Solution Manual for Prentice Hall's Federal Taxation 2013 Individuals, 26th Edition

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C:1-1Chapter C:1Tax ResearchDiscussion QuestionsC:1-1In a closed-fact situation, the facts have occurred, and the tax advisor’s task is to analyzethem to determine the appropriate tax treatment. In an open-fact situation, by contrast, the facts havenot yet occurred, and the tax advisor’s task is to plan for them or shape them so as to produce afavorable tax result. p. C:1-2.C:1-2According to the AICPA’sStatements on Standards for Tax Services, the tax practitionerowes the client the following duties:(1) to inform the client of (a) the potential adverseconsequences of a tax return position, (b) how the client can avoid a penalty through disclosure,(c)errors in a previously filed tax return, and (d) corrective measures to be taken; (2) to inquire ofthe client (a)when the client must satisfy conditions to take a deduction and (b) when informationprovided by him or her appears incorrect, incomplete, or inconsistent on its face; and (3) not todisclose tax-related errors without the client’s consent. pp. C:1-32 through C:1-35.C:1-3When tax advisors speak about“tax law,”they refer to the IRC as elaborated by TreasuryRegulations and administrative pronouncements and as interpreted by federal courts. The term alsoincludes the meaning conveyed by committee reports. p. C:1-7.C:1-4Committee reports concerning tax legislation explain the purpose behind Congress’proposing the legislation.Transcripts of hearings reproduce the testimonies of the persons whospoke for or against the proposed legislation before the Congressional committees.Committeereports are sometimes used to interpret the statute. p. C:1-7.C:1-5Committee reports can help resolve ambiguities in statutory language by revealingCongressional intent. They are indicative of this intent. pp. C:1-7 and C:1-8.C:1-6The Internal Revenue Code of 1986 is updated for every statutory change to Title 26subsequent to 1986. Therefore, it includes the post-1986 tax law changes enacted by Congress andtoday reflects the current state of the law. p. C:1-8.C:1-7No. Title 26 deals with all taxation matters, not just income taxation. It covers estate tax,gift tax, employment tax, alcohol and tobacco tax, and excise tax matters. p. C:1-8.C:1-8a.Subsection (c).It discusses the tax treatment of property distributions in general(e.g., amount taxable,amountapplied against basis, and amount exceeding basis).b.Because Sec. 301 applies to the entire chapter, one should look throughout that entirechapter (Chapter 1of the IRC–which covers Sec. 1 through Sec.1400U-3) for any exceptions. Onespecial rule–Sec. 301(e)–is found in Sec. 301. This special rule explains the tax treatment ofdividends received by a 20% corporate taxpayer. Section 301(f) indicates some of the importantspecial rules found in other IRC sections.

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