worksheets

Worksheet I

TAX SERVICE AND DATABASE WORKSHEET

Printed tax services and automated data bases are two of the most important commercial sources of tax information. Both contain substantial editorial information. Some printed tax services also contain the full text of primary sources such as the Internal Revenue Code. Others do not. Some publishers provide supplemental volumes that contain the text of the primary sources such as court cases and revenue rulings. In general, major automated databases contain the full text of primary authorities. The purpose of this exercise is to familiarize you with what leading products contain and how they work. For each of the listed products, answer the following questions.

a. Some products are better at assisting you in your efforts to locate and read primary authority while others are designed to assist you in your efforts to understand the sources. Which is this product's strength?

b. Does this product contain the full text of the Internal Revenue Code, Treasury Regulations, revenue rulings, letter rulings, or court cases? This is not asking whether the product contains summaries of the materials or whether the company separately publishes the materials.

c. If the product does not contain the full text of a primary authority listed above, how would the user find and read that source? The company might publish it separately, or you user might be forced to go to another product.

d. In answering the question, "What is the recovery period for a barn?" using a printed tax service, what heading in the topical index led you to the answer? In automated databases what search words did you use?

e. For the printed services only, is the service organized by topic or code section?

The library also has RIA's Tax Coordinator 2nd series, RIA's United States Tax Reporter, Merten's Law of Federal Income Taxation, and BNA's Tax Management Portfolios in print, but the subscriptions are not current. You are encouraged to become familiar with these products as that are often used in practice. You may use these in connections with assignments, but should be careful to check other sources for current developments.

CCH's Standard Federal Tax Reporter (printed)

Mertens' Law of Federal Income Taxation (automated) This product is only available on a single computer found in the library near the reference desk which is on the main floor. Completing this portion of the assignment is optional.

RIA's CheckPoint (automated)

Lexis-Nexis Academic Universe (automated)

CCH Tax Research Network (automated)

BNATax.com Portfolios Plus (automated)
a.

Worksheet II

BENCHMARK CASE WORKSHEET

Case	Date	Court	Basic Issue	Result
Pollock v. Farmers' Loan and Trust Co., 157 US 429, 3 AFTR 2557, 15 S Ct 912 39 L Ed 759 (example)	1895	Supreme	Whether income tax was constitutional.	Held income tax to be unconstitutional because it is a direct tax and as such must be in proportion to population. Led to 16th amendment.
Eisner v. Myrtle Macomber, 252 US 189, 1 USTC ¶32, 3 AFTR 3020, 40 S Ct 189, 64 L Ed 521
Evelyn F. Gregory v. Helvering, 293 US 465, 35-1 USTC ¶ 9043, 14 AFTR 1191, 79 L Ed 596
George M. Cohan v. CIR, 39 F2d 540, 2 USTC ¶ 489, 8 AFTR 10552 (Also see Sec. 274)
Lucas v. Guy C. Earl, 281 US 111, 2 USTC ¶496, 8 AFTR 10287, 50 S Ct 241, 74 L Ed 731
Helvering v. Paul R. G. Horst, 311 US 112, 40-2 USTC ¶9787, 24 AFTR 1058, 61 SCt 144, 85 L Ed 75
Thomas H. Welch v. Helvering, 290 US 111, 3 USTC ¶1164, 12 AFTR 1456, 54 S Ct 8, 78 L Ed 212
Corn Products v. CIR, 350 US 46, 47 AFTR 1789, 55-2 USTC ¶9746, 76 SCt 20, 100 L Ed 29,

Worksheet III

TAX ETHICS WORKSHEET

Tax accountants are governed by legal, ethical and professional standards. Failure to live up to these standards can result in the loss of clients, legal liability, suspension of rights to practice or even criminal sanctions. But more importantly, an accountant must live with his or her own professional behavior. Below are several different cases which required decisions as to what is permitted or expected. For each situation, indicate what you feel is the appropriate action. In each case, your action should take into consideration existing professional standards, regulatory authority, and court decisions.

Case 1
Anderson, Inc., a client for several years, has again asked you to prepare its tax return. While examining its records you determine that the corporation's bookkeeper made an error in the prior year. A large dividend paid to Anderson, Inc.'s shareholders was charged to interest expense. You did not detect the error last year, and as a result deducted the dividend as interest expense. Would it make a difference if the error were discovered by you during an administrative proceeding?

Case 2
Baker, Inc. a client for several years, is being audited by the IRS. The IRS says it may invalidate the S election you made for Baker. Baker sold stock to a Canadian investor. You were aware of the sale, but did not know that the investor was a Canadian. Baker thinks you should pay the corporate income tax that will result.

Case 3
Crumbley, a client for several years, has employed his daughter in his business since her graduation from high school three years ago. She has received a salary of $22,000 each year. During this year she left home to attend school in Los Angeles. She does come home on vacations and helps out in the business performing various clerical duties when possible. Crumbley states he wants to train her to take over the business and is using her employment to reach that end. He insists that he should be permitted to deduct the salary. In your judgment the salary may well be unreasonable.

Case 4
Davis uses an automobile in his business. Davis does not keep a record of the miles driven, but he estimates that above 75% of the miles driven are business related. Using your knowledge of the business activities you judge the business usage could be as little as 50% but accept this estimate as reasonable. However, you doubt he will be able to support that estimate because of the lack of records. The total automobile expense for the year is $6,253.

Case 5
Evans, your client for years, is starting a new business. She asked you to help her form a new corporation. She also says she thinks it's time she prepared her will and asked you to help her do it.

Case 6
Gardner is an individual who has never used your tax services. However, he saw your recent ad in the newspaper and came to you with a question. His tax work is done by the law firm Dewey, Cheatum and Howe. Howe has advised Gardner that he cannot deduct a fine imposed by the state for violating various fire and safety codes. Howe has also stated that the legal fees paid to Dewey, Cheatum and Howe for their services in defending Gardner are not deductible. What is the implication of offering advice to Gardner? Consider the fact that an attorney is involved. Also, consider the fact that Gardner does not plan to use your services in the future.

Case 7
Howard is a new client. He wishes to deduct education expenses on this tax return. Your research has shown that there are at least a dozen cases that indicate Howard is not entitled to a deduction. Included are Tax Court cases and 11th Circuit Court cases. How many cases, if any, would you have to find in favor of Howard before you would deduct his education expenses?

Case 8
Ingram has been a client for several years. The IRS has examined his return and determined that Ingram owes an additional $2,000 in taxes and interest of $400. I says he isn't going to pay it because he doesn't owe it.

Case 9
James, Inc. is being examined by the IRS. You have been doing the audit and tax work for James, Inc. for about 5 years. The IRS has requested that you turn over your files on James, Inc. for the tax year in question. You object because the information, in your opinion, is privileged.