Question

Explain the difference between closed-fact and open-fact situations.

A. In a closed-fact situation, the facts have not yet occurred, and the tax advisor's task is to plan them or shape them into a favorable tax result. In an open-fact situation, the facts have occurred, and the tax advisor's task is to analyze them to determine the appropriate tax treatment.
B. In a closed-fact situation, the facts have occurred, and the tax advisor's task is to analyze them to determine the appropriate tax treatment. In an open-fact situation, the facts have not yet occurred, and the tax advisor's task is to plan them or shape them into a favorable tax result.
C. In a closed-fact situation, the facts have occurred, and the tax advisor's task is to plan or shape the facts into a favorable tax result. In an open-fact situation, the facts have not yet occurred, and the tax advisor's task is to analyze them to determine the appropriate tax treatment.
D. None of the above.

Answer 1

In a closed-fact situation, the facts have occurred and the tax advisor analyzes them. In an open-fact situation, the facts have not yet occurred, and the tax advisor plans or shapes them.

Step-by-step explanation:

In a closed-fact situation, the facts have occurred, and the tax advisor's task is to analyze them to determine the appropriate tax treatment. For example, a tax advisor may analyze financial records of a company to determine the amount of taxable income.

In an open-fact situation, the facts have not yet occurred, and the tax advisor's task is to plan or shape them into a favorable tax result. For instance, a tax advisor may work with a client to structure a business transaction in a way that minimizes tax liabilities.

Therefore, the correct answer is option C: In a closed-fact situation, the facts have occurred, and the tax advisor's task is to plan or shape the facts into a favorable tax result.

In an open-fact situation, the facts have not yet occurred, and the tax advisor's task is to analyze them to determine the appropriate tax treatment.