Chapter 2

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

The (1) (2) Committee attempts to reconcile the House and Senate versions of a tax bill.

1. Joint 2. conference

Click and drag on elements in order Starting with the court having the highest level of authority, rank the courts in descending order of authoritative rank.

1. U.S. Supreme Court 2. Circuit Courts of Appeal 3. U.S. Tax Court 4. U.S. court of Federal Claims 5. District Courts

Tax services that are arranged by Internal Revenue Code Sections are known as (1) tax services.

1. annotated

In order to identify issues in the tax research process, the tax preparer should get a good understanding of the (1) (2). Then, the tax preparer can combine that information with his knowledge of the tax laws.

1. client's 2. facts

Regardless of the level of income, all (1) must file a tax return annually.

1. corporation

The IRS can impose both (1) and (2) penalties to encourage tax compliance by both tax professionals and taxpayers.

1. criminal 2. civil

All tax returns are checked for mathematical and tax calculation errors with a process referred to as the (1) (2) program.

1. document 2. perfection

If their gross income exceeds $600, (1) and (2) must file a tax return.

1. estates 2. trusts

Our (1) system has the ultimate authority to interpret the Internal Revenue Code and to settle disputes between the IRS and taxpayers.

1. judicial

Revenue (1) 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.

1. rulings

The IRC imposes a penalty on a tax practitioner for any position that is not supported by (1) (2).

1. substantial 2. authority

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

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

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

Civil

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

Contact IRS

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

Interpretative

Which of the following choices describes the official sources of the tax law generated by one of the branches of government?

Primary authorities

Which of the following statements is INCORRECT?

Primary authorities include IRS forms and publications.

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

issues, facts, authority list, conclusion, analysis

Revenue (1) and revenue (2) are second in administrative authoritative weight after regulations.

1. rulings 2. procedures

The Treasury Department is charged with ______ and ______ the tax laws of the United States.

administering, interpreting

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

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

private letter ruling

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

IRS Publication

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

House of Representatives

The (1) (2) system assigns a score to each tax return representing the probability the tax liabilities on the return have been underreported. (Please only use one word per blank.)

1. Discriminant 2. Function

There is no statute of limitations for (1) returns or failure to file.

1. fraud

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

3 years

Which of the choices below BEST describes the judicial doctrine of stare decisis?

A court will rule consistently with its previous rulings and the rulings of higher courts with appellate jurisdiction.

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: After the trial court's verdict, the losing party has the right to request the U.S. Supreme Court to hear the case.

False

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

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

Filing status Age Gross income

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

Generally Accepted Accounting Principles

What is the main statutory tax authority?

Internal Revenue Code

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

Select all that apply 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 statements is INCORRECT regarding Treasury regulations?

Temporary regulations carry less authoritative weight than final regulations.

Click and drag on elements in order List the five steps in the tax research process in order.

1. understand facts 2. identify issues 3. locate relevant tax authorities 4. analyze tax authorities 5. document and communicate results

Select all that apply 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.

A(n) (1)-day letter asks the taxpayer to either pay the deficiency or petition the Tax Court to hear the case. A(n) (2)-day letter asks the taxpayer to either pay the deficiency or request an appeals conference with the IRS.

1. 90 2. 30

The due date for filing an individual tax return is (1) 15th (assuming the date does not fall on a holiday or a weekend day).

1. April

Click and drag on elements in order Starting with the highest authoritative weight, rank the authorities in descending order.

1. Internal Revenue code 2. Treasury regulations 3. revenue rulings and revenue procedures 4. letter rulings

The highest judicial authority is the U.S. (1) Court followed by the 13 U.S. Circuit Courts of Appeal, the U.S. (2) Court, the U.S. Court of Federal Claims, and the District Court.

1. Supreme 2. Tax

Treasury regulations come in three forms: (1) regulations have been issued in their final form and represent the Treasury's interpretations of the Code; (2) regulations have a limited life but carry high authoritative weight; and (3) regulations, which have the lowest authority.

1. final 2. temporary 3. proposed

Fill in the blanks to complete the sentence. Treasury regulations have different purposes. (1) regulations represent the Treasury's understanding of the Code. (2) regulations explain Treasury Department's policies as they relate to administering the Code. And, (3) regulations are issued when the Treasury Department has been instructed to address an issue in an area of law.

1. interpretative 2. procedural 3. legislative

A question of (1) could involve the interpretation of a particular Code section, while a question of (2) hinges upon the circumstances of the taxpayer's transaction.

1. law 2. fact

(1) rulings are less authoritative and more specific than revenue rulings and regulations.

1. letter

(1) facts have not yet occurred. (2) facts have already occurred.

1. open 2. closed

(1) facts provide opportunities for tax planning, while (2) facts deal with tax compliance.

1. open 2. closed

The (1) authorities are official sources of the tax law generated by one of the branches of government. The (2) authorities are unofficial tax authorities that help explain the law.

1. primary 2. secondary

The tax preparer can avoid a penalty if the tax position has at least a(n) (1) (2), as long as it is disclosed on the tax return.

1. reasonable 2. basis

The highest authoritative weight when interpreting the Internal Revenue Code are (1) issued by the Treasury Department. (Enter only one word per blank.)

1. regulations

Primary sources consist of statutory, administrative, and judicial sources of the law. The (1) source includes committee reports from the House Ways and Means Committee or the Senate Finance Committee.

1. statutory

The U.S. (1) Court agrees to hear only a few tax cases each year. The cases must have great significance to a broad cross-section of taxpayers or settle disagreement among the circuit courts in order to be heard in this court.

1. supreme

Tax services that are arranged by topic, such as types of taxable income, are known as (1) tax services.

1. topical

The (1) (2) is charged with administering and interpreting the tax laws.

1. treasury 2. department

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

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

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

Which of the following statements is correct regarding extensions?

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

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

Legislative

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

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.

What judicial doctrine means that a court will rule consistently with its previous rulings and the rulings of higher courts with appellate jurisdiction?

Stare decisis

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 statements is correct?

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?

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

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).

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.

What action does the 90-day letter provide a taxpayer if the taxpayer does NOT agree with an assessment after being audited by the IRS and participating in the appeals conference?

The taxpayer should petition the U.S. Tax Court to hear the case.

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.

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

Three years: If the taxpayer misreports income (not exceeding 25 percent of gross income) or deductions Six years: If the taxpayer omits items of gross income that exceed 25 percent of gross income No statute of limitations: 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?

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

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

U.S. Tax Court: A taxpayer feels very confident in her position and lacks the funds to pay the assessment. U.S. District Court: The tax return position is low on technical support, but high on emotional appeal. U.S. Court of Federal Claims: 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.