,m them tax m system m ism an m outgrowth m of m them followingm fivem disc
iplines: mlaw,m accounting,m economics,m politicalm science,m and m sociology.m Them environmen
tm form themtax m system m isprovided m by m them principlesm of m economics,m sociology,m and m polit
icalm science,mwhilem them legalm and m accountingm fieldsm arem responsiblem form them system‘
sm interpretation mand m application.
Each m of m thesem disciplinesm affectsm thism country‘sm tax m system m in m a m uniquem way.mEcon
omistsm addressttsuch m issuesm asm howm proposed m tax m legislation m willm affect m themratem of mi
nflation m orm economicm growth.Measurement m of m them socialm equity m ofm am tax m and mdeter
miningm whetherm a m tax m systemm discriminatesm against m certain m taxpayersm arem issuesmthat
m arem examined m by msociologistsm and m politicalm scientists.
Finally,m attorneysm aremresponsiblem form theminterpretation m ofm them taxation m statutes,m a
nd maccountantsttensurem that m thesem samem statutesm arem applied m consistently.****8880
()m Pagem 4
1-2. Them otherm majorm categoriesm of m tax m practicem in m addition m to m tax m research m arem asm follows:
• Tax m compliance
• Tax m planning
• Tax mliti
gation ttPagem 5
1-3.
Tax m compliance m consistsm of m gatheringm pertinent m information,m evaluatingm andm classif
yingmthat m information,m andm filingm any m necessary m tax m returns.m Compliance m also m include
sm othermfunctionsm necessary m tom satisfy m governmentalm requirements,m such m asm representin
gm a m client mduringm an m InternalttRevenuem Servicem (IRS)m audit.
,Federalm Taxm Research 13th Pagem 1-
, 3
Pagem 5
1-4.
Most m of m them tax m compliancem work m ism performedm by m commercialm tax m preparers,m enr
olled magentsm (EAs),m attorneys,m and m certified m publicm accountantsm (CPAs).m Noncomplex m
individual,m partnership,ttand m corporatem tax m returnsm often m arem completed m by m commercialm t
ax mpreparers.m Them preparation m of m morem complex m returnsm usually m ism performed m by m EAs,
m attorneys,m and m CPAs.m Them latterm groupsm also ttprovidem tax m planningm servicesm and m repres
ent mtheirm clientsm beforem them IRS.
An m EAm ism onem who m ism admitted m to m practicem beforem them IRSm by m passingm a m specialm IRS-
m administered m examination,m orm who m hasm worked m form them IRSm form fivem yearsm and m ism issue
d m a m permit m to m represent m clientsm beforem them IRS.m CPAsm and m attorneysm arem notm required
m to m takemthism examination m and m arem automatically m admitted m to m practicem beforem them IRSm if
m they m arem in mgood m standingm with m them appropriate ttprofessionalm licensingm board.
Pagem 5 m and m Circularm 230
1-5.
Tax m planningm ism them processm of m arrangingm one‘sm financialm affairsm to m minimizem a
ny m tax mliability.m Much ttof m modern m tax m practicem centersm around m thism process,m and m the
m resultingmoutcomem ism tax m avoidance.
Therem ism nothingm illegalm orm immoralm in m them avoidance m of m taxation m asm longm asm them taxpay
ermremainsm within m legalm bounds.m In m contrast,m tax m evasion m constitutesm them illegalm nonpa
yment mof m am tax m and m cannotbem condoned.m Activitiesm of m thism sort m clearly m violatem existingm l
egalmconstraintsm and m fallm outsidem of m them domain m of m them professionalm tax m practitioner.
Pagem 6
1-6.
In m an m openm taxm planningm situation,m them transaction m ism notm yet m complete; m therefore,
m them tax mpractitionerttmaintainsm somem degreem of m controlm overm them potentialm tax m liability
,m and m themtransaction m may m bem modi-
m fied m to m achievem am morem favorablem tax m treatment.m Inm am closed mtransaction m however,m a
llm of m them pertinentactionsm havem been m completed,m and m tax m planningmactivitiesm maym bem l
, Pagem 1- SOLUTIONS
4 imited m to m them presentation m ofm them situation m to m them governmentm in m themmost m legally mad
vantageousm mannerm possible.
, 1
Solution Manual Federal Tax Research
tt tt tt tt
tt 13th Edition by Roby Sawyers, Steven Gill
tt
m tt
m tt
m tt tt
m tt
m
tt Chapters 1 -13 tt mtt
,Pagem 1- SOLUTIONS
2
CHAPTER 1 m
INTRODUCTION TO TAX PRACTICE AND ETHICS
m m m m m
DISCUSSION m QUESTIONS
1-1.
In m them United m States,m them tax m system m ism an m outgrowth m of m them followingm fivem disc
iplines: mlaw,m accounting,m economics,m politicalm science,m and m sociology.m Them environmen
tm form themtax m system m isprovided m by m them principlesm of m economics,m sociology,m and m polit
icalm science,mwhilem them legalm and m accountingm fieldsm arem responsiblem form them system‘
sm interpretation mand m application.
Each m of m thesem disciplinesm affectsm thism country‘sm tax m system m in m a m uniquem way.mEcon
omistsm addressttsuch m issuesm asm howm proposed m tax m legislation m willm affect m themratem of mi
nflation m orm economicm growth.Measurement m of m them socialm equity m ofm am tax m and mdeter
miningm whetherm a m tax m systemm discriminatesm against m certain m taxpayersm arem issuesmthat
m arem examined m by msociologistsm and m politicalm scientists.
Finally,m attorneysm aremresponsiblem form theminterpretation m ofm them taxation m statutes,m a
nd maccountantsttensurem that m thesem samem statutesm arem applied m consistently.****8880
()m Pagem 4
1-2. Them otherm majorm categoriesm of m tax m practicem in m addition m to m tax m research m arem asm follows:
• Tax m compliance
• Tax m planning
• Tax mliti
gation ttPagem 5
1-3.
Tax m compliance m consistsm of m gatheringm pertinent m information,m evaluatingm andm classif
yingmthat m information,m andm filingm any m necessary m tax m returns.m Compliance m also m include
sm othermfunctionsm necessary m tom satisfy m governmentalm requirements,m such m asm representin
gm a m client mduringm an m InternalttRevenuem Servicem (IRS)m audit.
,Federalm Taxm Research 13th Pagem 1-
, 3
Pagem 5
1-4.
Most m of m them tax m compliancem work m ism performedm by m commercialm tax m preparers,m enr
olled magentsm (EAs),m attorneys,m and m certified m publicm accountantsm (CPAs).m Noncomplex m
individual,m partnership,ttand m corporatem tax m returnsm often m arem completed m by m commercialm t
ax mpreparers.m Them preparation m of m morem complex m returnsm usually m ism performed m by m EAs,
m attorneys,m and m CPAs.m Them latterm groupsm also ttprovidem tax m planningm servicesm and m repres
ent mtheirm clientsm beforem them IRS.
An m EAm ism onem who m ism admitted m to m practicem beforem them IRSm by m passingm a m specialm IRS-
m administered m examination,m orm who m hasm worked m form them IRSm form fivem yearsm and m ism issue
d m a m permit m to m represent m clientsm beforem them IRS.m CPAsm and m attorneysm arem notm required
m to m takemthism examination m and m arem automatically m admitted m to m practicem beforem them IRSm if
m they m arem in mgood m standingm with m them appropriate ttprofessionalm licensingm board.
Pagem 5 m and m Circularm 230
1-5.
Tax m planningm ism them processm of m arrangingm one‘sm financialm affairsm to m minimizem a
ny m tax mliability.m Much ttof m modern m tax m practicem centersm around m thism process,m and m the
m resultingmoutcomem ism tax m avoidance.
Therem ism nothingm illegalm orm immoralm in m them avoidance m of m taxation m asm longm asm them taxpay
ermremainsm within m legalm bounds.m In m contrast,m tax m evasion m constitutesm them illegalm nonpa
yment mof m am tax m and m cannotbem condoned.m Activitiesm of m thism sort m clearly m violatem existingm l
egalmconstraintsm and m fallm outsidem of m them domain m of m them professionalm tax m practitioner.
Pagem 6
1-6.
In m an m openm taxm planningm situation,m them transaction m ism notm yet m complete; m therefore,
m them tax mpractitionerttmaintainsm somem degreem of m controlm overm them potentialm tax m liability
,m and m themtransaction m may m bem modi-
m fied m to m achievem am morem favorablem tax m treatment.m Inm am closed mtransaction m however,m a
llm of m them pertinentactionsm havem been m completed,m and m tax m planningmactivitiesm maym bem l
, Pagem 1- SOLUTIONS
4 imited m to m them presentation m ofm them situation m to m them governmentm in m themmost m legally mad
vantageousm mannerm possible.
