ACCT 401 - Chapter 2

True or false: Open fact transactions are more conducive to tax planning than closed fact transactions.

True

The gross income filing thresholds are calculated as the sum of which of the following criteria? (Check all that apply)

additional deductions for taxpayers age 65 or older standard deduction

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

False

All tax returns are checked for mathematical and tax calculation errors with a process referred to as the program.

Blank 1: document or documentation Blank 2: perfection

Which of the following is NOT governing criteria for tax practitioners?

Generally Accepted Accounting Principles

Which of the following statements regarding tax return extensions are CORRECT? (Check all that apply.)

"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.

When does the statute of limitations generally end for tax noncompliance when fraud is not a factor?

3 years

What is the statute of limitations for tax returns where over 25 percent of gross income has been omitted in a particular tax year?

6 years

Which of the following criteria determine whether an individual must file a tax return? (Check all that apply.)

Age Filing status Gross income

Which of the following statements is correct regarding extensions?

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

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.

Blank 1: final Blank 2: temporary Blank 3: proposed

Which of these penalties is the most common and generally comes in the form of monetary penalties?

Civil

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.

Blank 1: 90, 90-day, or ninety Blank 2: 30, 30-day, or thirty

The due date for filing an individual tax return is 15th (assuming the date does not fall on a holiday or a weekend day).

Blank 1: April

The system assigns a score to each tax return representing the probability the tax liabilities on the return have been underreported. (Enter only one word per blank.)

Blank 1: Discriminant or discriminant Blank 2: Function or function

The discriminant system assigns a score to each tax return representing the probability the tax liabilities on

Blank 1: Discriminant or discriminant Blank 2: Function or functionThe discriminantBlank

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.

Blank 1: Interpretative, Interpretive, or Interpretation Blank 2: Procedural Blank 3: Legislative

The Committee attempts to reconcile the House and Senate versions of a tax bill.

Blank 1: Joint Blank 2: Conference or conference

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

Blank 1: Letter

facts provide opportunities for tax planning, while facts deal with tax compliance.

Blank 1: Open Blank 2: Closed or Close

The highest judicial authority is the U.S. Court followed by the 13 U.S. Circuit Courts of Appeal, the U.S. Court, the U.S. Court of Federal Claims, and the District Court.

Blank 1: Supreme Blank 2: Tax

The is charged with administering and interpreting the tax laws.

Blank 1: Treasury, US, or U.S. Blank 2: Department or Treasury

Tax services that are arranged by Internal Revenue Code Sections are known as tax services.

Blank 1: annotated or annotative

In order to identify issues in the tax research process, the tax preparer should get a good understanding of the . Then, the tax preparer can combine that information with his knowledge of the tax laws.

Blank 1: client's, relevant, taxpayer's, important, clients, or client Blank 2: facts or fact

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

Blank 1: corporations or corporation

There is no statute of limitations for returns or failure to file.

Blank 1: fraud, fraudulent, or fraudulence

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

Blank 1: judicial or court

A question of could involve the interpretation of a particular Code section, while a question of hinges upon the circumstances of the taxpayer's transaction.

Blank 1: law Blank 2: fact or facts

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.

Blank 1: primary Blank 2: 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.

Blank 1: reasonable or substantial Blank 2: basis or authority

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

Blank 1: regulations, regulation, or Treasury regulations

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

Blank 1: rulings or ruling Blank 2: procedures or procedure

Primary sources consist of statutory, administrative, and judicial sources of the law. The source includes committee reports from the House Ways and Means Committee or the Senate Finance Committee.

Blank 1: statutory

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

Blank 1: substantial Blank 2: authority

Tax services that are arranged by topic, such as types of taxable income, are known as tax services.

Blank 1: topical or topic

Which of these penalties may involve incarceration along with monetary penalties?

Criminal

True or false: If an individual taxpayer discovers that he has a balance due on his tax return, but he does NOT have the money to pay the amount, he should file an extension in order to extend the date at which the payment is required to be made.

False Reason: An "extension" only postpones the due date of the tax return. However, the total tax liability must be paid by the original due date (typically April 15th).

Which of the following statements are correct regarding tax filing requirements? (Check all that apply.)

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

True or false: A Joint Conference Committee report is important, but is NOT considered an authority of the tax law when disputing a tax position.

False

True or false: Revenue rulings and revenue procedures are examples of secondary tax authorities.

False

Where does a tax bill originate in the legislative process for enacting a law?

House of Representatives

Which of the following choices is NOT a primary tax authority?

IRS Publication

What is the main statutory tax authority?

Internal Revenue Code

Which of the Treasury regulations represent the understanding that the Treasury Department has of the Internal Revenue Code?

Interpretative

How does the losing party in a trial court decide which U.S. Circuit Court of Appeals will hear the case?

The case must be appealed to the U.S. Circuit Court with jurisdiction over the taxpayer's case (typically based on the taxpayer's residence).

What type of tax authority is the U.S. Constitution, the Internal Revenue Code, and tax treaties?

Legislative

Which type of tax authority is the Internal Revenue Code of 1986?

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?

Primary

Which of the following statements is INCORRECT?

Primary authorities include IRS forms and publications.

Which type of issue will focus on understanding how the various components and circumstances of the transaction affect the research answer and look for authorities with fact patterns similar to the client's?

Question of fact

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.)

Race Gender

Which of the following choices is NOT one of the steps in the tax research process?

Request private letter ruling

Which of the following is NOT one of the basic parts of the internal research memo?

Secondary authorities

Sally has NOT completed her tax return and the due date is approaching. She estimates that she will owe no more than $1,500, but she doesn't have time to finish her return by April 15th. She has decided to file an extension. Which of the following statements describes what she needs to do when filing the extension?

She should send in a $1,500 payment when filing the extension.

Which of the following is NOT a computer initiative that helps the IRS identify tax returns that may have an understated tax liability?

Statistical percentage program

Which of the following are examples of statutes, rules, and criteria that may govern tax practitioners? (Check all that apply.)

Statutes enacted by a CPA's specific state board of accountancy IRS Circular 230 AICPA Statements of Standards for Tax Services AICPA Code of Professional Conduct

What is the gross income threshold for most taxpayers to determine whether a return is required to be filed?

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

Which of the following statements is INCORRECT regarding Treasury regulations?

Temporary regulations carry less authoritative weight than final regulations.

Which of the following statements is correct?

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

Which trial court provides for a jury trial?

The U.S. District Court

Which trial court does NOT require the taxpayer to pay the deficiency before the case is heard?

The U.S. Tax Court

Which trial court has a small claims division for tax liabilities of $50,000 or less?

The U.S. Tax Court

Who has the ultimate authority to interpret the IRC and settle tax disputes?

The judicial system

Which of the following reasons is NOT sufficient for the U.S. Supreme Court to agree to hear a tax case?

The tax issues are not clearly covered in the Internal Revenue Code.

In which of the following situations will a tax preparer likely incur a penalty?

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?

The taxpayer can request an appeals conference.

Which of the following statements does NOT apply to private letter rulings?

They carry the same weight and authority as Treasury regulations.

What audit function does the document perfection program perform?

This program checks the tax return for mathematical and tax calculation errors.

Which of the following primary authorities is NOT a legislative source of authority?

Treasury regulations

To where does a losing party in a trial level court appeal the decision?

U.S. Circuit Court of Appeal

After an appeals court hears a case, which court can the losing party petition to hear the case?

U.S. Supreme Court

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

civil; criminal

During the tax research process, the exercise of attaining and understanding the client's facts and combining those facts with the tax preparer's knowledge of the tax law is referred to as:

identifying the issues

Which of the following lists contains the five basic parts of an internal research memo?

issues, facts, authority list, conclusion, analysis

A ______ is issued in response to a taxpayer request. These requests commonly relate to proposed transactions with potentially large tax implications.

private letter ruling