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TEST BANK FOR FEDERAL TAX RESEARCH 11
TH
EDITION
ROBY B SAWYERS STEVEN GILL ALL CHAPTERS
COVERED QUESTIONS AND ANSWERS GRADED A+
LATEST UPDATE |2025-26|
CHAPTER 1
AN INTRODUCTION TO TAX PRACTICE AND ETHICS
DISCUSSION QUESTIONS
1 - 1. 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 inter- pretation of the taxation statutes, and accountants ensure that these same statutes are applied consistently. Page 4 1 - 2. The other major categories of tax practice in addition to tax research are: tax compliance tax planning tax litigation Page 5 1 - 3. 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 IRS audit. Page 5 1 - 4. Most of the tax compliance work is performed by commercial tax preparers, enrolled agents, attorneys, and CPAs. Noncomplex individual, partnership, and corporate tax returns often are completed by commercial tax preparers. The preparation of more complex returns usually is performed by enrolled agents, attorneys, and CPAs. The latter groups also provide tax planning services and represent their clients before the IRS. An enrolled agent is one who 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.
1 - 11. In addition to Circular 230, CPAs must follow the AICPA's Code of Professional Conduct and Statements on Standards for Tax Services. CPAs must also abide by the rules of the appropriate state board(s) of accountancy. Page 7 1 - 12. A return preparer must obtain 18 hours of continuing education from an IRS-approved CE Provider. The hours must include a 6 credit hour Annual Federal Tax Refresher course (AFTR) that covers filing season issues and tax law updates. The AFTR course must include a knowledge-based comprehension test administered at the conclusion of the course by the CE Provider. Limited practice rights allow individuals to represent clients whose returns they prepared and signed, but only before revenue agents, customer service representatives, and similar IRS employees. Page 10 and IRS.gov 1 - 13. False. Only communication with the IRS concerning a taxpayer's rights, privileges, or liability is included. Practice before the IRS does not include representation before the Tax Court. Page 7 1 - 14. Section 10.2 of Subpart A of Circular 230 defines practice before the IRS as including: matters connected with presentation to the Internal Revenue Service or any of its officers or employees relating to a client's rights, privileges, or liabilities under laws or regulations administered by the Internal Revenue Service. Such presentations include the preparation and filing of necessary documents, correspondence with, and communications to the Internal Revenue Service, and the representation of a client at conferences, hearings, and meetings. Page 7 1 - 15. To become an Enrolled Agent an individual can (1) pass a test given by the IRS or (2) work for the IRS for five years. Circular 230, Subpart A, Secs. 10.4 to 10.6. Page 9 1 - 16. Enrolled Agents must complete 72 hours of Continuing Education every three years (an average of 24 per year, with a minimum of 16 hours during any year.). Circular 230, Subpart A. §10.6. Page 9 1 - 17. True. As a general rule, an individual must be an enrolled agent, attorney, or CPA to represent a client before the IRS. There are limited situations where others may represent a taxpayer; however, this fact pattern is not one of them. Since Leigh did not sign the return, she cannot represent the taxpayer, only Rose can.
Pages 10 - 11 1 - 18. The names of organizations that can be represented by regular full-time employees are found in Circular 230, §10.7(c). A regular full-time employee can represent the employer (individual employer). A regular full-time employee of a partnership may represent the partnership. Also, a regular full-time employee of a trust, receivership, guardianship, or estate may represent the trust, receivership, guardianship, or estate. Furthermore, a regular full-time employee of a governmental unit, agency, or authority may represent the governmental unit, agency, or authority in the course of his or her official duties. Page 10 1 - 19. Yes. Circular 230, Subpart A, Sec. 10.7. Page 10 1 - 20. True. A practitioner may be suspended or disbarred from practice before the IRS if he or she knowingly helps a suspended or disbarred person practice indirectly before the IRS. Page 12 1 - 21. A practitioner may not advise a client to take a position on a document, affidavit, or other paper submitted to the Internal Revenue Service unless the position is not frivolous. Circular 230 §10.34(b) Page 14 1 - 22. Under Circular 230, an attorney, certified public accountant (CPA), or enrolled agent may use mass media (e.g., T.V. and the Internet) for advertising purposes. Such media may not contain false, fraudulent, unduly influencing, coercive, or unfair statements or claims. Attorneys, CPAs, and enrolled agents must also observe any applicable standards of ethical conduct adopted by the American Bar Association (ABA), the American Institute of Certified Public Accountants (AICPA), and the National Association of Enrolled Agents (NAEA). Additional standards and listing of items that may be included in mass media advertising are defined under Section 10.30 of Subpart B in Circular 230. Page 19 1 - 23. Under Section 10.25 of Circular 230, partners of government employees cannot represent anyone for which the government employee-partner has (or has had) official responsibility. For instance, a CPA firm with an IRS agent could not represent any taxpayer that is (or was in the past) assigned to the IRS agent-partner. Page 12 1 - 24. Under Section 10.21 of Circular 230, each attorney, CPA, enrolled agent, or enrolled actuary who knows that the client has not complied with the revenue laws of the United States or has made an error in or omission from any return, document, affidavit, or other
eligible to practice before the IRS (Attorneys, Certified Public Accountants (CPAs), and Enrolled Agents (EAs). Page 11 1 - 30. The AICPA's Code of Professional Conduct provides a philosophical foundation upon which the Rules of Conduct are based. The Principles of the Code of Professional Conduc t suggest that a CPA should strive for behavior that is above the minimal level of acceptable conduct set forth by the rules. The Code was designed to provide the following:
- A comprehensive code of ethics and professional conduct;
- A guide for practitioners in answering complex questions; and,
- Assurance to the public concerning the obligations and responsibilities of the accounting profession. Pages 16 - 17 1 - 31. Threats to complying with the Independence Rule include: Members not acting with objectivity due to an adverse interest Advocacy threats Familiarity threats due to a long or close relationship with a client Management participation threats Self-interest threats Self-review threats Undue influence threats Page 18 1 - 32. In a tax practice the CPA may be requested to blindly follow the guidelines of a government agency or the demands of an audit client. This rule prohibits such blind obedience. The code specifically recognizes that conflicts of interest may arise in tax contexts including providing tax or personal financial planning services for several members of a family whom the member knows to have opposing interests or when referring a personal financial planning or tax client to an insurance broker or other service provider which refers clients to the member under an exclusive arrangement. Page 20 1 - 33. The General Standards Include:
- The CPA must be able to complete all professional services with professional competence.
- The CPA must exercise due professional care in the performance of all professional services.
- The CPA shall adequately plan and supervise the performance of all professional services.
- The CPA must obtain sufficient relevant data to afford a reasonable basis for any conclusion or recommendation in connection with the performance of any professional services. Competence encompasses not only technical subject matter but also knowledge of the profession’s standards and the ability to exercise sound judgment in applying the technical knowledge. At the same time, the code is clear that the member does not assume a responsibility for infallibility of knowledge or judgment Page 21 1 - 34. a. No violation b. 1.520.001- Commissions and Referral Fees c. No violation d. 1.600.001- Advertising and Other Forms of Solicitation e. 1.800.001- Form of Organization and Name Rule f. 2.400.090 or 3.400.090- Acts Discreditable Rule Pages 19- 21 1 - 35. 1.700.001 (Confidential Client Information Rule) does not apply in the following situations:
- There is a conflict with the Compliance with Standards Rule [1.310.001] or the Accounting Principles Rule [1.320.001]
- The CPA is served with an enforceable subpoena or summons or must comply with applicable laws and government regulations
- There is a review of a CPA’s practice under AICPA or state society authorization
- The CPA is responding to an inquiry of an investigative or disciplinary body of a recognized society, or the CPA is initiating a complaint with a disciplinary body Pages 19 - 20 1 - 36. The Statements on Standards for Tax Services , or SSTS, are a series of statements, issued by the AICPA, as to what constitutes appropriate standards for tax practice. The State- ments also delineate a member's responsibility to clients, the public, and the profession. The stated objectives of the Statements are as follows: SSTS No. 1: Tax Return Positions. This statement sets forth the applicable standards for members when recommending tax return positions, or preparing or signing tax returns. This statement also addresses a member’s obligation to advise a taxpayer of relevant tax return disclosure responsibilities and potential penalties. SSTS No. 2: Answers to Questions on Returns. This statement sets forth the applicable standards for members when signing the preparer’s declaration on a tax return if one or more questions on the return have not been answered.
1. The pertinent data are not readily available and are not significant to the determination of taxable income or loss or the resulting tax liability. 2. The taxpayer and the member are genuinely uncertain as to the meaning of the question on the return. 3. An answer is voluminous; however, assurance should be given on the return that the data can be supplied upon request. Page 23 1 - 40. In preparing a return, the member may ordinarily rely upon information that the taxpayer has provided. Although an examination of supporting documents is not required, the member should encourage the taxpayer to provide supporting documents, whenever appropriate. Page 23 1 - 41. A member may prepare tax returns that involve the use of the taxpayer's estimates, if, under the circumstances, it is impractical to obtain exact data and the estimated amounts appear reasonable to the member. Estimates may be appropriate where the keeping of precise records with respect to numerous items of small amounts is difficult to achieve, where data is not available as of the time for filing the return, or certain records are missing. Pages 23 - 24 1 - 42. The selection of the treatment of an item on a tax return should be based upon the facts and the law that is applicable at the time a return is prepared. Unless the taxpayer is bound by the IRS to the treatment of an item in later years, such as by a closing agreement, the disposition of an item in a prior year's audit does not govern the treatment of a similar item in a later year's return. Therefore, a member may sign a return that contains a departure from a treatment that was required by the IRS in a prior year return, provided the standards under SSTS No. 1 are adhered to. Pages 24 - 25 1 - 43. When a member learns of an error in a previously filed tax return, or member becomes aware of an error during an administrative proceeding, he or she must advise the taxpayer promptly. This advice should include a recommendation of the appropriate measures that the taxpayer should take. The member is not obligated to inform the IRS of the error and may not do so without the taxpayer's permission, except as required by law. Page 25 1 - 44. SSTS No. 7. It states that the member must use judgment that reflects professional competence and serves the taxpayer's needs. Page 25
1 - 45. No, tax compliance work for an audit client is allowed. It must be approved by the audit committee of the issuer. Page 27 1 - 46. Neither the ABA Code nor the Model Rules have the force of law. Each was designed to be adopted by the appropriate agencies that govern the practice of law in the various states. In many jurisdictions, the state Supreme Court is charged with policing the practice of law. In other states, the legislature assumes this responsibility. Pages 27 - 28 1 - 47. An ethical dilemma occurs when someone is faced with a situation in which there are no clearly defined answers such as by regulation or law. Page 28 1 - 48. The major types of ethical reasoning are:
- End-based Ethical Reasoning is where the ethical decision is the one that produced the most good for the largest number of people.
- Rule-based Ethical Reasoning was based on German philosopher Immanuel Kant’s idea that individual actions should be such that we would accept similar behavior from everyone else.
- Care-based Ethical Reasoning advises one to make decisions that would result in the treatment you yourself would like to receive. Page 29 1 - 49. Professional ethical behavior is the result of the interaction of personal morality, social responsibility, business ethics, and other general ethical standards. When something is judged to be morally right or wrong (or good or bad), the underlying standards on which such judgments are based are called moral standards. The tax practitioner must be aware of social responsibility in areas such as environmental protection, equal opportunity, and occupational safety. Business ethics examines the moral and ethical problems that arise in a business environment. There is disagreement about whether a company has ethical responsibilities. Other ethical standards may include public policy, religious beliefs, and cultural values. Pages 29 - 31 1 - 50 Ethical issues involved in this case could include morality and business ethics. The moral issue involves the consideration of the “right thing to do” with respect to the plane ticket. The business ethics issues involve maintaining the integrity of the firm. 1 - 51 Unless the firm clearly allows staff to take home supplies (which likely would result in additional income to the staff members), this is clearly not ethical behavior. If Donna
Page l@l 1 - 13 d. Subpart l@lB, l@l§ [email protected]. l@lFees.. l@lDiscussion l@lof l@lprovision l@lthat l@la l@lpractitioner l@lmay l@lnot l@lcharge l@lan l@lunconscionable l@lfee l@lfor l@lrepresenting l@la l@lclient l@lin l@la l@lmatter l@lbefore l@lthe l@lIRS. l@lAlso, l@la l@lpractitioner l@lmay l@lnot l@lcharge l@la l@lcontingent l@lfee l@lfor l@lpreparing l@lan l@loriginal l@lreturn. 1 - 56. Circular l@l 230 a. Subpart l@lB, l@l§ [email protected](b) l@lReliance l@lon l@lothers. l@lExcept l@las l@lmodified l@lby l@l§§10. l@land [email protected], l@la l@lpractitioner l@lwill l@lbe l@lpresumed l@lto l@lhave l@lexercised l@ldue l@ldiligence l@lfor l@lpurposes l@lof l@lthis l@lsection l@lif l@lthe l@lpractitioner l@lrelies l@lon l@lthe l@lwork l@lproduct l@lof l@lanother l@lperson l@land l@lthe l@lpractitioner l@lused l@lreasonable l@lcare l@lin l@lengaging, l@lsupervising, l@ltraining, l@land l@levaluating l@lthe l@lperson, l@ltaking l@lproper l@laccount l@lof l@lthe l@lnature l@lof l@lthe l@lrelationship l@lbetween l@lthe l@lpractitioner l@land l@lthe l@lperson. b. Subpart l@lA, l@l§ [email protected](c)(1)(vi). l@lAn l@lindividual l@lmay l@lrepresent l@lany l@lindividual l@lor l@lentity, l@lwho l@lis l@loutside l@lthe l@lUnited l@lStates, l@lbefore l@lpersonnel l@lof l@lthe l@lInternal l@lRevenue l@lService l@lwhen l@lsuch l@lrepresentation l@ltakes l@lplace l@loutside l@lthe l@lUnited l@lStates. c. Subpart l@lB, l@l§ [email protected]. l@lProhibits l@lassistance l@lfrom l@ldisbarred l@lor l@lsuspended l@lpersons. d. Subpart l@lB, l@l§ [email protected]. l@lDefines l@lstandards l@lfor l@ladvising l@land l@lsigning l@lreturns. Circular l@l 230 1 - 57. a. Subpart l@lB, l@l§ [email protected]. l@lDiscussion l@lof l@ladhering l@lto l@lthe l@lbest l@lpractices l@lin l@lproviding l@ladvice. b. Subpart l@lB, l@l§ [email protected]. l@lProvides l@lstandards l@lon l@l“covered l@lopinions.” c. Subpart l@lB, l@l§ [email protected]. l@lRequires l@lthat l@la l@lfirm l@ltake l@lreasonable l@lsteps l@lto l@ladhere l@lto l@lthe l@l“covered l@lopinions” l@lsection. d. Subpart l@lB, l@l§ [email protected]. l@lDescribes l@lsituations l@lin l@lwhich l@la l@ltax l@lpractitioner l@lshould l@lnot l@lgive l@lwritten l@ladvice. Circular l@l 230 1 - 58. a. Solicitation l@lis l@ldiscussed l@lin l@lSubpart l@lB, l@l§10.30. b. Negotiation l@lof l@la l@ltaxpayer's l@lrefund l@lchecks l@lis l@ldiscussed l@lin l@lSubpart l@lB, l@l§ [email protected]. c. Who l@lmay l@lpractice l@lbefore l@lthe l@lIRS? l@lSubpart l@lA l@l§10. d. Authority l@lto l@ldisbar l@lor l@lsuspend l@lfrom l@lpractice l@lbefore l@lthe l@lInternal l@lRevenue l@lService l@lis l@ldiscussed l@lin l@lSubpart l@lC, l@l§10.50. Circular l@l 230 1 - 59. a. Conflicting l@linterests l@lare l@ldiscussed l@lin l@lSubpart l@lB, l@l§ [email protected]. b. Disreputable l@lconduct l@lis l@ldiscussed l@lin l@lSubpart l@lC, l@l§ [email protected]. c. Assistance l@lfrom l@ldisbarred l@lor l@lsuspended l@lpersons l@lis l@ldiscussed l@lin l@lSubpart l@lB, l@l§ [email protected]. d. Representing l@loneself l@lbefore l@lthe l@lIRS l@lis l@ldiscussed l@lin l@lSubpart l@lA, l@l§ [email protected]. Circular l@l 230 1 - 60. a. Practice l@lof l@llaw l@lis l@lin l@lSubpart l@lB, l@l§ [email protected]. b. Information l@lto l@lbe l@lfurnished l@lis l@lin l@lSubpart l@lB, l@l§ [email protected]. c. Fees l@lare l@lin l@lSubpart l@lB, l@l§ [email protected].
Page l@l 1 - 14 d. Responsibility l@lfor l@lcorrecting l@lerrors? l@lSubpart, l@l§ l @ l 10.21 l@lCircular l@l 230 1 - 61. a. Best l@lPractices l@lare l@ldiscussed l@lin l@lSubpart l@lB, l@l§ [email protected]. b. The l@lreturn l@lof l@lclient’s l@lrecords l@lis l@ldiscussed l@lin l@lSubpart l@lB, l@l§ [email protected]. c. Tax l@lReturn l@lPositions l@lare l@ldiscussed l@lin l@lSubpart l@lB, l@l§ [email protected]. d. Due l@lDiligence l@lis l@ldiscussed l@lin l@lSubpart l@lB, l@l§ [email protected]. Circular l@l 230 1 - 62. a. l@lSSTS l@lNo. l@l1. l@lIn l@lpreparing l@la l@ltax l@lreturn, l@la l@lmember l@lshould l@lhave l@la l@l good-faith l@lbelief l@l that l@la l@lrecommended l@lposition l@lhas l@la l@l realistic l@lpossibility l@l of l@lbeing l@lsustained l@lif l@lchallenged; l@lotherwise l@lsuch l@la l@lposition l@lshould l@lnot l@lbe l@lrecommended l@lby l@lthe l@lmember. b. l@lSSTS l@lNo. l@l4. l@lA l@lmember l@lmay l@lprepare l@ltax l@lreturns l@lthat l@linvolve l@lthe l@luse l@lof l@lthe l@ltaxpayer's l@lestimates l@lif l@lit l@lis l@limpractical l@lto l@lobtain l@lexact l@ldata l@land l@lif l@lthe l@lestimated l@lamounts l@lappear l@lreasonable l@lto l@lthe l@lmember. c. l@lSSTS l@lNo. l@l6. l@lThe l@lmember l@lmust l@ladvise l@lthe l@ltaxpayer l@lpromptly, l@lwhether l@lor l@lnot l@lthe l@lmember l@lprepared l@lor l@lsigned l@lthe l@lreturn l@lin l@lquestion, l@lwhen l@lhe l@lor l@lshe l@llearns l@lof l@lan l@lerror l@lin l@la l@lpreviously l@lfiled l@ltax l@lreturn, l@lan l@lerror l@lin l@la l@lreturn l@lthat l@lis l@lthe l@lsubject l@lof l@lan l@ladministrative l@lproceeding, l@lor l@la l@ltaxpayer’s l@lfailure l@lto l@lfile l@la l@lrequired l@lreturn. l@lHowever, l@lthe l@lmember l@lis l@lneither l@lobligated l@lto l@linform l@lthe l@lIRS l@lof l@lthe l@lsituation, l@lnor l@lmay l@lhe l@lor l@lshe l@ldo l@lso l@lwithout l@lthe l@ltaxpayer's l@lpermission, l@lexcept l@las l@lprovided l@lby l@llaw. Pages l@l 22 - 25 1 - 63. a. l@l Lowell l@lBar l@lAssociation l@lv. l@lLoeb. l@lThe l@lpreparation l@lof l@l"simple" l@ltax l@lreturns l@ldid l@lnot l@lconstitute l@lthe l@lunauthorized l@lpractice l@lof l@lMassachusetts l@llaw l@lbecause l@ltax l@lreturn l@lpreparation l@lcould l@lnot l@lbe l@lidentified l@las l@lstrictly l@lwithin l@lthe l@llegal l@ldiscipline. b. l@l Bercu. l@lThe l@lcourt l@lheld l@lthat l@lBercu l@lcould l@lhave l@lprovided l@ltax l@ladvice l@lif l@lit l@lhad l@lbeen l@lincidental l@lto l@lthe l@ltax l@lreturn l@lwork l@lhe l@lregularly l@lperformed l@lfor l@lhis l@lclients. c. l@l Sperry l@lv. l@lFlorida. l@lThe [email protected]. l@lSupreme l@lCourt l@lheld l@lthat l@la l@lFederal l@lstatute l@lthat l@ladmitted l@lnonattorneys l@lto l@lpractice l@lbefore l@lFederal l@lagencies l@l(in l@lthis l@lcase, l@lthe l@lPatent l@lOffice) l@ltook l@lprecedence l@lover l@lstate l@lregulation, l@lthus l@lCPAs l@land l@lEnrolled l@lAgents l@lwere l@lnot l@lengaged l@lin l@lthe l@lunauthorized l@lpractice l@lof l@llaw l@lwhen l@lthey l@lwere l@lgiving l@ltax l@ladvice. Pages l@l 33 - 34 1 - 64. False. l@lSee l@lCircular l@l230, l@l§10.29. 1 - 65. True. l@lSee l@lCircular l@l230, l@l§10.7. 1 - 66. These l@lfees l@lwould l@lall l@lbe l@lcontingent l@lfees l@lif l@lthe l@lIRS l@lchallenges l@la l@ltax l@lposition. l @ l Under l@lCircular l@l 230 l@l§ [email protected] l @ l A l@lContingent l@lfee l@lis l@lany l@lfee l@lthat l@lis l@lbased, l@lin l@lwhole l@lor l@lin l@lpart, l@lon l@lwhether l@lor l@lnot l@la l@lposition l@ltaken l@lon l@la l@ltax l@lreturn l@lor l@lother l@lfiling l@lavoids l@lchallenge l@lby l@lthe l@lInternal l@lRevenue l@lService l@lor l@lis l@lsustained l@leither l@lby l@lthe l@lInternal l@lRevenue l@lService l@lor l@lin l@llitigation. l@lA l@lcontingent l@lfee l@lincludes l@la l@lfee l@lthat l@lis l@lbased
Page l@l 1 - 16 reported l@lon l@la l@lreturn, l@lthat l@lis l@lbased l@lon l@la l@lpercentage l@lof l@lthe l@ltaxes l@lsaved, l@lor l@lthat l@lotherwise l@ldepends l@lon l@lthe l@lspecific l@lresult l@lattained. Circular l@l 230 1 - 67. Circular l@l230, l@l§ [email protected] l@l(Practice l@lof l@llaw) l@lstates l@lthat, l@l“Nothing l@lin l@lthe l@lregulations l@lin l@lthis l@lpart l@lmay l@lbe l@lconstrued l@las l@lauthorizing l@lpersons l@lnot l@lmembers l@lof l@lthe l@lbar l@lto l@lpractice l@llaw.” Circular l@l 230 1 - 68. d. l@l Under l@lRule [email protected] l@lof l@lthe l@lAICPA l@lCode l@lof l@lConduct, l@lCPAs l@lcannot l@lmake l@lself- l@llaudatory l@lstatements l@lnot l@lbased l@lon l@lverifiable l@lfacts. Page l@l 21 1 - 69. c. l@l See l@lCircular l@l230, l@l§10. 1 - 70. c. l@lUnder l@lRule [email protected] l@lof l@lthe l@lAICPA l@lCode l@lof l@lConduct , l@l CPAs l@lcannot l@lpractice l@lpublic l@laccounting l@lunder l@la l@lfirm l@lname l@lthat l@lis l@lmisleading. l@lA l@lsole l@lpractitioner l@lis l@lnot l@la l@lcompany. l@lThe l@lonly l@lexception l@lis l@lwhen l@la l@lsole l@lpractitioner l@lsurvives l@lthe l@ldeath l@lor l@lwithdrawal l@lof l@lall l@lother l@lpartners l@lor l@lshareholders, l@lhe l@lor l@lshe l@lcan l@lcontinue l@lto l@lpractice l@lunder l@la l@lfirm l@lname l@lfor l@lup l@lto l@ltwo l@lyears l@lafter l@lbecoming l@la l@lsole l@lpractitioner. Page l@l 20 1 - 71. b. l@l SSTS l@lNo. l@l 4 l@lallows l@la l@lmember l@lto l@luse l@lreasonable l@lestimates l@lin l@lthe l@lpreparation l@lof l@la l@ltax l@lreturn. Pages l@l 23 - 24 1 - 72. d. l@l Under l@lRule [email protected] l@lthe l@lAICPA l@lCode l@lof l@lConduct , l@l CPAs l@lare l@lallowed l@lto l@ltake l@lcontingent l@lfees l@lin l@ltax l@lmatters l@lif l@lthey l@lare l@lbased l@lon l@ljudicial l@lproceedings l@lor l@lthe l@lfindings l@lof l@lgovernmental l@lagencies. Page l@l 18 1 - 73. c. l@lUnder l@lRule [email protected] l@lof l@lthe l@lAICPA l@lCode l@lof l@lConduct, l@lCPAs l@lcannot l@lreveal l@lconfidential l@lclient l@linformation l@lwithout l@lthe l@lconsent l@lof l@lthe l@lclient l@lunless l@lit l@lis l@lto l@lan l@linvestigative l@lbody, l@ltrial l@lboard, l@lquality l@lreview l@lbody, l@lor l@lcourt l@lof l@llaw. Pages l@l 19 - 20 1 - 74. a. l@lSSTS l@lNo. l@l 4 l@lrequires l@lmembers l@lto l@ldisclose l@lto l@lthe l@lIRS l@lthe l@luse l@lof l@lestimates l@lwhen l@lfire l@lor l@lcomputer l@lfailure l@lhas l@ldestroyed l@lthe l@lrelevant l@lrecords. Pages l@l 23 - 24 1 - 75. d. l@lUnder l@lSubpart l@lA, l@l§10.7(c)(2)(i) l@lof l@lCircular l@l230, l@lpersons l@lwho l@lare l@ldisbarred l@lor l@lsuspended l@lare l@lnot l@lallowed l@lto l@lpractice l@lbefore l@lthe l@lIRS.
Page l@l 1 - 17 Circular l@l 230 1 - 76. b. l @ l Under l@lSubpart l@lB, l@l§10.21 l@lof l@lCircular l@l 230 , l@l practitioners l@lmust l@lnotify l@lclients l@lof l@lany l@lnoncompliance l@lwith l@lthe l@ltax l@llaw. l@lA l@lsimilar l@lrule l@lis l@lfound l@lin l@lSSTS l@lNo. l@l6. Page l@l 11 1 - 77. a. l@lCircular l@l230, l@lSubpart l@lA, l@l§10.7(a) l@lstates l@lthat l@la l@ltaxpayer l@lcan l@lappear l@lon l@ltheir l@lown l@lbehalf l@lbefore l@lthe l@lIRS. b. 1.520.001 l@lCommissions l@land l@lReferral l@lFees l@lRule c. SSTS l@lNo. l@l 3 l@lCertain l@lProcedural l@lAspects l@lof l@lPreparing l@lReturns d. Under l@lStatement l@lon l@lStandards l@lfor l@lTax l@lService l@l(SSTS) l@lNo. l@l1, l@la l@lmember l@lmust l@lhave l@la l@lgood-faith l@lbelief l@lthat l@la l@lrecommended l@lposition l@lhas l@la l@lrealistic l@lpossibility l@lof l@lbeing l@lsustained l@lif l@lchallenged. Circular l@l230, l@lPages l@l20, l@l22, l@l 24 1 - 78. a. l@lCircular l@l230, l@lSubpart l@lC, l@l§10.51 l@lstates l@lthat l@la l@lpractitioner l@lcan l@lbe l@ldisbarred l@lor l@lsuspended l@lfrom l@lpractice l@lbefore l@lthe l@lIRS l@lfor l@ldisreputable l@lconduct. b. The l@lknowledge l@lof l@lclient l@lomissions l@lrule l@lis l@lfound l@lin l@lCircular l@l230, l@lSubpart l@lB, l@l§10.21. c. 1.400.200 l@lRecords l@lRequests. l@lMembers l@lmust l@lcomply l@lwith l@lthe l@lrules l@land l@lregulations l@lof l@lauthoritative l@lregulatory l@lbodies, l@lsuch l@las l@lthe l@lmember’s l@lstate l@lboard(s) l@lof l@laccountancy, l@lwhen l@lthe l@lmember l@lperforms l@lservices l@lfor l@la l@lclient l@land l@lis l@lsubject l@lto l@lthe l@lrules l@land l@lregulations l@lof l@lsuch l@lregulatory l@lbody. d. SSTS l@lNo. l@l 5 l@lDeparture l@lfrom l@la l@lPosition l@lPreviously l@lConcluded l@lin l@lan l@lAdministrative l@lProceeding l@lor l@lCourt l@lDecision e. Under l@lStatement l@lon l@lStandards l@lfor l@lTax l@lServices l@l(SSTS) l@lNo. l@l7, l@la l@lmember l@lmust l@luse l@ljudgment that l@lreflects l@l professional l@lcompetence l@l and l@lserves l@lthe l@ltaxpayer’s l@lneeds. Circular l@l230, l@lPages l@l 22 - 26 1 - 79. The l@lparts l@lof l@lthe l@lenrolled l@lagent l@lexam l@lare: l@lPart l@l 1 l@l- l@lIndividual l@lIncome l@lTaxes Part l@l 2 l@l- l@lBusinesses Part l@l 3 l@l- l@lRepresentation, l@lPractices, l@lProcedures See [email protected] l@lfor l@lmore l@linformation l@lon l@lthe l@lenrolled l@lagent l@lexam. 1 - 80. The l@lApplication l@lfor l@lEnrollment l@lto l@lPractice l@lBefore l@lthe l@lIRS l@lis l@lForm l@l23. 1 - 81. a. l@lCalifornia- l@lMinimum l@l 3 l@lsemester l@lor l@l 4 l@lquarter l@lunits l@lin l@laccounting l@lethics l@lor l@laccountants’ l@lprofessional l@lresponsibilities b. l@lTexas- l@lThe l@lboard l@lrequires l@lthat l@l 3 l@lpassing l@lsemester l@lhours l@lbe l@learned l@las l@la l@lresult l@lof l@ltaking l@la l@lcourse l@lin l@lethics. c. l@lNorth l@lCarolina- l@lThe l@l 150 l@lsemester l@lhours l@lrequired l@linclude l@la l@lconcentration l@lin l@laccounting, l@las l@ldefined l@lby l@l 21 l@lNCAC l@l08A [email protected], l@land l@l 24 l@lsemester l@lhours l@lof l@lcoursework l@lwhich l@linclude l@lone l@l(1) l@lthree l@l(3) l@lsemester l@lhour l@lcourse l@lfrom l@lat l@lleast l@leight l@l(8) l@lof l@lthe l@lfollowing l@l 10 l@lfields l@lof l@lstudy: l@lcommunications; l@lcomputer l@ltechnology; l@leconomics; l@lethics;
Page l@l 1 - 19 Whether l@lthe l@ltransaction l@lis l@lproposed l@lor l@lcompleted. Pages l@l 47 - 48 2 - 5. The l@lresearcher l@lshould l@lbe l@laware l@lof l@lthe l@lfollowing l@lpitfalls:
- The l@lresearcher l@lmay l@lattempt l@lto l@lresearch l@la l@lproblem l@lbefore l@lfully l@lunderstanding l@lthe l@lfacts l@land l@lcircumstances l@lrelevant l@lto l@lthe l@lclient's l@lsituation.
- Often l@lthe l@lresearcher l@lmay l@lhave l@la l@ltendency l@lto l@lignore l@lnew l@lquestions l@lthat l@larise l@las l@lthe l@lresearch l@ltask l@lprogresses.
- The l@lclient l@lmay l@lfail l@lto l@lprovide l@lall l@lof l@lthe l@linformation l@lthat l@lis l@lvital l@lto l@lan l@laccurate l@lsolution.
- The l@ltax l@lresearcher l@lmay l@lapproach l@la l@ltax l@lproblem l@lwithout l@lconsidering l@lother l@lconstraints l@lon l@lthe l@lsolution l@lto l@lthe l@lproblem, l@lsuch l@las l@leconomic l@lfactors l@lor l@lpersonal l@lpreferences l@lof l@lthe l@lclient. Page l@l 50 2 - 6. a. T l@l(lower l@ltax l@lliability). b. NT l@l(economic l@lconstraints). c. NT l@l(personal l@lpreference). d. NT l@l(personal l@lpreference). e. NT l@l(personal l@lpreference). 2 - 7. a. NT l@l(personal l@lpreference). l@lMight l@lalso l@lbe l@lclassified l@las l@lT, l@lsince l@lthe l@ltaxpayer's l@lmotivation l@lfor l@la l@lpotential l@ltransaction l@lis l@lknown. b. NT l@l(personal l@lpreference) c. NT l@l(family l@lpreference) d. T l@l(lower l@ltax l@lliability) e. T l@l(lower l@ltax l@lliability) Page l@l 50 2 - 8. Research l@lissues l@lcan l@lbe l@ldivided l@linto l@ltwo l@lmajor l@lcategories, l@lnamely, l@lfact l@lissues l@land l@llaw l@lissues. l@lFact l@lissues l@lare l@lconcerned l@lwith l@lproblems l@lsuch l@las l@lthe l@ldates l@lof l@lthe l@ltransactions, l@lthe l@lamounts l@linvolved l@lin l@lan l@lexchange, l@lreasonableness, l@lintent, l@land l@lpurpose. l@lLaw l@lissues l@larise l@lwhen l@lthe l@lfacts l@lare l@lwell l@lestablished, l@lbut l@lit l@lis l@lnot l@lclear l@lwhich l@lportion l@lof l@lthe l@ltax l@llaw l@lapplies. Page l@l 48
Page l@l 1 - 20 2 - 9. The l@llegal l@lconcept l@lof l@l collateral l@lestoppel l@l bars l@lrelitigation l@lon l@lthe l@lsame l@lfacts l@lor l@lthe l@lsame l@lissues. l@lTherefore, l@lthe l@ltax l@lpractitioner l@lmust l@lbe l@lcertain l@lthat l@lhis l@lor l@lher l@lcase l@lis l@lresearched l@lfully l@land l@lno l@lissues l@lhave l@lbeen l@loverlooked. l@lIf l@lan l@lissue l@lis l@lnot l@laddressed l@lin l@lthe l@loriginal l@lcase, l@lit l@lmay l@lbe l@llost l@lforever. Page l@l 49 2 - 10. Tax l@lresearch l@lmay l@lbe l@lspread l@lover l@la l@llengthy l@lperiod l@lof l@ltime. l@lThe l@lresearcher l@lmust l@lbe l@laware l@lof l@lchanges l@lthat l@loccur l@lduring l@lthis l@lperiod l@lwhich l@lmight l@laffect l@lthe l@loutcome l@lof l@lthe l@lresearch. l@lApplicable l@llaw l@lor l@lfacts l@lmight l@lbe l@lsubject l@lto l@lchanges l@lwhich l@lwill l@lcause l@lthe l@lresearcher l@lto l@larrive l@lat l@ldifferent l@lconclusions l@land l@lrecommendations, l@leven l@lconcerning l@lcompleted l@lresearch l@lactivities. Page l@l 52 2 - 11. All l@ltax l@lauthority l@ldoes l@lnot l@lcarry l@lthe l@lsame l@lprecedential l@lvalue. l@lThe l@ltax l@lresearcher l@lmust l@lconsider l@lthe l@lsource l@lof l@lthe l@lauthority, l@lincluding l@lwhether l@lthe l@lsource l@lof l@lauthority l@lis l@la l@lprimary l@lor l@lsecondary l@lsource, l@land l@lthe l@lforce l@lof l@lthe l@lauthority. l@lPrimary l@lauthority l@lcomes l@lfrom l@lstatutory, l@ladministrative, l@land l@ljudicial l@lsources. l@lIn l@lfact, l@lstatutory l@lauthority l@lis l@lthe l@lbasis l@lfor l@lall l@ltax l@lprovisions. Secondary l@lauthority l@lconsists l@lof l@lunofficial l@lsources l@lof l@ltax l@linformation, l@lsuch l@las l@ltax l@ljournal l@larticles, l@ltextbooks, l@land l@lnewsletters. l@lThe l@lresearcher l@lshould l@lbe l@lcautious l@lin l@lrelying l@lupon l@lsecondary l@lauthority l@lwhich l@ldoes l@lnot l@lhave l@lprecedential l@lvalue, l@lbut l@lwhich l@lmay l@lbe l@lof l@lassistance l@lin l@lclarifying l@lor l@lexplaining l@lthe l@lprimary l@lauthority. l@lIn l@laddition, l@lthe l@lresearcher l@lmust l@ltake l@linto l@laccount l@lnew l@lissues l@lthat l@lhave l@ldeveloped l@lsince l@lthe l@ldate l@lof l@lthe l@lauthority. Pages l@l 51 - 52 2 - 12. Statutory l@lsources l@linclude l@lthe l@lConstitution, l@ltax l@ltreaties, l@land l@ltax l@llaws l@lthat l@lhave l@lbeen l@lpassed l@lby l@lCongress. Administrative l@lauthority l@lincludes l@lthe l@lvarious l@lrulings l@lof l@lthe l@lTreasury l@lDepartment l@land l@lthe l@lIRS. l@lJudicial l@lauthority l@lconsists l@lof l@lthe l@lcollected l@lrulings l@lof l@lthe l@lvarious l@lcourts l@lon l@lFederal l@ltax l@lmatters. Pages l@l 52 - 53 2 - 13. a. P b. P c. S d. P e. P Pages l@l 51 - 52 2 - 14. a. P b. P c. P d. S e. S Pages l@l 51 - 52 2 - 15. a. S b. S
