Question

1) The facts must be determined. However, some facts may not have occurred in an open-

fact situation. Where facts have not yet occurred, it is useful to review tax research material to determine

which facts would produce the most favorable outcome.
2) The issues must be determined. The issues may not always be clear and may be different than the
client believes. Thus, only a thorough understanding of the facts permits an adequate formulation of the
issues.
3) Determine which authorities are applicable.
4) Evaluate the authorities. Choose the ones to follow when there are conflicting authorities.
5) Communicate the result to the client. The communication with the client should not result in a
misunderstanding. While discussions with the client may be suitable, it is recommended by the AICPA's
Statements on Standards for Tax Services that the communication be written where issues are important,
unusual or complicated. Many firms require that conclusions be communicated in writing.

Answer 1

Tax research involves identifying factual bases, tax issues, applicable authorities, evaluating these authorities, and clear communication with the client. Taxes are expected to be equitable, simple, and efficient, with current issues centered around complexity and high rates. Political influences often shape tax laws, leading to yearly changes.

Step-by-step explanation:

The process of tax research involves several steps to ensure that the most favorable outcome is achieved for the client while adhering to tax requirements and principles. First, establishing a factual base is essential, followed by accurately identifying the tax issues. Subsequently, the applicable tax authorities must be determined, and their guidance evaluated, especially when they are conflicting. Finally, the results are to be communicated clearly to the client, with a recommendation that in complex situations, written communication is used for clarity and to meet the AICPA's Statements on Standards for Tax Services.

Taxes should be equitable, simple, and efficient to gain public understanding and acceptance. Historical and current tax issues show that the public often perceives taxes as overly complex and high, which influences calls for reform, such as value-added taxes or flat taxes. The Internal Revenue Service is the main body responsible for assessing federal income taxes, while the political landscape frequently affects tax laws.