FederalTaxResearch(12th Edition)
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Roby Sawyers,Steven Gill study guide
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DISCUSSION QUESTIONSte
,Federal Tax Research, 11th Edition Page 1-1
CHAPTER 1 te
AN INTRODUCTION TO TAX PRACTICE AND ETHICS
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DISCUSSIONteQUESTIONS
1-1.
IntetheteUnitedteStates,tethetetaxtesystemteisteanteoutgrowthteoftethetefollowingtefivetediscipline
s:telaw,teaccounting,teeconomics,tepoliticaltescience,teandtesociology.teTheteenvironmenttefortetheteta
xtesystemteispte rovidedtebytetheteprinciplesteofteeconomics,tesociology,teandtepoliticaltescience,tewhilet
ethetelegalteandteaccountingtefieldsteareteresponsibleteforte thetesystem'steinterpretationte andteapplicati
on.
Eachteoftethesetedisciplinesteaffectstethistecountry'stetaxtesystemteinteateuniqueteway.teEconomiststeaddres
stse uchteissuesteastehowteproposedtetaxtelegislationtewillteaffecttetheterateteofteinflationteorteeconomictegrowt
h.tM e easurementteoftethetesocialteequityteofteatetax,teandtedeterminingtewhetherteatetaxtesystemtediscrimina
testeagainsttecertaintetaxpayers,teareteissuestethatteareteexaminedtebytesociologiststeandtepoliticaltescientis
ts.teFinally,teattorneysteareteresponsibletefortetheteinterpretationteoftethetetaxationtestatutes,teandteaccount
antstee nsuretethattethesetesametestatutesteareteappliedteconsistently.
Pagete4
1-2. Theteothertemajortecategoriesteoftetaxtepracticeteinteadditiontetotetaxteresearchteare:
• taxtecompliance
• taxteplanning
• taxtelitigatio
nP
te agete5
1-3.
Taxtecomplianceteconsiststeoftegatheringtepertinentteinformation,teevaluatingteandteclassifyingtet
hatteinformation,teandtefilingteanytenecessarytetaxtereturns.teCompliancetealsoteincludesteothertefunction
stenecessarytetotesatisfytegovernmentalterequirements,tesuchteasterepresentingteateclientteduringteanteIRSte
audit.
Pagete5
1-4.
Mostteoftethetetaxtecomplianceteworkteisteperformedtebytecommercialtetaxtepreparers,teenrolled
teagents,teattorneys,teandteCPAs.teNoncomplexteindividual,tepartnership,teandtecorporatetetaxtereturns
teoftentearetecompletedtebytecommercialtetaxtepreparers.teThetepreparationteoftemoretecomplextereturn
steusuallyteisteperformedtebyteenrolledteagents,teattorneys,teandteCPAs.teThetelattertegroupstealsoteprov
idetetaxteplanningtse ervicesteandterepresenttetheirteclientstebeforetetheteIRS.
AnteenrolledteagentteisteonetewhoteisteadmittedtetotepracticetebeforetetheteIRStebytepassingteatespecialteIRS-
teadministeredteexamination,teortewhotehasteworkedtefortetheteIRStefortefiveteyears,teandteisteissuedteateper
mittetotre epresentteclientstebeforetetheteIRS.teCPAsteandteattorneystearetenotterequiredtetotetaketethisteexamin
ationteandtae reteautomaticallyteadmittedtetotepracticetebeforetetheteIRSteiftetheyteareteintegoodtestandingtewit
htetheteappropriateteprofessionaltelicensingteboard.
Pagete5teandteCircularte230
,Page 1-2 SOLUTIONS MANUAL
1-5.
Taxteplanningteistetheteprocessteoftearrangingteone'stefinancialteaffairstetoteminimizeteanytetaxteliabi
lity.teMuchote ftemoderntetaxtepracticetecenterstearoundtethisteprocess,teandtetheteresultingteoutcometeistetaxte
avoidance.
Thereteistenothingteillegalteorteimmoralteintetheteavoidanceteoftetaxation,teastelongteastethetetaxpayerteremai
nstewithintelegaltebounds.teIntecontrast,tetaxteevasionteconstitutestetheteillegaltenonpaymentteofteatetaxteandt
ecannottbe etecondoned.teActivitiesteoftethistesortteclearlyteviolateteexistingtelegalteconstraintsteandtefallteout
sideteoftethetedomainteoftetheteprofessionaltetaxtepractitioner.
Pagete6
1-6.
Inteanteopentetaxteplanningtesituation,tethetetransactionteistenotteyettecomplete,tetherefore,tethetetaxte
practitionerm te aintainstesometedegreeteoftecontrolteovertethetepotentialtetaxteliability,teandtethetetransaction
temaytebetemodi-
tf
e iedtetoteachieveteatemoretefavorabletetaxtetreatment.teInteateclosedtetransactiontehowever,teallteoftetheteperti
nenttae ctionstehavetebeentecompleted,teandtetaxteplanningteactivitiestemaytebetelimitedtetotethetepresentatio
nteoftethetesituationtetotethetegovernmentteintethetemosttelegallyteadvantageoustemannerte possible.
Pagete6
1-7.
TaxtelitigationteistetheteprocessteoftesettlingteatedisputetewithtetheteIRSteinteatecourtteoftelaw.teTypi
cally,teatetaxate ttorneytehandlestetaxtelitigationtethatteprogressestebeyondtethetefinalteIRSteappeal.
Pagete6
1-8. CPAsteserveteisteatesupporttecapacityteintetaxtelitigation.
Pagete6
1-9.
Taxteresearchteconsiststeoftetheteresolutionteofteunansweredtetaxationtequestions.te Thetetaxteresear
chteprocessite ncludestethetefollowing:
1. Identificationteoftepertinentteissues;
2. Specificationteofteproperteauthorities;
3. Evaluationteoftetheteproprietyteofteauthorities;teand,
4. Applicationteofteauthoritiestetoteatespecifictesituation.
Pagete6
1-10.
Circularte230teisteissuedtebytetheteTreasuryteDepartmentteandteappliestetotealltewhotepracticetebefo
retetheteIRS.P
te agete7
1-11.
InteadditiontetoteCircularte230,teCPAstemusttefollowtetheteAICPA'steCodeteofteProfessionalteCo
nductteandteStatementsteonteStandardsteforteTaxteServices.teCPAstemusttealsoteabidetebytetheterulesteoftet
heteappropriatetse tateteboard(s)teofteaccountancy.
Pagete7
1-12. Atereturntepreparertemustteobtainte18tehoursteoftecontinuingteeducationtefromteanteIRS-
approvedteCEteProvider.teThetehourstemustteincludeteate6tecredittehourteAnnualteFederalteTaxteRefresherte
coursete(AFTR)tethattecoverstefilingteseasonteissuesteandtetaxtelawteupdates.teTheteAFTRtecoursetemusttein
cludeteateknowledge-
, Federal Tax Research, 11th Edition Page 1-3
bte asedtecomprehensiontetestteadministeredteattetheteconclusionteoftethetecoursetebytetheteCEteProvider.
Limitedtepracticeterightsteallowteindividualstetoterepresentteclientstewhosetereturnstetheytepreparedtean
dtse igned,tebutteonlytebeforeterevenueteagents,tecustomerteserviceterepresentatives,teandtesimilarteIRSte
employees.
