Tax Chapter 2-

Revenue and revenue are second in administrative authoritative weight after regulations.

rulings, procedures

Which of the following statements regarding tax return extensions are CORRECT? (Check all that apply.) Multiple select question. A six-month extension allows a taxpayer to pay the tax due up to six months after the original due date. Partnerships extensions are granted for up to four months only. "C" Corporations are not granted automatic tax return extensions. "S" Corporations may request an automatic six month extension to file. A six-month extension allows a taxpayer to file a return up to six months after the original due date.

"S" Corporations may request an automatic six month extension to file. A six-month extension allows a taxpayer to file a return up to six months after the original due date.

List the steps in the legislative process to enact a tax law.

1. The bill is discussed in the House Ways and Means Committee and moves to the house of Representatives for a vote.2. The bill is reviewed in the Senate Finance committee for discussion and revisions.3. The revised bill from the Finance Committee passes a vote in the Senate.4. The two versions of teh bill are reconciled in the Joint Conference Committee.5. the bill passes both the House of Representatives and the Senate.6. The bill is signed into law or vetoed by the President.

A(n) _______________-day letter asks the taxpayer to either pay the deficiency or petition the Tax Court to hear the case. A(n) _______________-day letter asks the taxpayer to either pay the deficiency or request an appeals conference with the IRS.

30, 90

What is the statute of limitations for tax returns where over 25 percent of gross income has been omitted in a particular tax year? Multiple choice question. No limit 3 years 10 years 6 years

6 years

Which of the following statements is correct regarding extensions? Multiple choice question. Extensions must be approved by the IRS within two weeks before they are valid. An extension to file will allow a taxpayer extra time to pay his taxes. Extensions for individual returns give the taxpayer four additional months to file. An extension to file is granted automatically at the request of the taxpayer.

An extension to file is granted automatically at the request of the taxpayer.

Which of the following statements is correct regarding extensions? Multiple choice question. Extensions must be approved by the IRS within two weeks before they are valid. Extensions for individual returns give the taxpayer four additional months to file. An extension to file will allow a taxpayer extra time to pay his taxes. An extension to file is granted automatically at the request of the taxpayer.

An extension to file is granted automatically at the request of the taxpayer.

What is the due date for calendar-year corporate income tax returns assuming the date does NOT fall on a Saturday, Sunday or holiday? Multiple choice question. March 15 December 31 January 31 April 15

April 15th

Which of the following statements are correct regarding tax filing requirements? (Check all that apply.) Multiple select question. All trusts must file tax returns regardless of income. Corporations do not have to file tax returns if their net income is less than $400. Estates are required to file income tax returns if their gross income exceeds $600. All corporations must file regardless of income.

Estates are required to file income tax returns if their gross income exceeds $600. All corporations must file regardless of income.

Which of the following criteria determine whether an individual must file a tax return? (Check all that apply.) Multiple select question. Amount of tax withheld Gross income Race Age Filing status Number of dependents

Gross income, filing status, age

Where does a tax bill originate in the legislative process for enacting a law? Multiple choice question. Joint Conference Committee President's office U.S. Senate House of Representatives

House of Representatives

Which of the following choices is NOT a primary tax authority? Multiple choice question. U.S. Tax Court Case IRS Publication Treasury Regulation IRS Revenue Ruling

IRS Publication

Administrative and judicial tax authorities are interpretations of which statutory authority? Multiple choice question. U.S. Constitution Internal Revenue Code Tax treaties Congressional reports

Internal Revenue Code

The understanding that the Treasury Department has of the Internal Revenue Code is represented in Blank______ regulations. Multiple choice question. Legal Legislative Interpretative Procedural

Interpretative

What type of tax authority is the U.S. Constitution, the Internal Revenue Code, and tax treaties? Multiple choice question. Administrative Executive Judicial Legislative

Legislative

Which type of tax authority is the Internal Revenue Code of 1986? Multiple choice question. Secondary Legislative Judicial Administrative

Legislative

What is the due date for calendar-year partnership income tax returns, assuming the date does NOT fall on a Saturday, Sunday or holiday?

March 15

Which of the following choices describes the official sources of the tax law generated by one of the branches of government? Multiple choice question. Main authorities Secondary authorities Primary authorities Editorial authorities

Primary authorities

Which of the following statements is INCORRECT? Multiple choice question. Primary authorities include rulings by the trial courts, appellate courts and the U.S. Supreme Court. Primary authorities come from the legislative, judicial, and executive/administrative branches of government. Primary authorities include the Internal Revenue Code and the Treasury Regulations. Primary authorities include IRS forms and publications.

Primary authorities include IRS forms and publications.

Which of the following taxpayer characteristics are NOT factors in determining whether or not a taxpayer is required to file a tax return? (Check all that apply.) Gross income Race Filing status Gender Age

Race and Gender

Which of the following is NOT a computer initiative that helps the IRS identify tax returns that may have an understated tax liability? Multiple choice question. Document perfection program Information matching program Discriminant function system Statistical percentage program

Statistical percentage program

What is the gross income threshold for most taxpayers to determine whether a return is required to be filed? Multiple choice question. Sum of standard deduction and additional deductions for taxpayers age 65 or older. Sum of standard deductions and additional deductions for taxpayers who are blind. Sum of itemized deductions and additional deductions for taxpayers who are blind. Sum of itemized deductions and additional deductions for taxpayers age 65 or older.

Sum of standard deduction and additional deductions for taxpayers age 65 or older.

Which of the following statements is INCORRECT regarding Treasury regulations? Multiple choice question. Proposed regulations allow public comment on them. Proposed regulations do not carry the same authoritative weight as final regulations. Temporary regulations carry less authoritative weight than final regulations. Final regulations represent the Treasury's interpretation of the Code.

Temporary regulations carry less authoritative weight than final regulations.

Which of the following statements is correct? Multiple choice question. Within its own geographic area, a District Court carries more authoritative weight than the U.S. Tax Court. The U.S. Court of Federal Claims is considered to be a higher authority than the U.S. Tax Court. The Supreme Court and the Internal Revenue Code represent the highest tax-specific authorities in tax law. The Supreme Court, along with the IRC, establishes tax law that is interpreted by the other authorities.

The Supreme Court and the Internal Revenue Code represent the highest tax-specific authorities in tax law.

Which trial court does NOT require the taxpayer to pay the deficiency before the case is heard? Multiple choice question. The U.S. Court of Federal Claims The U.S. Tax Court The U.S. Circuit Court of Appeal The U.S. District Court

The U.S. Tax Court

Who has the ultimate authority to interpret the IRC and settle tax disputes? Multiple choice question. The legislative system The Internal Revenue Service Congress The judicial system

The judicial system

In which of the following situations will a tax preparer likely incur a penalty? Multiple choice question. The tax position is supported by one authority, contradicted by several other authorities, and is not disclosed on the tax return. The tax position is supported by substantial authority and is not disclosed on the tax return. Based on research, it appears there is a 35-40 percent chance that the position will be upheld in an audit or litigation. The position has a reasonable basis for being upheld and is disclosed on the tax return.

The tax position is supported by one authority, contradicted by several other authorities, and is not disclosed on the tax return.

What action does the 30-day letter provide a taxpayer if the taxpayer does NOT agree with an assessment after being audited by the IRS? Multiple choice question. The taxpayer can request an appeals conference. The taxpayer should petition the U.S. Tax Court to hear the case. If there has been an audit, the taxpayer should pay the deficiency. There is no recourse. The taxpayer should file for an Offer in Compromise.

The taxpayer can request an appeals conference.

Match the statute of limitations to the various types of noncompliance.

Three years matches Choice If the taxpayer misreports income (not exceeding 25 percent of gross income) or deductions Six years matches Choice If the taxpayer omits items of gross income that exceed 25 percent of gross income No statute of limitations matches Choice If the taxpayer commits fraud or doesn't file a tax return

Which of the following primary authorities is NOT a legislative source of authority? Multiple choice question. U.S. Constitution Tax treaties Internal Revenue Code Treasury regulations

Treasury regulations

Starting with the court having the highest level of authority, rank the courts in descending order of authoritative rank. Instructions

U.S. Supreme Court. Circuit Courts of Appeal. U.S. Tax Court. U.S. court of Federal Claims. District Courts.

Match which trial court would be the best choice for a taxpayer in the situation described below. Instructions

U.S. Tax Court matches Choice A taxpayer feels very confident in her position and lacks the funds to pay the assessment. U.S. District Court matches Choice The tax return position is low on technical support, but high on emotional appeal. U.S. Court of Federal Claims. matches Choice The taxpayer knows that the Circuit Court of Appeals in the circuit in which she resides has ruled against a similar tax return position in the past.

When will a taxpayer NOT be subject to an underpayment penalty due to noncompliance? Multiple choice question. When there is a reasonable basis for the position taken on the tax return When the amount of the underpayment is less than $1,000 When the underpayment is less than $500 When there was substantial authority that supports the tax return position

When there was substantial authority that supports the tax return position

The gross income filing thresholds are calculated as the sum of which of the following criteria? (Check all that apply.) itemized deductions additional deductions for taxpayers who are blind additional deductions for taxpayers age 65 or older standard deduction

additional deductions for taxpayers age 65 or older standard deduction

Which of these penalties is the most common and generally comes in the form of monetary penalties? Multiple choice question. Criminal Civil Punitive Negligence

civil

Regardless of the level of income, all ___________ must file a tax return annually.

corporations

The IRS can impose both ________________ and _____________ penalties to encourage tax compliance by both tax professionals and taxpayers.

criminal, civil

The ____________ _____________ system assigns a score to each tax return representing the probability the tax liabilities on the return have been underreported.

discriminant function

True or false: Revenue rulings and revenue procedures carry the same authoritative weight as Treasury regulations.

false

Treasury regulations come in three forms: ______________ regulations have been issued in their final form and represent the Treasury's interpretations of the Code; ______________ regulations have a limited life but carry high authoritative weight; and ______________ regulations, which have the lowest authority.

final, temporary, proposed

Starting with the highest authoritative weight, rank the authorities in descending order.

internal revenue code treasury regulations revenue rulings letter rulings

Treasury regulations have different purposes. _________________ regulations represent the Treasury's understanding of the Code. __________________ regulations explain Treasury Department's policies as they relate to administering the Code. And, _______________ regulations are issued when the Treasury Department has been instructed to address an issue in an area of law.

interpretative, procedural, legislative

Our _________________ system has the ultimate authority to interpret the Internal Revenue Code and to settle disputes between the IRS and taxpayers.

judicial

______________ rulings are less authoritative and more specific than revenue rulings and regulations.

letter

The _____________ authorities are official sources of the tax law generated by one of the branches of government. The ________________ authorities are unofficial tax authorities that help explain the law.

primary, secondary

The tax preparer can avoid a penalty if the tax position has at least a(n) _______________ _____________, as long as it is disclosed on the tax return.

reasonable basis

The highest authoritative weight when interpreting the Internal Revenue Code are __________________ issued by the Treasury Department. (Enter only one word per blank.)

regulations

Revenue ___________ address the application of the Code and regulations to a specific factual situation. They provide a much more detailed interpretation of the Code than the regulations as it applies to a specific transaction.

rulings

Tax articles in professional journals and law reviews are examples of _________________ authorities.

secondary

Which of the following choices describes the unofficial tax authorities that interpret and explain the meaning of the various tax laws and regulations? Multiple choice question. Secondary authorities Legal authorities Primary authorities Main authorities

secondary authorities

A taxpayer may NOT be subject to an underpayment penalty if there was _____________________ _____________________ that supports the tax return position.

substantial authority

The IRC imposes a penalty on a tax practitioner for any position that is not supported by _______________ _______________. (Enter only one word per blank.)

substantial authority

The ____________ ____________ is charged with administering and interpreting the tax laws.

treasury department