Before a researcher can analyze the tax consequences of a transaction, he or she must understand the transaction itself. Specifically, the researcher should discuss the details of the transaction with the client to ascertain the client’s motivation. What are the client’s business or financial objectives in undertaking the transaction? What does the client foresee as the desired outcome? What risks has the client identified? By asking these types of questions, the researcher gets to be more acquainted with the non-tax features of the transactions.
The researcher must discover all the facts concerning the client’s transaction. Like a newspaper reporter, the researcher should question the client about the precise "who, when, where, why, and how" of the transaction. The researcher should not assume that the client’s initial summary of the transaction is factually accurate and complete. Perhaps the client hasn’ t determined all the facts that the researcher needs. Or the client may have discounted the significance of certain facts and omitted them from the initial summary. The researcher should encourage the client to be objective in stating the facts. Often, a client unwittingly presents the researcher with the client’s subjective conclusions about the facts rather than with the facts themselves.
When a researcher is working with a client to uncover the relevant facts, the researcher must take into account the level of the client’s tax knowledge. If the client has some knowledge of the tax law, the researcher can ask questions that presume such knowledge. On the other hand, if the client is unsophisticated in tax matters, the researcher should ask only questions that the client can answer without reference to the tax law.