Solutions for Federal Tax Research, 13th Edition Sawyers (All Chapters included)
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Course
Income tax
Institution
Income Tax
Complete Solutions Manual for Federal Tax Research, 13th Edition by Roby B. Sawyers, Steven L. Gill ; ISBN13: 9780357988411....(Full Chapters included Chapter 1 to 13)...1. Introduction to Tax Practice and Ethics.
2. Tax Research Methodology.
3. Constitutional and Legislative Sources.
4. Adminis...
TABLE OF CONTENTS
Discussion Questions ................................................................................................................................... 1
Exercises .................................................................................................................................................... 19
DISCUSSION QUESTIONS
1. In a modern, industrial society, the tax system is derived from several disciplines. Identify the
disciplines that play this role in the United States. Explain how each of them affects the U.S.
tax system.
Answer: In the United States, the tax system is an outgrowth of the following five
disciplines: law, accounting, economics, political science, and sociology. The environment
for the tax system is provided by the principles of economics, sociology, and political
science, while the legal and accounting fields are responsible for the system’s interpretation
and application.
Each of these disciplines affects this country’s tax system in a unique way. Economists
address such issues as how proposed tax legislation will affect the rate of inflation or
economic growth. Measurement of the social equity of a tax and determining whether a tax
system discriminates against certain taxpayers are issues that are examined by sociologists
and political scientists. Finally, attorneys are responsible for the interpretation of the taxation
statutes, and accountants ensure that these same statutes are applied consistently.
Page 4
,2. The elements of tax practice fall into what major categories in addition to tax research?
Answer: The other major categories of tax practice in addition to tax research are as follows:
• Tax compliance
• Tax planning
• Tax litigation
Page 5
3. What is tax compliance as practiced in the United States? Give several examples of activities
that can be classified as tax compliance.
Answer: Tax compliance consists of gathering pertinent information, evaluating and
classifying that information, and filing any necessary tax returns. Compliance also includes
other functions necessary to satisfy governmental requirements, such as representing a client
during an Internal Revenue Service (IRS) audit.
Page 5
4. Several groups of individuals do most of the tax compliance work in the United States.
Identify these groups and briefly describe the kind of work that each group does. In this
regard, be sure to define the term enrolled agent.
Answer: Most of the tax compliance work is performed by commercial tax preparers,
enrolled agents (EAs), attorneys, and certified public accountants (CPAs). Commercial tax
preparers often complete noncomplex individual, partnership, and corporate tax returns. EAs,
attorneys, and CPAs usually perform the preparation of more complex returns. The latter
groups also provide tax planning services and represent their clients before the IRS.
An EA is admitted to practice before the IRS by passing a special IRS-administered
examination, or who has worked for the IRS for five years and is issued a permit to represent
clients before the IRS. CPAs and attorneys are not required to take this examination and are
automatically admitted to practice before the IRS if they are in good standing with the
appropriate professional licensing board.
Page 5 and Circular 230
5. What is tax planning? Explain the difference between tax evasion and tax avoidance and the
role of each in professional tax planning.
Answer: Tax planning is the process of arranging one’s financial affairs to minimize any tax
liability. Much of modern tax practice centers around this process, and the resulting outcome
is tax avoidance. There is nothing illegal or immoral in the avoidance of taxation as long as
the taxpayer remains within legal bounds. In contrast, tax evasion constitutes the illegal
nonpayment of a tax and cannot be condoned. Activities of this sort clearly violate existing
legal constraints and fall outside of the domain of the professional tax practitioner.
Pages 5–6
, 6. Tax planning falls into two major categories: the “open” transaction and the “closed”
transaction. Discuss each type of transaction and describe how each affects tax planning.
Answer: In an open tax planning situation, the transaction is not yet complete; therefore, the
tax practitioner maintains some degree of control over the potential tax liability, and the
transaction may be modified to achieve a more favorable tax treatment. In a closed
transaction, however, all of the pertinent actions have been completed, and tax planning
activities may be limited to the presentation of the situation to the government in the most
legally advantageous manner possible.
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7. What is tax litigation? What type of tax practitioner typically handles tax litigation on a
taxpayer’s behalf?
Answer: Tax litigation is the process of settling a dispute with the IRS in a court of law.
Typically, a tax attorney handles tax litigation that progresses beyond the final IRS appeal.
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8. In tax litigation, what is usually the role of a CPA?
Answer: CPAs typically serve in a support capacity in tax litigation.
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9. Define tax research. Briefly describe the tax research process.
Answer: Tax research consists of the resolution of unanswered taxation questions. The tax
research process includes the following:
1. Identification of pertinent issues;
2. Specification of proper authorities;
3. Evaluation of the propriety of authorities; and,
4. Application of authorities to a specific situation.
Page 6
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