FederalTax Research(12th Edition)
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Roby Sawyers,Steven Gill study guide
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DISCUSSION QUESTIONS
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CHAPTER 1 hd
AN INTRODUCTION TO TAX PRACTICE AND ETHICS
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DISCUSSIONhdQUESTIONS
1-1.
InhdthehdUnitedhdStates,hdthehdtaxhdsystemhdishdanhdoutgrowthhdofhdthehdfollowinghdfivehddisci
plines:hdlaw,hdaccounting,hdeconomics,hdpoliticalhdscience,hdandhdsociology.hdThehdenvironmenthdf
orhdthehdtaxhdsystemhdishdprovidedhdbyhdthehdprincipleshdofhdeconomics,hdsociology,hdandhdpoliticalhds
cience,hdwhilehdthehdlegalhdandhdaccountinghdfieldshdarehdresponsiblehdforhd thehdsystem'shdinterpretat
ionhd andhdapplication.
Eachhdofhdthesehddisciplineshdaffectshdthishdcountry'shdtaxhdsystemhdinhdahduniquehdway.hdEconomistshda
ddresshdsuchhdissueshdashdhowhdproposedhdtaxhdlegislationhdwillhdaffecthdthehdratehdofhdinflationhdorhdecono
michdgrowth.hdMeasurementhdofhdthehdsocialhdequityhdofhdahdtax,hdandhddetermininghdwhetherhdahdtaxhdsys
temhddiscriminateshdagainsthdcertainhdtaxpayers,hdarehdissueshdthathdarehdexaminedhdbyhdsociologistshda
ndhdpoliticalhdscientists.hdFinally,hdattorneyshdarehdresponsiblehdforhdthehdinterpretationhdofhdthehdtaxati
onhdstatutes,hdandhdaccountantshdensurehdthathdthesehdsamehdstatuteshdarehdappliedhdconsistently.
Pagehd4
1-2. Thehdotherhdmajorhdcategorieshdofhdtaxhdpracticehdinhdadditionhdtohdtaxhdresearchhdare:
• taxhdcompliance
• taxhdplanning
• taxhdlitigatio
nhdPagehd5
1-3.
Taxhdcompliancehdconsistshdofhdgatheringhdpertinenthdinformation,hdevaluatinghdandhdclassifyi
nghdthathdinformation,hdandhdfilinghdanyhdnecessaryhdtaxhdreturns.hdCompliancehdalsohdincludeshdotherhd
functionshdnecessaryhdtohdsatisfyhdgovernmentalhdrequirements,hdsuchhdashdrepresentinghdahdclienthdduri
nghdanhdIRShdaudit.
Pagehd5
1-4.
Mosthdofhdthehdtaxhdcompliancehdworkhdishdperformedhdbyhdcommercialhdtaxhdpreparers,hdenr
olledhdagents,hdattorneys,hdandhdCPAs.hdNoncomplexhdindividual,hdpartnership,hdandhdcorporatehdta
xhdreturnshdoftenhdarehdcompletedhdbyhdcommercialhdtaxhdpreparers.hdThehdpreparationhdofhdmorehdco
mplexhdreturnshdusuallyhdishdperformedhdbyhdenrolledhdagents,hdattorneys,hdandhdCPAs.hdThehdlatterhd
groupshdalsohdprovidehdtaxhdplanninghdserviceshdandhdrepresenthdtheirhdclientshdbeforehdthehdIRS.
AnhdenrolledhdagenthdishdonehdwhohdishdadmittedhdtohdpracticehdbeforehdthehdIRShdbyhdpassinghdahdspecial
hdIRS-
hdadministeredhdexamination,hdorhdwhohdhashdworkedhdforhdthehdIRShdforhdfivehdyears,hdandhdishdissuedhda
hdpermithdtohdrepresenthdclientshdbeforehdthehdIRS.hd CPAshdandhdattorneyshdarehdnothdrequiredhdtohdtakehdthi
shdexaminationhdandhdarehdautomaticallyhdadmittedhdtohdpracticehdbeforehdthehdIRShdifhdtheyhdarehdinhdgoo
dhdstandinghdwithhdthehdappropriatehdprofessionalhdlicensinghdboard.
Pagehd5hdandhdCircularhd230
,Pagehd1-2 SOLUTIONShdMANUA
L
1-5.
Taxhdplanninghdishdthehdprocesshdofhdarranginghdone'shdfinancialhdaffairshdtohdminimizehdanyhdtaxhd
liability.hdMuchhdofhdmodernhdtaxhdpracticehdcentershdaroundhdthishdprocess,hdandhdthehdresultinghdoutcom
ehdishdtaxhdavoidance.
Therehdishdnothinghdillegalhdorhdimmoralhdinhdthehdavoidancehdofhdtaxation,hdashdlonghdashdthehdtaxpayerhd
remainshdwithinhdlegalhdbounds.hdInhdcontrast,hdtaxhdevasionhdconstituteshdthehdillegalhdnonpaymenthdofh
dahdtaxhdandhdcannothdbehdcondoned.hdActivitieshdofhdthishdsorthdclearlyhdviolatehdexistinghdlegalhdconstrain
tshdandhdfallhdoutsidehdofhdthehddomainhdofhdthehdprofessionalhdtaxhdpractitioner.
Pagehd6
1-6.
Inhdanhdopenhdtaxhdplanninghdsituation,hdthehdtransactionhdishdnothdyethdcomplete,hdtherefore,hdtheh
d taxhdpractitionerhdmaintainshdsomehddegreehdofhdcontrolhdoverhdthehdpotentialhdtaxhdliability,hdandhdthehdtr
ansactionhdmayhdbehdmodi-
hdfiedhdtohdachievehdahdmorehdfavorablehdtaxhdtreatment.hdInhdahdclosedhdtransactionhdhowever,hdallhdofhdthe
hdpertinenthdactionshdhavehdbeenhdcompleted,hdandhdtaxhdplanninghdactivitieshdmayhdbehdlimitedhdtohdthehdp
resentationhdofhdthehdsituationhdtohdthehdgovernmenthdinhdthehdmosthdlegallyhdadvantageoushdmannerhd po
ssible.
Pagehd6
1-7.
TaxhdlitigationhdishdthehdprocesshdofhdsettlinghdahddisputehdwithhdthehdIRShdinhdahdcourthdofhdlaw.
Typically,hdahdtaxhdattorneyhdhandleshdtaxhdlitigationhdthathdprogresseshdbeyondhdthehdfinalhdIRShdap
hd
peal.
Pagehd6
1-8. CPAshdservehdishdahdsupporthdcapacityhdinhdtaxhdlitigation.
Pagehd6
1-9.
Taxhdresearchhdconsistshdofhdthehdresolutionhdofhdunansweredhdtaxationhdquestions.hd Thehdtaxhdre
searchhdprocesshdincludeshdthehdfollowing:
1. Identificationhdofhdpertinenthdissues;
2. Specificationhdofhdproperhdauthorities;
3. Evaluationhdofhdthehdproprietyhdofhdauthorities;hdand,
4. Applicationhdofhdauthoritieshdtohdahdspecifichdsituation.
Pagehd6
1-10.
Circularhd230hdishdissuedhdbyhdthehdTreasuryhdDepartmenthdandhdapplieshdtohdallhdwhohdpracticehd
beforehdthehdIRS.hdPagehd7
1-11.
InhdadditionhdtohdCircularhd230,hdCPAshdmusthdfollowhdthehdAICPA'shdCodehdofhdProfessiona
lhdConducthdandhdStatementshdonhdStandardshdforhdTaxhdServices.hdCPAshdmusthdalsohdabidehdbyhdtheh
druleshdofhdthehdappropriatehdstatehdboard(s)hdofhdaccountancy.
Pagehd7
1-12. Ahdreturnhdpreparerhdmusthdobtainhd18hdhourshdofhdcontinuinghdeducationhdfromhdanhdIRS-
approvedhdCEhdProvider.hdThehdhourshdmusthdincludehdahd6hdcredithdhourhdAnnualhdFederalhdTaxhdRefre
, FederalhdTaxhdResearch,hd11thhdEdit Pagehd1-3
ion sherhdcoursehd(AFTR)hdthathdcovershdfilinghdseasonhdissueshdandhdtaxhdlawhdupdates.hdThehdAFTRhdcour
sehdmusthdincludehdahdknowledge-
hdbasedhdcomprehension hdtesthdadministeredhdathdthehdconclusionhd ofhdthehdcoursehdbyhdthehdCEhdProvider
.
Limitedhdpracticehdrightshdallowhdindividualshdtohdrepresenthdclientshdwhosehdreturnshdtheyhdprepare
dhdandhdsigned,hdbuthdonlyhdbeforehdrevenuehdagents,hdcustomerhdservicehdrepresentatives,hdandhdsimi
larhdIRShdemployees.
