FederaldTaxdResearch,d12thdEditio Paged1-1
n
Solution Manual Federal Tax Research 12th Edition by Roby Sawyers, Steven Gill
CHAPTERd1
INTRODUCTIONdTOdTAXdPRACTICEdANDdETHICS
DISCUSSIONdQUESTIONS
1-1.
IndthedUniteddStates,dthedtaxdsystemdisdandoutgrowthdofdthedfollowingdfiveddisciplines:
dlaw,daccounting,deconomics,dpoliticaldscience,danddsociology.dThedenvironmentdfordthedtaxdsy
stemdisdprovideddbydthedprinciplesdofdeconomics,dsociology,danddpoliticaldscience,dwhiledthedle
galdanddaccountingdfieldsdaredresponsibledford thedsystem‘sdinterpretationd anddapplication.
Eachdofdtheseddisciplinesdaffectsdthisdcountry‘sdtaxdsystemdindaduniquedway.dEconomistsdaddre
ssdsuchdissuesdasdhowdproposeddtaxdlegislationdwilldaffectdthedratedofdinflationdordeconomicdgro
wth.dMeasurementdofdthedsocialdequitydofdadtaxdandddeterminingdwhetherdadtaxdsystemddiscrimi
natesdagainstdcertaindtaxpayersdaredissuesdthatdaredexamineddbydsociologistsdanddpoliticaldscien
tists.
Finally,dattorneysdaredresponsibledfordthedinterpretationdofdthedtaxationdstatutes,danddaccountant
sdensuredthatdthesedsamedstatutesdaredapplieddconsistently.
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1-2. Thedotherdmajordcategoriesdofdtaxdpracticedindadditiondtodtaxdresearchdaredasdfollows:
Taxdcompliance
Taxdplanning
Taxdlitigatio
ndPaged5
1-3.
Taxdcompliancedconsistsdofdgatheringdpertinentdinformation,devaluatingdanddclassifying
dthatdinformation,danddfilingdanydnecessarydtaxdreturns.dCompliancedalsodincludesdotherdfuncti
onsdnecessarydtodsatisfydgovernmentaldrequirements,dsuchdasdrepresentingdadclientdduringdandIn
ternaldRevenuedServiced(IRS)daudit.
,Paged1-2 SOLUTIONSdMANUAL
Paged5
1-4.
Mostdofdthedtaxdcompliancedworkdisdperformeddbydcommercialdtaxdpreparers,denrolledd
agentsd(EAs),dattorneys,danddcertifieddpublicdaccountantsd(CPAs).dNoncomplexdindividual,dpar
tnership,danddcorporatedtaxdreturnsdoftendaredcompleteddbydcommercialdtaxdpreparers.dThedprep
arationdofdmoredcomplexdreturnsdusuallydisdperformeddbydEAs,dattorneys,danddCPAs.dThedlatter
dgroupsdalsodprovidedtaxdplanningdservicesdanddrepresentdtheirdclientsdbeforedthedIRS.
AndEAdisdonedwhodisdadmitteddtodpracticedbeforedthedIRSdbydpassingdadspecialdIRS-
administereddexamination,dordwhodhasdworkeddfordthedIRSdfordfivedyearsdanddisdissueddadpermitdt
odrepresentdclientsdbeforedthedIRS.dCPAsdanddattorneysdarednotdrequireddtodtakedthisdexaminationd
anddaredautomaticallydadmitteddtodpracticedbeforedthedIRSdifdtheydaredindgooddstandingdwithdtheda
ppropriatedprofessionaldlicensingdboard.
Paged5danddCirculard230
1-5.
Taxdplanningdisdthedprocessdofdarrangingdone‘sdfinancialdaffairsdtodminimizedanydtaxdliabil
ity.dMuchdofdmoderndtaxdpracticedcentersdarounddthisdprocess,danddthedresultingdoutcomedisdtaxdav
oidance.
Theredisdnothingdillegaldordimmoraldindthedavoidancedofdtaxationdasdlongdasdthedtaxpayerdremainsd
withindlegaldbounds.dIndcontrast,dtaxdevasiondconstitutesdthedillegaldnonpaymentdofdadtaxdanddcann
otdbedcondoned.dActivitiesdofdthisdsortdclearlydviolatedexistingdlegaldconstraintsdanddfalldoutsidedofd
theddomaindofdthedprofessionaldtaxdpractitioner.
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1-6.
Indandopendtaxdplanningdsituation,dthedtransactiondisdnotdyetdcomplete;dtherefore,dthedtaxdp
ractitionerdmaintainsdsomeddegreedofdcontroldoverdthedpotentialdtaxdliability,danddthedtransactiondm
aydbedmodi-
dfieddtodachievedadmoredfavorabledtaxdtreatment.dIndadcloseddtransactiondhowever,dalldofdthedpertin
entdactionsdhavedbeendcompleted,danddtaxdplanningdactivitiesdmaydbedlimiteddtodthedpresentationdof
dthedsituationdtodthedgovernmentdindthedmostdlegallydadvantageousd mannerd possible.
,FederaldTaxdResearch,d12thdEditio Paged1-3
n
Paged6
1-7.
TaxdlitigationdisdthedprocessdofdsettlingdaddisputedwithdthedIRSdindadcourtdofdlaw.dTypic
ally,dadtaxdattorneydhandlesdtaxdlitigationdthatdprogressesdbeyonddthedfinaldIRSdappeal.
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1-8. CPAsdservedisdadsupportdcapacitydindtaxdlitigation.
Paged6
1-9.
Taxdresearchdconsistsdofdthedresolutiondofdunanswereddtaxationdquestions.d Thedtaxdresearc
hdprocessdincludesdthedfollowing:
1. Identificationdofdpertinentdissues;
2. Specificationdofdproperdauthorities;
3. Evaluationdofdthedproprietydofdauthorities;dand,
4. Applicationdofdauthoritiesdtodadspecificdsituation.
Paged6
1-10.
Circulard230disdissueddbydthedTreasurydDepartmentdanddappliesdtodalldwhodpracticedbefor
edthedIRS.dPaged7
1-11.
IndadditiondtodCirculard230,dCPAsdmustdfollowdthedAICPA‘sdCodedofdProfessionaldCo
nductdanddStatementsdondStandardsdfordTaxdServices.dCPAsdmustdalsodabidedbydthedrulesdofdth
edappropriatedstatedboard(s)dofdaccountancy.
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1-12. Adreturndpreparerdmustdobtaind18dhoursdofdcontinuingdeducationdfromdandIRS-
approveddCEdProvider.dThedhoursdmustdincludedad6dcreditdhourdAnnualdFederaldTaxdRefresherdco
ursed(AFTR)dthatdcoversdfilingdseasondissuesdanddtaxdlawdupdates.dThedAFTRdcoursedmustdinclud
edadknowledge-
, Paged1-4 SOLUTIONSdMANUAL
baseddcomprehensiondtestdadministereddatdthedconclusiond ofdthedcoursedbydthedCEdProvider.
d
