FederalTaxResearch
f f
th
(13 Edition)
f f
Roby Sawyers, f
Steven Gill
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Study Guide f
,Federal fTax fResearch, f11th fEdition Page f1-1
CHAPTER 1 f
AN INTRODUCTION TO TAX PRACTICE AND ETHICS
f f f f f f
DISCUSSION QUESTIONS f
1-1. In fthe fUnited fStates, fthe ftax fsystem fis fan foutgrowth fof fthe ffollowing ffive fdisciplines: flaw,
faccounting, feconomics, fpolitical fscience, fand fsociology. fThe fenvironment ffor fthe ftax fsystem fis
fprovided fby fthe fprinciples fof feconomics, fsociology, fand fpolitical fscience, fwhile fthe flegal fand
faccounting ffields fare fresponsible ffor f the fsystem's finterpretation f and fapplication.
Each fof fthese fdisciplines faffects fthis fcountry's ftax fsystem fin fa funique fway. fEconomists faddress
fsuch fissues fas fhow fproposed ftax flegislation fwill faffect fthe frate fof finflation f or f economic fgrowth.
fMeasurement fof fthe fsocial fequity fof fa ftax, fand fdetermining fwhether fa ftax fsystem fdiscriminates
fagainst fcertain ftaxpayers, fare fissues fthat fare fexamined fby fsociologists fand fpolitical fscientists.
fFinally, fattorneys fare fresponsible ffor fthe finterpretation fof fthe ftaxation fstatutes, fand faccountants
fensure fthat fthese fsame fstatutes fare fapplied fconsistently.
Page f4
1-2. The fother fmajor f categories fof ftax fpractice fin faddition fto ftax fresearch fare:
tax fcompliance
tax fplanning
tax flitigation
Page f5
f
1-3. Tax fcompliance fconsists fof fgathering fpertinent finformation, fevaluating fand fclassifying fthat
finformation, fand ffiling fany fnecessary ftax freturns. fCompliance falso fincludes fother ffunctions
fnecessaryfto fsatisfy fgovernmental frequirements, fsuch fas frepresenting fa fclient fduring fan fIRS faudit.
Page f5
1-4. Most fof fthe ftax fcompliance fwork fis fperformed fby fcommercial ftax fpreparers, fenrolled fagents,
fattorneys, fand fCPAs. fNoncomplex findividual, fpartnership, fand fcorporate ftax freturns foften fare
fcompleted fby fcommercial ftax fpreparers. fThe fpreparation fof f more fcomplex freturns fusually fis
fperformed fby fenrolled fagents, fattorneys, fand fCPAs. fThe flatter fgroups falso fprovide ftax fplanning
fservices fand frepresent ftheir fclients fbefore fthe fIRS.
An fenrolled fagent fis fone fwho fis fadmitted fto fpractice fbefore fthe fIRS f by fpassing fa fspecial fIRS-
fadministered fexamination, for fwho fhas fworked ffor fthe fIRS ffor ffive f years, fand fis fissued fa fpermit fto
fr epresent fclients fbefore fthe fIRS. f CPAs fand fattorneys fare fnot frequired fto ftake fthis fexamination fand
fare fautomatically fadmitted fto fpractice fbefore fthe fIRS fif fthey fare fin fgood fstanding fwith fthe
fappropriate fprofessional flicensing fboard.
Page f5 fand fCircular f 230
,Page f1-2 SOLUTIONS fMANUAL
1-5. Tax fplanning fis fthe fprocess fof farranging fone's ffinancial faffairs fto fminimize fanyftax fliability. f Much
fof fmodern ftax fpractice fcenters faround fthis fprocess, f and fthe fresulting foutcome fis ftax favoidance.
There fis fnothing fillegal for fimmoral fin fthe favoidance fof ftaxation, fas flong fas fthe ftaxpayer fremains
fwithin flegal fbounds. fIn fcontrast, ftax fevasion fconstitutes fthe fillegal fnonpayment fof fa ftax fand fcannot
fbe f condoned. fActivities fof fthis fsort fclearly fviolate fexisting flegal fconstraints fand ffall foutside fof fthe
fdomain fof fthe fprofessional ftax fpractitioner.
Page f6
1-6. In fan fopen ftax fplanning fsituation, fthe ftransaction fis fnot fyet fcomplete, ftherefore, fthe ftax fpractitioner
fmaintains fsome fdegree fof fcontrol fover fthe fpotential ftax fliability, fand fthe ftransaction fmay f be fmodi-
ffied fto fachieve fa fmore ffavorable ftax ftreatment. fIn fa fclosed ftransaction fhowever, fall fof fthe fpertinent
factions fhave fbeen fcompleted, fand ftax fplanning factivities fmay fbe flimited fto fthe fpresentation fof fthe
fsituation fto fthe fgovernment fin fthe fmost flegallyfadvantageous f manner f possible.
Page f6
1-7. Tax flitigation fis fthe fprocess f of fsettling fa fdispute fwith fthe fIRS fin fa fcourt fof flaw. fTypically, f a ftax
fattorney fhandles ftax flitigation fthat fprogresses fbeyond fthe ffinal fIRS fappeal.
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1-8. CPAs fserve fis fa fsupport fcapacityfin ftax flitigation.
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1-9. Tax fresearch fconsists fof fthe fresolution fof funanswered ftaxation fquestions. f The ftax fresearch fprocess
fincludes fthe ffollowing:
1. Identification foffpertinent fissues;
2. Specification f of fproper fauthorities;
3. Evaluation f of fthe fproprietyfof fauthorities; fand,
4. Application fof fauthorities fto fa fspecific fsituation.
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1-10. Circular f230 fis fissued fbyfthe fTreasuryfDepartment fand fapplies fto fall fwho fpractice fbefore fthe fIRS.
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f
1-11. In faddition fto fCircular f230, fCPAs fmust ffollow fthe fAICPA's fCode fof fProfessional fConduct fand
fStatements fon fStandards ffor fTax fServices. f CPAs fmust falso fabide fby fthe frules fof fthe fappropriate
fstate fboard(s) fof faccountancy.
Page f7
1-12. A freturn fpreparer fmust fobtain f18 fhours fof fcontinuing feducation ffrom fan fIRS-approved fCE
fProvider. fThe fhours fmust finclude fa f6 fcredit fhour fAnnual fFederal fTax fRefresher fcourse f(AFTR)
fthat fcovers ffiling fseason fissues fand ftax flaw fupdates. fThe fAFTR fcourse fmust finclude fa fknowledge-
fbased fcomprehension ftest fadministered fat fthe fconclusion f of fthe fcourse fbyfthe fCE f Provider.
Limited fpractice frights fallow findividuals fto frepresent fclients fwhose freturns ftheyfprepared fand
fsigned, fbut fonly fbefore frevenue fagents, fcustomer fservice frepresentatives, fand fsimilar fIRS
femployees.
, Federal fTax fResearch, f11th fEdition Page f1-3
Page f10 fand fIRS.gov
1-13. False. fOnly fcommunication fwith fthe fIRS fconcerning fa ftaxpayer's frights, fprivileges, for fliability fis
fincluded. fPractice fbefore fthe fIRS fdoes fnot finclude frepresentation fbefore fthe fTax fCourt.
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1-14. Section f 10.2 fof fSubpart f A fof fCircular f 230 fdefines fpractice fbefore fthe fIRS fas fincluding:
matters fconnected fwith fpresentation fto fthe fInternal fRevenue fService for fany f of fits fofficers
for femployees frelating fto fa fclient's frights, fprivileges, for fliabilities funder flaws for
fregulations fadministered fby fthe fInternal fRevenue fService. fSuch fpresentations finclude fthe
fpreparation fand ffiling fof fnecessary fdocuments, fcorrespondence f with, fand
fcommunications fto fthe fInternal fRevenue fService, fand fthe frepresentation fof fa fclient fat
fconferences, fhearings, fand fmeetings.
Page f7
1-15. To fbecome fan fEnrolled fAgent fan findividual fcan f(1) fpass fa ftest fgiven fbyfthe fIRS for f (2) fwork ffor
fthe fIRS ffor f five f years. fCircular f230, f Subpart f A, f Secs. f 10.4 fto f10.6.
Page f9
1-16. Enrolled fAgents fmust f complete f72 fhours fof fContinuing fEducation f everyfthree fyears f(an faverage fof
f24 fper f year, fwith fa fminimum fof f16 fhours fduring fany fyear.). fCircular f230, fSubpart fA. f§10.6.
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1-17. True. fAs fa fgeneral frule, fan findividual fmust fbe fan fenrolled fagent, fattorney, for fCPA fto frepresent fa
fclient fbefore fthe fIRS. fThere fare flimited fsituations fwhere fothers fmay frepresent fa ftaxpayer;
fhowever, fthis ffact fpattern fis fnot fone fof fthem. fSince fLeigh fdid fnot fsign fthe freturn, fshe fcannot
frepresent fthe ftaxpayer, f onlyfRose fcan.
Pages f10-11
1-18. The fnames fof f organizations fthat fcan fbe frepresented fby fregular ffull-time femployees fare ffound fin
fCircular f230, f§10.7(c). fA fregular ffull-time femployee fcan frepresent fthe femployer f(individual
femployer). fA fregular ffull-time femployee f of fa fpartnership fmay frepresent fthe fpartnership. fAlso, fa
fregular ffull-time femployee fof fa ftrust, freceivership, fguardianship, for festate fmay frepresent fthe ftrust,
freceivership, fguardianship, for festate. fFurthermore, fa fregular ffull-time femployee fof fa fgovernmental
funit, fagency, for fauthority fmay frepresent fthe fgovernmental funit, fagency, for fauthority fin fthe fcourse
fof fhis for fher f official fduties.
Page f10
1-19. Yes. fCircular f230, fSubpart fA, fSec. f10.7.
Page f10
1-20. True. fA fpractitioner fmay f be fsuspended for fdisbarred ffrom fpractice fbefore fthe fIRS fif fhe for fshe
fknowingly fhelps fa f suspended for fdisbarred fperson f practice findirectly fbefore fthe fIRS.
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