Exam Review

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An appeal from any of the Circuit Courts of Appeals is to the: a. U.S. District Court. b. U.S. Court of Federal Claims. c. Court of Appeals for the Federal Circuit. d. U.S. Supreme Court.

An effective speaker should: a. not be afraid of silence. b. get physically close to the audience. c. vary the pitch of his or her voice. d. all of the above.

An individual who is convicted of willfully aiding or assisting in the preparation of a false return is subject to which of the following penalties? a. Imprisonment up to 2 years and /or fine that cannot exceed $10,000. b. Imprisonment up to 5 years and /or fine that cannot exceed $50,000. c. Imprisonment up to 10 years and/or fine that cannot exceed $15,000. d. Imprisonment up to 3 years and/or fine that cannot exceed $100,000.

An office examination is scheduled when a selected return for examination: a. belongs to a taxpayer who was previously found guilty of manipulating return b. belongs to a taxpayer who resides near to the IRS local office c. requires a mere verification of record-keeping d. involves one or more issues that will require some analysis and the exercise of the IRS personnel's judgment

By far the most common form of substantive communication between the tax professional and his or her client is a: a. File Memo. b. text message. c. tax-oriented blog. d. telephone call or e-mail.

Effective written business communication often makes use of which of the following guidelines? a. The main point should be in the first paragraph. b. Use clichés and trendy jargons to add interest to your communications. c. Follow the 10-80-10 rules for structure of the communication. d. Only (a) and (c).

If a taxpayer fails to file return due to willful neglect, the minimum penalty is: a. 25 percent or 5 months cumulative penalty b. lesser of $ 125 or the full amount of taxes that are required to be shown on the return c. 15 percent monthly penalty d. lesser of $135 or the full amount of taxes that are required to be shown on the return

In client files, a practitioner should include all of the following types of underlying legal authority except? a. Underlined or highlighted portions of important legal documents. b. Case, regulation, and ruling briefs that are pertinent to the file memo. c. A listing of legal citations and computer files that would show a researcher's analysis. d. All of the above information should be included in a client file.

In the House of Representatives, tax law changes are primarily considered by: a. the Finance Committee b. the Joint Conference Committee c. the Budget Committee d. the Ways and Means Committee

In which of the following cases does a taxpayer hold the right to refuse to answer inquiries that are made by the IRS in a criminal setting? a. The taxpayer would suffer a monetary loss by answering a criminal inquiry. b. The nature of crime is not severe. c. The taxpayer is confident to obtain a conviction. d. The taxpayer would suffer a loss of some constitutional right by answering a criminal inquiry.

Initial determinations of the facts of a tax issue are likely to be incomplete because: a. taxpayers tend to see the dispute only from their side. b. taxpayers not being trained in the tax law may be unable to determine which facts are important to convey. c. fact-gathering often depends on the reliability of the memory of taxpayers. d. all of the above.

Investing in non-dividend paying stock that is expected to appreciate yearly by 5 percent instead of investing in 5 percent corporate bonds is an example of tax planning by: a. spreading income through portfolio diversification. b. avoiding income recognition. c. changing the timing of recognition of taxable income. d. changing the character of income

Jane owns land adjacent to her home that appreciated in value by $5,000 this year. She acquired the land five years ago for $25,000. Based on these facts alone, the amount that would be included in her taxable income for the current year is: a. $30,000 b. $25,000 c. $5,000 d. $0

Tax Court Memorandum decisions can be located in which of the following reporters? a. USTC b. AFTR2d c. the Tax Court of the United States Reports (T.C.) d. None of the above

Temporary Regulations expire: a. After an IRS hearing on the regulations. b. At the end of the public comment period. c. Five years after issuance pursuant to the statute. d. Three years after issuance pursuant to the statute. e. Temporary regulations never expire

The IRS Oversight Board: a. Has the authority to affect tax policy. b. Has the authority to affect the processing of individual tax cases. c. Can intervene in IRS personnel or procurement matters. d. Can review and approve the IRS annual budget request.

The Tax Court will review a taxpayer's case, provided that he or she files a petition with the court within: a. 10 days of the date of his or her statutory notice of deficiency b. 60 days of the date of his or her statutory notice of deficiency c. 30 days of the date of his or her statutory notice of deficiency d. 90 days of the date of his or her statutory notice of deficiency

The audience for tax research communication is primarily: a. IRS officials. b. the practitioner's supervisor. c. the client. d. Both (b) and (c).

The civil fraud penalty is: a. 5% b. 20% c. 25% d. 75%

The highest ranking legal adviser of the IRS is the: a. Attorney General b. Chief Attorney c. District Attorney d. Chief Counsel

The overriding purpose of tax treaties is to: a. create 'tax havens' b. minimize tax liability of multinational corporations c. require business taxpayers to file returns in all countries in which they operate d. eliminate the 'double taxation' that a taxpayer would face if his or her income were subject to tax in both countries

The period for filing a claim for refund is extended when overpayment results from: a. Overstatement of incomes in the income statement. b. Ignorance of tax laws on the part of return preparers. c. Negligence on the part of return preparer while filing returns. d. Carryback of a net operating loss, capital loss or certain credits.

A statutory notice of deficiency is also known as a: a. 30-day letter b. 10-day letter c. 90-day letter d. 21-day letter

A tax return preparer may disclose information obtained from the taxpayer without being subject to civil and criminal penalty if such disclosure is: a. For other than the specific purpose of preparing a tax return. b. Pursuant to fulfillment of his own financial goals. c. Pursuant to any provisions of the code, or to a court order. d. Required for the growth of his profession.

Treasury Decisions are published first, officially, in: a. the Internal Revenue Bulletin b. first in the Internal Revenue Bulletin and then in the Federal Register c. the Federal Register d. Congressional Committee Reports

The procedure used to match the information recorded on a return with corresponding data received from third parties is referred to as: a. Information Document Reconciliation Program b. Information Document Review Program c. Information Document Check Program d. Information Document Matching Program

The statute of limitations refers to a: a. Set of provisions that limits a return preparer's rights. b. Specific period of time within which returns must be filed. c. Set of provisions that limits a taxpayer's rights. d. Specific period of time within which all taxes must be assessed and collected, and all refund claims must be made.

Under AICPA Rule 502, which of the following actions would constitute deceptive advertising? a. advertising too frequently b. implying that the CPA had the ability to influence an IRS official c. promising a favorable result without justification d. Only b and c

Under a regressive tax rate system, the applicable tax rate: a. increases as the tax base grows larger. b. remains unchanged irrespective of the level of tax base. c. best reflects the capacity of the taxpayer to pay. d. decreases as the tax base grows larger.

When the accuracy-related penalty applies, interest on the penalty accrues from the: a. date on which assessment is made b. date on which the penalty was imposed or December 31 whichever is earlier c. date on which the penalty was imposed d. due date of the return

Which of the following statements is CORRECT regarding the definition of terms in the Internal Revenue Code? a. All definitions are included in Section 7701. b. Definitions are always included within the Code section to which they apply. c. Definitions are written into the Code by the IRS rather than included in tax laws passed by Congress. d. Sometimes, a researcher may need to consult the regulations to find a complete definition of a term.

Which of the following statements is INCORRECT regarding headnotes and case briefs? a. Headnotes are usually inserted at the beginnig of a case by the court reporter editors. b. Headnotes help researchers quickly determine if a case is relevant. c. Case briefs are a summary of a case identifying the facts, issue, holding and analysis. d. All of the above statements are correct.

Which of the following statements is INCORRECT with regard to IRS Revenue Rulings? a. Revenue Rulings apply the Code and Regulations to a specific fact situation. b. Revenue Rulings are published chiefly to give guidance to taxpayers. c. A Revenue Ruling is an official pronouncement of the IRS National Office. d. All of the above statements are correct

Which statement is CORRECT regarding Proposed Regulations? a. They cannot become final until the expiration of at least 30 days after they are published in proposed form. b. The IRS cannot make changes to Proposed Regulations before they become final. c. The public must be given an opportunity to comment on Proposed Regulations before they become final. d. Only (a) and (c) are correct

Which statement is CORRECT regarding the United States Tax Court? a. The Tax Court will hear any Federal case. b. The Tax Court is an appeals court. c. The Tax Court must follow decisions of the District Court with jurisdiction over the taxpayer. d. None of the above statements are correct.

With regard to IRS Announcements and Notices, which of the following statements is CORRECT?: a. IRS Notices contain guidance on substantive interpretations of the law. b. IRS Announcements and Notices are published in the weekly Internal Revenue Bulletin. c. IRS Announcements contain guidance on substantive interpretations of the law. d. Only (a) and (b) are correct. e. All of the above statements are correct.

Examples of instances where the burden of proof is on the government, rather than on the taxpayer, include: a. when the IRS uses statistics to recreate income. b. fraud with intent to evade tax. c. cases involving corporations with a net worth exceeding $7 million. d. only (a) and (b).

D, burden of proof on IRS when net worth of partnership, trust, or corporation is <$7,000,000

Under a progressive tax rate system, the applicable tax rate: a. is applied against the taxpayer's net holdings of tangible assets. b. decreases as the tax base grows larger. c. increases as the tax base grows larger. d. is independent of the tax base.

Under the Golsen rule, the Tax Court must: a. compute the tax liability due the government. b. reach the same decision in each region of the county. c. follow the Court of Appeals that has direct jurisdiction over the taxpayer. d. None of the above.

What is the age at which children who are not full-time students are no longer subject to the "kiddie" tax? a. 24 b. 18 c. 19 d. none of the above.

When a taxpayer is subject to both underpayment and overpayment computations for the same time period, which of the following rates of interest applies to the net amount payable to or receivable from the government? a. 4 % b. 6 % c. 0 % d. 5 %

When the IRS examines the returns of large corporate taxpayers, it uses a team approach in its field audits known as the: a. Collective Examination Program b. Grouped Examination Program c. Coordinated Examination Program d. Team Examination Program

Which of the following is the basic formula for computing a taxpayer's tax liability? a. Tax Liability = Tax Base ÷ Tax Rate b. Tax Liability = Tax Base * (1 - Tax Rate) c. Tax Liability = Tax Base * Tax Rate d. None of the above.

Which of the following is the most common tax that is found in contemporary industrialized societies? a. A tax on consumption. b. A proportional tax. c. A tax on income. d. A property tax.

Which of the following issues is NOT addressed by tax treaties? a. what tax disclosures must be made by a visitor to a host country b. treatment of business and investment income earned by a foreign visitor in the United States c. treatment of business and investment income earned by a foreign citizen in his home country d. how to compute the taxable amount in the host country e. all of the above

Which of the following statements is CORRECT regarding the enactment into law of a tax bill? a. A tax bill must always be signed by the President to become law. b. A tax law must be approved by the Treasury Department. c. A tax law must either be signed into law by the President or Congress must override a presidential veto of the proposed law. d. only b and c

Which of the following statements is CORRECT with respect to conflicting tax laws? a. Revenue Rulings and Revenue Procedures seldom are held to be invalid by a court. b. Regulations are frequently held to be invalid by a court. c. The decisions of courts that are higher in the judicial hierarchy should receive additional precedential weight. d. All of the above are correct.

Section 121(B)(2)(a)(b)(iii) would be a correct type of Code citation.

False, Section 121(b)(2)(A)(ii) would be a correct Code citation. Subsections are denoted by small letters and subparagraphs are denoted by capital letters and two subsections would not be together in a citation

Field Service Advice (FSAs) are binding guidance provided by the IRS National Office to IRS service centers

False, Service Center Advice is guidance provided by the IRS National Office to the IRS service centers

Subparagraphs are the major divisions of the Internal Revenue Code covering such broad topics as Income Taxes, and Estate and Gift Taxes.

False, SubTITLES

Which of the following statements is INCORRECT regarding Actions on Decisions (AODs)? a. AODs are prepared when the IRS loses a case in a court. b. AODs are published in the Internal Revenue Bulletin. c. AODs are published when the IRS wins a case in court. d. The IRS's decisions on AODs are driven by litigation costs, revenue effects, and administrative and policy directives. e. All of the above statements are correct.

Which of the following statements is INCORRECT regarding letters to unsophisticated clients? a. Citations to controlling authority should not be included. b. The letter should give the answer in the first paragraph. c. A practitioner should always attach a file memo to give the client more detailed information. d. All of the above are correct.

Criminal and civil penalties are mutually exclusive.

False, TP may be acquitted of a criminal tax offense, but still be liable for corresponding civil tax penalty

Taxpayers can use the step-transaction doctrine to obtain various tax advantages.

False, TP's are restricted to the actual legal form of the transactions in which they engage, but the IRS has the option to employ the step-transaction doctrine to reduce tax benefits

District Court judges hearing tax cases are tax specialists.

False, Tax Court judges are though

'Economic reality' factors are considered by the IRS in selection of returns for audit only where it has some other evidence that the taxpayer has over reported taxable income for the year.

False, UNDER reported

Which of the following statements is INCORRECT regarding the reasons tax researchers may have difficulty in interpreting the Internal Revenue Code: a. Code sections can appear to conflict. b. Definitions can be significantly different from the common use of a term. c. All exceptions to a Code section are addressed within that same section. d. Frequently, phrases modify percentage or dollar amounts.

Which of the following tax law rules create incentives for tax planning? a. The Federal income tax itself is deductible in determining taxable income. b. Reducing the amount of income taxes that are paid decreases a taxpayer's allowable deductions. c. The Federal income tax itself is not allowed as a deduction in determining taxable income. d. None of the above.

Which of the following tax rate systems is applicable to the U.S. individual income tax? a. Proportional tax rate system. b. Regressive tax rate system. c. Progressive tax rate system. d. None of the above.

List several issues that tax treaties commonly address.

Any tax matter may be covered in a tax treaty with another country. Types of issues commonly covered by treaties include: • How to treat the business and investment income of a visiting taxpayer. • When the visitor is subject to the host country's tax laws. • How to offset the possibility of taxing the same income or assets more than once. • How to compute the taxable amount in the host country. • To what extent the host-country withholding and taxes are applied to a visitor's transactions. • How taxes levied by a state/province/canton are treated. • What tax disclosures must be made by a visitor.

In oral communications, a speaker should always aim the presentation at the audience members who have the least amount of knowledge.

False, a speaker must decide whether to aim at the median knowledge base or above or below it. The stakes are high in exercising this judgment and the decision is dependent on the makeup of the particular audience.

Any business-related expenses that are incurred in connection with the determination of a tax are not deductible.

False, all business-related expenses incurred in connection with the determination of a tax are deductible

The Joint Conference Committee is called on to resolve differences between the House Ways and Means Committee version and the full House version of tax legislation.

False, between the House and the Senate

A "DIF" score is a type of: a. Fraud definition used by the Service. b. Discriminate analysis used to identify questionable returns. c. Negligent penalty score. d. Score used for an information purpose in collateral agreements.

A "technical corrections act" is: a. A set of changes made by IRS to fit new tax law provisions into the Code. b. An act passed by Congress to remove errors in implementing and interpreting the new provisions of a tax law. c. The act which provides the effective dates for a new tax law. d. None of the above.

A decision of which of the following court(s) cannot be found in RIA's American Federal Tax Reports (AFTR or AFTR2d)? a. the District Courts b. the Tax Court c. the Supreme Court a. the U.S. Court of Federal Claims b. Only (b) and (c).

A proportional tax rate system represents: a. an increasing tax rate structure. b. a flat tax rate structure. c. the U.S. federal income tax system. d. none of the above.

After the assessment has been made, the taxes assessed must be collected within: a. 2 years b. 10 years c. 5 years d. 8 years

All of the following types of tax documents are published in the Internal Revenue Bulletin except: a. IRS Revenue Procedures. b. IRS Letter Rulings. c. Treasury Decisions. d. New Tax Treaties e. All of the above documents are published in the Internal Revenue Bulletin

Code Section 61 relates to: a. deductions for adjusted gross income b. the definition of gross income c. corporate tax rates d. the deduction for state taxes

Determination Letters are: a. issued by the National Office of the IRS on proposed transactions. b. issued by a local IRS office, usually on completed transactions. c. published first in the Internal Revenue Bulletin. d. Issued to IRS field agents as audit guidance

Form 9465 is used by the taxpayer to initiate which of the following? a. Closing Agreement b. Installment Agreement c. Offer in Compromise d. Tax Refund

With regard to employers, generally, salary payments to employees are deductible but fringe benefit payments are not.

False, both are deductible by employers

A taxpayer may be represented before the IRS only by attorneys.

False, can be CPA's or anyone with properly obtained executed power of attorney

IRS agents are bound only by which types of authority? a. The Code. b. The Code, administrative pronouncements and Supreme Court decisions. c. Second and Ninth Circuit Court Decisions. d. The Code and Regulations.

If a taxpayer and the IRS cannot agree on the proposed adjustments after an appeals conference, the regional director of appeals will issue a: a. 30-day letter b. 90-day letter c. 21-day letter d. 10-day letter

In a closed-fact problem, the main goal of tax research is to: a. determine several alternative courses of future action for the taxpayer b. find support for an action the taxpayer has already taken c. both a and b d. none of the above

In selecting returns for examination, the primary goal of the IRS is to review only those returns that: a. Belong to the taxpayers who were found guilty before. b. Will result in a satisfactory increase in the tax liability. c. Have been filed for the first time. d. Contain mathematical/clerical errors.

In the citation Reg. §1.162-2(a)(1), the number '162' stands for the: a. type of Regulation. b. related Code section. c. Code of Federal Regulations. d. Regulation paragraph.

In which of the following courts does the taxpayer have to pay first and then sue for a refund? a. the Tax Court Small Cases Division b. the District Courts and U.S. Court of Federal Claims c. the U.S. Courts of Appeal d. All of the above.

In which of the following courts would a taxpayer want to argue an "emotional issue" rather than a "technical" issue? a. the Supreme Court b. the District Courts c. the U.S. Court of Federal Claims d. the U.S. Tax Court

Once the research question has been stated, the researcher must next: a. gather the facts b. identify the keywords to construct a proper query c. select a database and execute the search d. interpret and refine the search

P.L. 107-16 is the citation for: a. the Conference report on the 16th public law enacted in the 107th Congress b. the 16th public law enacted in the 107th Congress c. a public law enacted by Congress but not signed by the President d. none of the above

Penalties that are based on a percentage of the delinquent tax are referred to as: a. assessable penalties b. ad valorem penalties c. criminal penalties d. nominal penalties

The Commissioner of the IRS is appointed by the: a. The Treasury Secretary b. The President of the United States c. The Chief Counsel of the IRS d. General Counsel of the Treasury Department

The IRS, as an administrative agency, is responsible for: a. formulating and interpreting the tax laws b. interpreting and enforcing the tax laws c. formulating and evaluating the tax laws d. planning and formulating the tax laws

The National Taxpayer Advocate: a. Represents the IRS in Tax Court cases. b. Administers a taxpayer-intervention system. c. Assists the IRS in preparing proposed legislation, treaties, regulations, and executive orders. d. Prepares IRS rulings and other written determinations.

The current Internal Revenue Code is the: a. Internal Revenue Code of 2011 b. Internal Revenue Code of 1986 c. Internal Revenue Code of 1954 d. none of the above

The standard for conviction in a criminal case is establishment of: a. guilt with some reasonable doubt b. guilt beyond reasonable doubt c. any guilt even though highly doubtful d. criminal intent even though not implemented

The statute of limitations can be suspended if: a. The taxpayer is outside the United States for three consecutive months. b. The taxpayer's assets are in the custody of the court. c. A fiduciary or receiver is yet to be appointed in a bankruptcy case. d. The taxpayer is ignorant of such a statue.

The tax rate which is computed by simply dividing the total tax liability by the corresponding tax base is known as the: a. capital gains tax rate. b. average tax rate. c. effective tax rate. d. marginal tax rate.

The two methods of judicial review of an administrative action taken by the Service in determining whether a taxpayer owes taxes are: a. Release method and the deficiency method. b. Refund method and the assessment method. c. The refund method and the deficiency method. d. The protest method and the deferral method.

To effectively convey the results of a tax research project, the practitioner must: a. consult IRS officials. b. apply professional judgment and communication skills. c. have an informal discussion with the client. d. all of the above.

Tax treatises and journal articles should not be used in the formation of the practitioner's research schedule.

False, can be, because they often include both a comprehensive summary of the evolution of the controlling law and a thorough list of citations concerning prior interpretive court decisions

Congress cannot override a Presidential veto of a tax bill.

False, can with sufficient number of votes

The code provides for payment of interest on underpayments and overpayments of tax at an adjustable rate compounded annually.

False, compounded DAILY

A file memorandum should not include citations to secondary sources of tax law, such as commercial tax services.

False, could help to facilitate subsequent review and commentary concerning the tax issue

The IRS has increased the number of tax return processing centers with the increase in electronic filing of returns.

False, decreased number of centers

Consulting firms and tax departments all use the same format for client files.

False, each has its own

The Employee Withholding Allowance Certificate is required to be given by the employer to the employees.

False, employee to employer, certificate is also known as a W-4

The term 'not less than 50' represents only those numbers which are more than 50.

False, includes 50

The IRS Oversight Board is made up of only IRS officials.

False, includes members from private sector as well

Under the 10-80-10 rules for the structure of technical tax communications: a. the introduction should identify three to six key points. b. the introduction should be 10 percent, the body should be 80 percent, and the conclusion should be 10 percent. c. Fifty percent of the body of the communication should be examples. d. all of the above.

What is the general statute of limitations on assessment of income tax: a. 6 years b. 3 years c. 7 years for criminal tax evasion. d. None of the above.

When a Tax Court decision is said to be entered under Rule 155, it means: a. the Court computed the refund due the taxpayer. b. the Court reaches a decision without calculating the tax. c. the Court must follow the Court of Appeals that has direct jurisdiction over the taxpayer. d. the case cannot be appealed.

Which of the following are the two pervasive judicial doctrines that often limit the taxpayer's ability to employ effective planning techniques? a. the progressive tax rate requirement and marginal rates. b. business purpose and substance over form. c. business purpose and changing tax jurisdiction. d. All of the above are judicial doctrines that limit effective tax planning.

Which of the following examinations involves complex issues that require more advanced knowledge of the internal revenue laws and accounting skills? a. Correspondence Examination b. Field Examination c. Office Examination d. Arithmetical Error Examination

If a taxpayer mistakenly overstates itemized deductions which results in an understatement of adjusted gross income of 25 percent, the IRS has a 6-year Statute of Limitations on assessment.

False, itemized deductions are disclosed to IRS and aren't part of the "Gross Income" definition

Circuit Courts are administrative sources of the Federal tax law.

False, judicial

If the Supreme Court refuses to review a lower case, the Supreme Court is upholding the lower court decision.

False, just means they chose not to hear it.

When a Code provision and a provision under a treaty conflict, the one adopted earlier in time generally controls.

False, later, not earlier

The IRS issues General Regulations under a mandate by Congress to specify the substantive requirements of a tax provision

False, legislative

Tax planning analyses should be based on the average tax rates that the individual will pay or save by adopting a particular course of action.

False, marginal tax rate

After the researcher has located authority that deals with the client's problem, he or she must develop conclusions and recommendations.

False, must evaluate usefulness of authority first

Tax Court Summary Opinions are published in a printed reporter by the Government Printing Office (GPO).

False, not published in a print reporter, but available online through commercial tax services

The number of routine math errors has increased sharply due to increase in electronic filing.

False, number of errors sharply decreased

The 10-year period of limitations for collection begins from the due date of filing the return.

False, only after an assessment is made

IRS agents are bound by District Court decisions.

False, only by the Code, administrative pronouncements and Supreme Court decisions

Investment expenses can offset ordinary income.

False, only investing/capital or "portfolio" income

The IRS examines each and every return critically in order to generate additional revenue for the Treasury.

False, only those that will generate additional revenues for the Treasury

The Appeals Office has the exclusive and final authority to settle cases that originate in any district irrespective of its jurisdiction.

False, only within its jurisdiction

The U.S. Treasury Department is a part of the Internal Revenue Service

False, other way around

With respect to tax planning activities, the decision maker must compare the after-tax benefits with the pre-tax costs.

False, pre-tax benefits with the after-tax costs

The 'General Explanation' of tax legislation, called the "Blue Book," is prepared by the Joint Conference Committee.

False, prepared by Joint Committee on Taxation

Judicial decisions constitute a secondary source of the tax law.

False, primary

The common form of legal citation is as follows: case name, volume number, page number, reporter abbreviation.

False, reporter abbreviation before page number

The tax researcher spends most of his or her time writing the memorandum to the client's file.

False, reviewing sources of law, redefining pertinent issues, and attempting to discover additional facts concerning the client's situation

Taxpayers can always minimize their tax liability simply by moving income and assets out of one jurisdiction to another.

False, some jurisdictions offer tax benefits to attract businesses to their jurisdiction, but these governments often put in place tax changes to prevent "leakage" of tax revenues through such cross-border transactions.

A field audit by the IRS is always conducted at the taxpayer's premises.

False, sometimes at office of taxpayer's representative

Tax avoidance and tax evasion are both illegal.

False, tax avoidance is the legitimate object of modern tax practice

The ABA Model Code of Professional Responsibility has the force of law and covers all attorneys practicing in the United States.

False, the ABA Model Code of Professional Responsibility does not in itself have the force of law and must be adopted by the state licensing authority before becoming mandatory for a state's attorneys

The IRS, under no circumstances, has the authority to decline to issue Letter Rulings

False, the IRS has the authority to decline to issue Letter Rulings under certain conditions

The IRS website is a full-service, tax research resource.

False, the IRS website, while containing much useful information, is not a full-service tax research resource.

Paper reduction should be the main goal in deciding whether or not to include duplications of controlling law in a client file.

False, the client file should contain enough information to provide a road map by which to retrace a researcher's line of thinking.

IRS Publications are published in the monthly Internal Revenue Bulletin as well as on the IRS website

False, they don't appear in the weekly IRB

If the taxpayer's Circuit Court of Appeals has not yet ruled on an issue, a researcher should not consider a decision on the same issue by a Court of Appeals outside of the taxpayer's circuit.

False, they should if taxpayer's Circuit Court hasn't decided the issue. Other Circuit Court of Appeals decisions are influential and have precedential value in anticipating the proper position for a client.

The search "stock or securities" would find documents that contain both the term "stock" and the term "securities."

False, this search would find documents that have either the word "stock" or the word "securities."

Which of the following is CORRECT with respect to a file memo? a. It should include only the strengths of the client's position. b. It should include a list of the tax issues that are in dispute and a matching conclusion for each identified issue. c. It should be prepared only in closed-fact situations. d. All of the above.

Which of the following is an example of secondary authority? a. tax treaties b. tax journals c. U.S. Constitution d. tax laws by Congress

Which of the following statements best explains the need for tax practitioners to understand nonregulatory ethical models of behavior? a. Competing ethical solutions must be resolved by the courts. b. There is more to ethical behavior than just following the rules of professional organizations. c. Practitioners must always choose the action with the greatest benefit for their client. d. Ethical choices are clearly spelled out by IRS regulations.

Which of the following statements is CORRECT regarding computerized tax research? a. The method of constructing queries is the same for all databases. b. Most computer tax services allow the use of connectors and wild cards. c. If a query generates too little information, the researcher should add more unique keywords. d. All of the above are correct.

In slides and other visual aids, fancy fonts and many colors should be used to create a more sophisticated presentation.

False, use simple fonts and conservative colors

Which of the following statements is INCORRECT with regard to the weight of authority of tax documents? a. District and Circuit Court opinions have direct bearing on the taxpayer only if they were issued in the taxpayer's jurisdiction. b. The opinions of the Court of Federal Claims and Tax Court are not binding on a taxpayer if they were issued with respect to a taxpayer who lives in a different jurisdiction. c. Revenue Rulings and Revenue Procedures are frequently modified or held to be invalid by courts. d. Older court decisions should be given a declining degree of importance unless they are Supreme Court cases.

Which of the following would lead to imposition of civil penalties? a. violation of civil protocols b. violation of tax laws as a result of negligence c. violation of tax statues due to reasonable cause d. violation of social rules and norms

Which reporter is the official, government reporter for U.S. Supreme Court tax cases? a. S.Ct. b. U.S. c. AFTR2d d. The government does not print Supreme Court cases.

William, a tax-payer, timely mailed his tax return. However, the same was returned for insufficient postage. IRS imposed a penalty. Can William claim waiver of penalty? a. Yes, William can claim waiver of penalty since it is his first tax return. b. Yes, William can claim waiver since the failure to file tax return is due to a reasonable clause. c. No, William can not claim waiver since it is a case of willful neglect. d. No, William cannot claim waiver of penalty as he is a delinquent tax-payer.

Your client has just received an IRS summons to appear for an interview. Which of the following statements is false concerning this interview? a. Provided your client gives prior notice to the IRS, the taxpayer may tape-record the interview. b. The IRS may tape record the interview but must provide a transcript of the recording to the taxpayer if he requests a copy and pays for the copying charges. c. Notes may not be taken by either the IRS agent or the taxpayer during the interview. d. The IRS investigator must explain various taxpayer rights to your client before commencing the interview.

Robinson, a calendar-year taxpayer, filed his 2010 income tax return on October 20, 2011, paying an amount due of $2,000. On April 1, 2011, he had obtained a six- month extension of time in which to file his return. However, he could not assert a reasonable cause for failing to file the return by October 15, 2011 (the extended due date), nor did he show any reasonable cause for failing to pay the tax that was due on April 15, 2011. Robinson's failure to file was not fraudulent. The penalty for failure-to-pay tax is: a. $ 35 b. $ 10 c. $ 70 d. $ 40

C 2,000 X .5% = $10/month X 7 months = $70

Smith, a calendar-year taxpayer, filed his 2008 Federal income tax return on October 1, 2011.His return showed an overpayment of $1,200, for which Smith requested a full refund. The IRS refunds the amount without any interest. Which of the following could be the date of refund by the IRS? a. November 17, 2011 b. December, 29 2011 c. November, 12 2011 d. December, 12 2011

C, 45 days

Which citation represents the CORRECT numbering scheme for identification of IRS written determinations? a. 199538005 where "1995" is the year, "38" is the week of the year, and "005" is the number of the ruling/memoranda that week. b. LTR 2010-43, where "2010" is the year and "43" is the number of the ruling or memoranda for that year. c. 1996 C.B. 6, where 1996 is the year and 6 is the page number for the ruling or memoranda. d. 200917024 where "2009" is the year, "17" is the week of the year, and "024" is the number of the ruling/memoranda for that week

A taxpayer who loses in the Small Cases Division of the Tax Court may appeal directly to the: a. Appellate division of the IRS. b. District Court in the taxpayer's circuit. c. U.S. Court of Appeals in the taxpayer's circuit. d. Decisions in the Small Cases Division cannot be appealed.

A written RAR is prepared by the IRS agent and is given to the taxpayer: a. before the commencement of the examination b. at the beginning of the examination c. during the examination d. upon the conclusion of the examination

Which of the following entities usually request to have their tax assessed within 18 months? a. Estates. b. Liquidating Corporations. c. Income tax return of a decedent. d. All of the above.

Which of the following forms the basis for all tax provisions? a. secondary authority b. the administrative authority of the IRS c. judicial interpretation of the law d. the statutory authority of Congress

According to Rule 101 of the AICPA Rules of Professional Conduct, a CPA in public practice must: a. comply with Circular 230 b. disclose any conflict of interest with another client c. keep client information confidential d. be independent of his or her clients

Which of the following is INCORRECT regarding the Floor Debate Report? a. It is contained in the Congressional Record. b. It is a supplement to the Committee Report. c. It summarizes the discussions made in the House or the Senate concerning a proposed tax bill. d. All of the above statements are correct.

Which of the following is a feature of a properly accomplished tax planning? a. It allows the tax professional to exercise a higher degree of creativity. b. It forces the client to identify financial goals and general means by which to achieve them. c. It offers a legal way to avoid taxes. d. All of the above.

Which of the following issues would most typically not be handled as a correspondence examination: a. Mathematical errors. b. Clearly defined unallowable deductions. c. Errors detected through matching of forms 1099 and W-2. d. Questions concerning gambling income.

Which of the following statements is CORRECT regarding tax treaties: a. They are authorized by the U.S. Constitution. b. They are usually initiated by the State Department, not the Treasury. c. The U.S. can have multiple types of tax treaties with one country. d. All of the above statements are correct.

"In case of both civil and criminal frauds, the burden of proof is on the IRS." Explain.

IRS must show fraudulent intent - more than mere negligence. - A plan to defraud the government, often including a series of actions over time to evade the tax. Criminal fraud: IRS must prove 'beyond a shadow of any reasonable doubt' that the taxpayer's actions were fraudulent. Civil fraud: Must be 'clear and convincing evidence' that the taxpayer committed fraud. Ordinarily, evidence is circumstantial, so the court must infer the taxpayer's state of mind from the evidence.

Cite two instances that would lead to imposition of criminal penalties on the return preparers.

If preparer: • aids or assists in the preparation or presentation of a false return, affidavit, claim, or other document, or • discloses or uses information for other than return preparation purposes

What is the procedure for claiming refund or credit for overpayment of tax?

TP must file a timely and valid claim at the service center for the district in which the tax was paid to receive a refund or credit for an overpayment of tax. Individuals: Form 1040X, Individual Amended Income Tax Return Corporations: Form 1120X, Corporation Amended Income Tax Return

Robinson is subject to a 40 percent overall marginal tax rate. Is he better off if he receives a tax-free fringe benefit of $4,000 than receiving an equivalent raise in his salary? Why or why not?

Tax-free fringe benefit, because it is not taxed and a raise in salary is. ATB is higher.

Briefly explain the nonattorney-client confidentiality privilege.

The attorney-client privilege extends to communication between TP and any nonattorneys authorized to practice before the IRS (CPAs & enrolled agents). - Excluding written communication regarding tax shelters and tax workpapers used to prepare financial statements Only asserted in a noncriminal tax matter before IRS or a Federal court - Usually doesn't apply to tax return preparation or accounting/business advice

What information is included in the history of a Code section?

The history of a Code section includes a list of Public Laws that have altered or amended the section. This listing generally includes a reference to the section as it existed prior to amendment as well as the effective date of the amendment to the law

Tax planning has a more likelihood of success when a tax practitioner is dealing with an open transaction instead of a closed transaction.

True

Tax practice can be defined as the application of the tax laws to specific accounting situations.

True

Tax treaties are agreements negotiated between countries concerning the treatment of entities subject to tax in both countries.

True

Taxpayers are rewarded more for finding ways to save taxes than for earning an equal amount in the marketplace.

True

Technical Advice Memoranda are issued in response to a request by an IRS agent

True

Temporary Regulations must be followed by taxpayers until they are superseded or until they expire

True

The 'Kiddie tax' was created to prevent parents from sheltering income by putting accounts in the names of their lower-taxed children.

True

The 16th Amendment to the U.S. Constitution authorized the imposition of a Federal income tax.

True

The Chief Counsel is appointed by the President and reports to the Commissioner of the IRS.

True

The IRS disclaims (renounces) responsibility for damages that a taxpayer may suffer in erroneously relying on its Taxpayer Publications

True

The IRS treats an adjustment in tax resulting from an unallowable item identified in return as a correction of a mathematical or clerical error.

True

The Internal Revenue Bulletin also is published in twice-yearly, bound volumes as the Cumulative Bulletin

True

The National Research Program (NRP) provides statistics that are used in the development and update of the DIF formulas.

True

The North American Free Trade Agreement (NAFTA) is a non-tax international treaty which addresses some tax-related issues.

True

The Tax Court was formerly known as the Board of Tax Appeals.

True

The U.S. Constitution is a statutory source of tax law.

True

The U.S. Court of Federal Claims is a trial-level court.

True

The U.S. Tax Court may examine the entire return of a taxpayer whose case it is hearing.

True

The appellant is the party who appeals a decision to a higher court.

True

The courts may invalidate IRS Regulations if they are found to conflict with the Code.

True

The effective tax rate can be found by dividing the total tax liability by the economic income.

True

The first requirement for effective tax planning is awareness on the part of decision- makers.

True

The judicial doctrine 'business purpose' can decrease the taxpayer's ability to employ effective planning techniques.

True

The objective of the Appeals Office is to resolve tax controversies without litigation on a basis that is fair and impartial to both the government and the taxpayer.

True

The penalty for a willful failure to pay to the government a tax withheld from an employee's paycheck is one hundred percent of the unpaid tax.

True

The penalty for failure to make payment of quarterly estimated income taxes is computed without any daily compounding and is not deductible.

True

The progressive nature of the tax system tends to increase the advantage of income splitting.

True

The tone and nature of the file memo should recognize that its reader (the client) probably is not well versed in the Federal tax law.

True

The two levels of appellate courts in the Federal court system are the U.S. Courts of Appeals and the U.S. Supreme Court.

True

There is a general common law privilege of confidentiality for non-criminal tax matters that exists between a Taxpayer and his or her Tax Practitioner.

True

Treaties may expire because of a specific congressional time limitation.

True

Under a proportional tax rate system, the tax rate is constant.

True

Well-written case opinions typically provide a summary of the evolution of the pertinent tax law and a discussion of the parties' competing interpretations.

True

When tax rates are constant, delaying income recognition or accelerating deductions can be beneficial.

True

When the IRS mails a statutory notice of deficiency to the taxpayer, the assessment and collection period is suspended for 150 days (210 days if the letter is addressed to a person who is outside the United States).

True

Whenever a major new tax law is passed, CCH and RIA both publish the related Committee Reports.

True

Whenever a series of transactions results in significant tax savings, the IRS may attempt to apply the concept of substance over form by 'telescoping' or 'collapsing' several transactions into one.

True

Why would a taxpayer want to bring a case in the U.S. Court of Federal Claims?

U.S. Tax Court & District Court of Appeals limit their cases to geographic appellate courts, but FC appeals actions to Federal Circuit Court of Appeals - Different circuits have different precedents If Court of Appeals in TP's circuit decided the issue adversely to TP and Federal Circuit Court of Appeals has established a rule favorable to the TP, then TP would want to bring case to FC which would have established precedent by the Federal Circuit Court of Appeals.

List in sequential order the major steps involved in the tax research process.

• Establish the facts • Identify the issues • Locate authority • Evaluate authority • Develop conclusions and recommendations • Communicate the recommendations

What are the major duties of the IRS Oversight Board?

• Review and approve IRS mission, strategic plans, and annual planning documents. • Review IRS operational functions, including modernization, outsourcing, and training efforts. • Recommend to the President candidates for Commissioner. • Review the process of selecting, evaluating, and compensating senior IRS executives. • Review and approve the IRS annual budget request. • Ensure the proper treatment of taxpayers.

Identify the major elements of a client letter

• Salutation/social graces/general conclusion. • Summary of the research project results. • Objective of the report. • Statement of facts and disclaimer as to the scope of the tax professional's knowledge base. • Summary of critical sources of law that lead to result.

Identify five or more types of tax-related communications.

• Telephone call or text message. • Informal discussion in person or via e-mail. • Letters prepared for someone familiar with the tax laws or someone unfamiliar with the tax laws. • Tax articles for publication in a newspaper, magazine, or professional journal. • Directed discussion among tax peers. • Speech to general audience or to a conference of tax professionals. • File Memoranda to be read in the future by the author or by a peer with similar training. • Appearance on a news broadcast or program. • Posting on a general, business, or tax-oriented blog.

In which of the following situations would a CPA be engaged in the unauthorized practice of law? a. The CPA drafts a contract for his small business client. b. The CPA files a client's state tax return. c. The CPA answers estate tax questions for his client. d. The CPA represents his client before the IRS.

Regarding the taxing powers of the federal government, the U.S. Constitution requires that: a. taxes imposed by Congress must apply uniformly throughout the U.S. b. no direct taxes may be imposed on income c. all revenues from the federal income tax must be apportioned to the population of the states from which they were collected d. all of the above

Secondary sources are useful when: a. conflicting primary authority exists b. the issue is a closed-fact problem c. a researcher does not have access to primary sources d. when a researcher disagrees with the client

Standards for Tax Services (SSTS) contain advisory guidelines for: a. CPAs b. enrolled agents c. attorneys d. IRS authorities e. All of the above

Tax evasion is: a. a fraudulent act involving illegal nonpayment of taxes b. one of the objectives of tax planning c. an act of deferring tax payments to future periods d. the same as tax avoidance as both of them result in nonpayment of taxes

Tax journals perform which of the following functions: a. offer researchers expert analysis of unclear tax issues b. keep researchers aware of current developments c. suggest tax planning techniques d. all of the above

The first Internal Revenue Code was: a. the Internal Revenue Code of 1939 b. the Internal Revenue Code of 1954 c. the Revenue Act of 1913 d. none of the above

The first step in the tax research process is to: a. establish the facts b. identify the issues c. locate authority d. evaluate authority

Under Statements on Standards for Tax Services No. 3, (SSTS No. 3) a CPA preparing a tax return should perform all of the actions EXCEPT: a. independently confirm the accuracy of the taxpayer's information b. obtain additional information if the taxpayer's information appears to be incorrect or incomplete c. review the prior year's return when feasible d. determine when conditions for a deduction have been met

An EA must renew his or her enrollment card on a: a. 5-year cycle b. 3-year cycle c. 2-year cycle d. Renewal is not required once an EA gets a card

Collateral estoppel is a legal concept which: a. allows relitigation on the same facts or same issues b. bars relitigation on the same facts or same issues c. requires that the court resolve factual issues in a taxpayer's favor d. none of the above

Tax litigation is a process of: a. participating in an administrative audit b. settling tax-related disputes in a court of law c. filing amended tax returns as prescribed by tax laws d. arranging a taxpayer's affairs to minimize tax liabilities

The final step of the tax research process is to: a. develop conclusions and recommendations b. communicate recommendations c. document conclusions and recommendations d. litigate the tax-related dispute

Which of the following is CORRECT about a CPA's responsibility with regard to tax return positions under Statements on Standards for Tax Services No. 1 (SSTS No. 1): a. A CPA may not base his or her position on authority that is not approved by the IRS under Section 6662 (accuracy-related penalty). b. A CPA may sign a return which has a tax position that has a realistic possibility of being sustained on the merits. c. A CPA may not sign a return which has any tax position that is not fully disclosed. d. All of the above statements are correct.

Which of the following represents a law issue? a. intent of the transaction b. definition of a term used in the code c. date of transaction d. location of the transaction e. all of the above

Which of the following statements best describes Circular 230? a. Circular 230 has been adopted by the AICPA as its set of rules of practice for CPAs. b. Circular 230 is a set of Treasury Department ethical and legal standards for those engaging in practice before the IRS. c. Circular 230 is a set of internal rules at the IRS designed to protect tax practitioners from unfair discipline by the IRS. d. Circular 230 is a set of ethical rules for taxpayers.

Which of the following statements describes the tax research process? a. It is strictly linear. b. It requires mechanical skills combined with critical thinking. c. It requires the ability to use complex mathematical techniques to identify and locate tax authorities. d. All of the above.

Which of the following statements is INCORRECT regarding the CPA exam: a. The National Association of State Boards of Accountancy administers the test. b. Each state has its own test. c. CPA exam candidates must pass all four sections of the exam. d. The Regulation section requires tax research.

A contingent fee is: a. always allowed by Circular 230 b. a fee that is out of line with the value of the service provided c. a fee based on a percentage of a taxpayer's refund on a tax return d. all of the above

According to Circular 230, the "best practices" rules are: a. mandatory for all tax practitioners b. restricted only to attorneys and CPAs c. aspirational, to act as goals for tax practitioners d. enforced by disbarment from practice before the IRS

CCH's annotated, or code-based commercial tax service is: a. the United States Tax Reporter b. the Tax Coordinator 2d c. the Standard Federal Tax Reporter d. the Federal Tax Library

Circular 230 includes rules on all of the following topics EXCEPT: a. who is authorized to practice before the IRS b. standards for "covered opinions" c. compliance with state ethical requirements d. a set of best practices to guide practitioners

Due diligence, in essence, means a tax practitioner: a. must be efficient in performing his duties b. must give due respect to IRS officials c. should use reasonable effort to comply with the tax laws d. should charge reasonable fees for work performed for a client

The Statements on Standards for Tax Services (SSTS) are issued by: a. the Internal Revenue Service b. the FASB c. the AICPA d. the American Bar Association e. the AICPA and the American Bar Association jointly

The Statements on Standards for Tax Services are: a. part of the ABA Code of Professional Responsibility b. intended to replace Circular 230 c. intended to supplement the AICPA Code of Professional Conduct and Circular 230 d. none of the above

The amount of a transaction represents a: a. law issue b. social issue c. fact issue d. political issue

Which of the following is an administrative source of primary authority? a. U.S. Constitution b. collected rulings of the various courts on Federal tax matters c. regulations d. newsletters

Which of the following statements is CORRECT regarding unauthorized practice of law? a. Taxpayers may not draft their own contracts. b. Taxpayers may not represent themselves in Tax Court. a. A CPA cannot express a legal opinion on a non-tax matter. b. A CPA cannot express a legal opinion on a tax matter.

A reference source that enables the researcher to follow the judicial history of court cases is known as: a. a case reporter b. a judicial directory c. the Cumulative Bulletin d. a citator

A statutory source of Federal tax law is: a. various rulings of the Treasury Department and the IRS b. collected rulings of the various courts on Federal tax matters c. textbooks d. tax treaties

All of the following are goals of tax research EXCEPT? a. to balance the need for efficiency against the need for thoroughness b. to balance the client's tax goals with the client's nontax, personal considerations c. to find a defensible solution to a client's problem d. to find a perfect solution to a client's problem, no matter how long it takes

In a closed transaction, the scope of tax planning is: a. more limited as compared to an open transaction b. limited by the IRS rules of practice c. limited to presenting the taxpayer's facts to the government in the most favorable, legal manner d. Only a and c

Once the initial facts have been gathered and the issues defined, the tax researcher must: a. develop conclusions and recommendations b. evaluate the authority c. contact the IRS d. locate the authority

Regarding open transactions, which of the following statements is INCORRECT? a. the transaction is not yet completed b. the practitioner can suggest changes to achieve a better tax result c. a tax practitioner has some degree of control over the client's tax liability d. the practitioner can fix the problem by amending the client's tax return

Tax compliance is the process of: a. filing necessary tax returns b. gathering the financial information necessary to report taxable income c. representing a taxpayer at an IRS audit d. all of the above

The IRS website can be used to perform which of the following tasks: a. obtain downloadable forms b. keyword search IRS tax publications c. search with connectors and wildcards d. all of the above

The distinction between primary and secondary authority is important for which of the following reasons? a. to meet the accuracy threshold of "substantial authority." b. to avoid penalties under Section 6662 of the Code. c. to search properly with connectors and wildcards. d. only a and b

The primary change made by the Sarbanes-Oxley Act which affects the practice of public accounting is: a. Public accounting firms may no longer provide any actuarial services. b. Accounting firms may no longer offer tax shelters. c. Auditors may never do tax compliance work for their clients. d. Public accounting firms may provide some nonaudit services to their audit clients if the services are approved in advance by an audit committee.

Which of the following is an administrative source of the Federal tax law issued by the IRS? a. court rulings b. Internal Revenue Code c. tax treaties d. revenue rulings e. none of the above

Who can represent a taxpayer before the IRS Appeals Office under Circular 230? a. A CPA b. An officer of a corporation may represent the corporation c. An attorney d. All of the above e. Only a and c

Which of the following are basic connectors you can use to construct a search query? a. google b. not c. or d. * e. only b and c

Under Circular 230, "covered opinions" include oral advice on tax avoidance transactions.

False, 'covered opinions' includes written advice concerning one or more Federal tax avoidance transactions

CPAs may never disclose confidential taxpayer information under the AICPA rules.

False, CPAs may disclose confidential taxpayer information with the taxpayer's consent or in response to a subpoena or summons or if there is a review or investigation by the AICPA or a state CPA society

Tax research is only required for tax planning, not preparing returns.

False, Tax research is undertaken by all three types of tax practice--planning, compliance and litigation.

Westlaw is an example of an online, free tax-related internet site.

False, Westlaw is a commercial, subscription law library online with extensive tax and other legal and business information databases

If a CPA becomes aware of an error in a tax return, he or she must immediately notify the IRS.

False, a CPA member is neither obligated to inform the IRS of the situation, nor may he or she do so without the taxpayer's permission, except as provided by law

A member of the AICPA is not allowed to prepare tax returns that involve the use of the taxpayer's estimates.

False, a member may prepare tax returns that involve the use of the taxpayer's estimates if it is impractical to obtain exact data and if the estimated amounts appear reasonable to the member

All primary source material has the same precedential value.

False, different types of primary authority have different value as precedent. The researcher must understand the hierarchy of primary sources

Drafting wills is a part of a CPA's professional duties.

False, drafting wills by a CPA would give rise to the issue of unauthorized practice of law

Tax researchers should not consider the client's potential liability in determining how much time to spend on a client's problem.

False, researcher has an obligation to a client not to waste the client's money on a low cost/benefit issue

A tax researcher should ignore the personal preferences of a client and concentrate only on minimizing the client's tax liability.

False, the researcher must be aware of the nontax considerations pertinent to a client's situation such as economic constraints and personal preferences.

The three categories of modern tax practice include tax planning, tax compliance, and tax research.

False, the three types of tax practice include tax planning, tax compliance and tax litigation

A tax researcher can rely on tax journals as substantial authority under Section 6662 of the Code.

False, under Section 6662 of the Code, which deals with the accuracy-related penalty, taxpayer must have "substantial authority" for an undisclosed position. That authority must be based on only on primary sources, not secondary sources. Tax journals may give some insight to the preparer, but they are not considered "substantial authority" under the Code

Explain the difference in primary and secondary sources of tax information and give several examples of each.

Primary authority consists of original pronouncements that come from government sources, including statutory, administrative, or judicial sources. Statutory authority comes out of the legislative branch of government, the U.S. Congress, and includes the Internal Revenue Code, legislative history, and tax treaties. Administrative documents come out of the IRS, including regulations, rulings, taxpayer publications, and other guidance documents. The judiciary releases court opinions which are a judicial primary source. Secondary sources consist of interpretations of primary authority and are an unofficial source of tax information. Secondary authority includes tax services, journals, textbooks, treatises and newsletters.

Taxation and tax practice are comprised of the interaction of several disciplines. What are those disciplines? Briefly discuss their impact on the tax system.

Tax practice involves a blend of accounting and law. The tax law itself is a product of economics, political science, and sociology. Each of these disciplines influences taxation in a different way. Economics provides input about how the tax law will affect the economy. Political science is the process by which laws are made, and sociology provides the framework to determine the equity and societal goals of the tax law

What standard must tax practitioners meet under Section 6694 (preparer penalties) of the Internal Revenue Code with respect to undisclosed positions taken on tax returns?

Tax return positions which are not disclosed on the tax return must meet the standard of "substantial authority" (40%) to avoid the penalties under Code Section 6694, relating to understatement of taxpayer's liability by tax return preparer.

"Wildcards" such as an asterisk can be used to search for word variations in most tax services.

True

A CPA can rely without verification on information given to the CPA by a taxpayer unless the information appears to be incorrect.

True

An attorney, CPA, or enrolled agent may use advertising to obtain clients under Circular 230.

True

An ethical dilemma occurs when someone is faced with a situation for which there are no clearly defined answers.

True

Circular 230 bans tax practitioners from giving written advice on a Federal tax issue based on the likelihood of an audit.

True

Enrolled actuaries are allowed to practice before the IRS.

True

Paid tax return preparers must register with the IRS and obtain a PTIN.

True

RIA Checkpoint is a web-based tax research service that contains all the RIA material on Federal, state, local, and international taxation.

True

Skilled tax research requires a combination of reasoning and creativity.

True

State Boards of Accountancy are the organizations with responsibility to license public accountants in each state.

True

The CPA exam is prepared by the AICPA.

True

The Sarbanes-Oxley Act addresses issues of corporate governance as well as the independence of auditors.

True

The Tax Adviser journal is published by the AICPA.

True

The power of Congress to implement and collect taxes is summarized in the Internal Revenue Code, the official title of U.S. tax law.

True

To become an enrolled agent, a person must either pass a special IRS examination or must work for the IRS for at least five years.

True

Topical tax services are arranged by subject as defined by the publisher's editorial staff.

True

The tax research process should be approached in a structured, step-by-step manner.

True, more structured approach is more efficient and leads to better accuracy

Who may represent a taxpayer before the IRS in cases which go beyond the examination of the return?

Under Circular 230, the following individuals may represent taxpayers before the IRS beyond the examination stage: - Attorneys - CPAs - Enrolled agents (Who passed IRS exam on individual, business and procedural tax issues OR has formerly been employed by IRS for 5 years) - Enrolled actuaries & Retirement Plan Agents NOT: - Registered Tax Return Preparer (TRP) - Certain authorized individuals may represent taxpayers in special situations under the "limited practice without enrollment" rules of Section 10.7.

Does the IRS regulate unenrolled tax preparers? Explain your answer.

Yes, unenrolled preparers are now regulated by the IRS under proposed amendments to Circular 230 and recent IRS regulations. Tax return preparers who prepare returns for compensation and sign the return are authorized to conduct "limited practice" before the IRS. The tax return preparer may only make an appearance before the Examination Division of the IRS. All paid preparers must register for a Preparer Tax Identification Number (PTIN) and include that number on all returns submitted to the IRS. In addition, tax return preparers are subject to competency testing and are required to take continuing professional education courses. They also are subject to the Circular 230 ethical standards.

What are the functions performed by the Mathematical/Clerical Error Program?

- Check every return for mathematical errors - Re-compute the tax due after properly applying the numbers that are included in the return - Summarily assess any additional tax that is due or allows refunds or credits based on (previously) miscomputed deductions or credits. - A summary assessment may be made concerning any deficiency that results from a mathematical or clerical error

Define General and Legislative Regulations Explain the Distinction

- General Regulations are issued under the general authority granted to the IRS to interpret the language of the Code. - Legislative Regulations are issued by the IRS as directed by the Congress to effectively perform a law-making function and to specify the substantive requirements of a tax provision. - Legislative Regulations bear the greatest precedential value of any IRS pronouncement.

"If a taxpayer cannot resolve his or her dispute with the IRS administratively, he or she may seek judicial relief." Explain how a taxpayer can seek relief through the judicial system.

- TP can choose from the U.S. Tax Court, district court, and U.S. Court of Federal Claims to initiate lawsuit against the government. - TC will review the taxpayer's case provided that TP files a petition with the court within 90 days of the date of his or her statutory notice of deficiency. - DC's & CoFC's cannot hear the taxpayer's case unless he or she is suing for a refund, so must first pay the disputed tax, and then file an (unsuccessful) claim for refund to obtain a judicial review in either of these latter two forums

Describe the steps in the legislative process by which a tax bill becomes law.

1. Most originate in House of Representatives 2. In the House, tax law changes are considered by Ways and Means Committee. 3. When approved, bill is sent to the Senate Finance Committee. 4. When approved, sent to Senate floor for vote. 5. If Senate passes different version, sent to Joint Conference Committee to negotiate 6. Compromised bill must be approved by both the House and the Senate 7. If approved, sent to the President for his signature 8. If signed, becomes Public Law and new provisions incorporated into IRC 9. If vetoed by President, Congress can override with a sufficient revote

List the three types of IRS written determinations Briefly explain the differences

1. Private Letter Rulings - issued by the National Office of IRS in response to a taxpayer's request for IRS's position on specified tax issue - Usually a proposed transaction 2. Technical Advice Memoranda - issued by the IRS National Office in response to a request by an IRS agent when a question arises during an audit. - Deal with completed transactions. 3. Determination Letters - similar to Private Letter Rulings, but they are issued by a local IRS office such as a District Director, to a taxpayer, - generally treatment of completed transaction.

A "writ of certiorari" is: a. the process by which the Supreme Court agrees to review a lower court decision. b. a judgment notwithstanding the verdict. c. the procedure for determining if the authorities can hold an individual in custody. d. a reversal of the prior decision of a court.

Allowing an investment to increase in value without selling it is an example of tax planning by: a. changing the timing of recognition of taxable income. b. changing the character of income. c. spreading income among related parties. d. Only (a) and (b).

An appeal from the Tax Court is to the: a. U.S. Court of Appeals where the taxpayer is located. b. District Court where the taxpayer is located. c. U.S. Court of Federal Claims d. Supreme Court

An unenrolled tax return preparer can make an appearance as the taxpayer's representative only before the: a. Examination Division of the IRS b. Appeals and Collection Division of the IRS c. SB/SE Division of the IRS d. Criminal Investigation Division of the IRS

Decisions of which court(s) are published by West Publishing Company in its Federal Supplement (F.Supp.) Series? a. District Courts b. U.S. Court of Federal Claims a. U.S. Courts of Appeal b. All of the above

Each Congress lasts for: a. 2 years b. 1 year c. 3 years d. 4 years

For 2010, the amount of exemption that a child can enjoy on any interest, dividends or capital gains income is limited to: a. $950. b. $1900. c. $10,000. d. There is no exemption for this type of income.

How much time from the date of issue of 30-day letter does a taxpayer get to request for a conference with an appeals officer? a. 30 days b. 90 days c. 10 days d. 21 days

If a return is identified as including an unallowable item, the IRS: a. Computes the seemingly necessary adjustment in taxes, and the taxpayer is notified by mail. b. Sends a formal notice of deficiency to the taxpayer. c. Considers the contact that it makes with a taxpayer under this circumstance to be an examination. d. Cancels the return and asks the taxpayer to file his return again.

In a court case, "dictum" or "dicta" is: a. a statement or remark that is not necessary to support the court's decision. b. the legal concept that bars relitigation on the same set of facts. c. a judgment that reverses the determination of a jury. d. none of the above.

In the citation Rev Rul. 87-90, 1987-1 CB 198, the number '90' is the: a. Ruling number for the year. b. Year of ruling. c. Paragraph number in the CB. d. Volume number in the CB

In which of the following courts is a jury trial available? a. U.S. District Courts b. Tax Court c. U.S. Court of Federal Claims d. All of the above.

Most official IRS pronouncements are written by: a. The IRS Office of Chief Counsel b. The IRS Commissioner c. The Treasury Secretary d. IRS Field Office Staff Members

Most sales and property taxes in the U.S. employ a: a. proportional rate structure. b. regressive rate structure. c. progressive rate structure. d. consumption rate structure.

Other factors being equal, decisions of which of the following Circuit Courts should be given additional weight when evaluating sources? a. the Second and Ninth Circuits. b. the Sixth and Ninth Circuits. c. the Federal and First Circuits. d. All the above courts have equal weight.

Tax planning: a. is a completely legal means for saving taxes. b. has as its goal tax evasion. c. endeavors to understate the taxpayer's real wealth. d. is all of the above.

Tax research issues can be divided in two main categories. These are: a. fact and law issues b. primary and secondary issues c. major and minor issues d. internal and external issues e. tax and nontax issues

Taxpayers often can legally reduce their exposure to taxation by: a. avoiding the accumulation of gross income that must be recognized. b. deducting federal taxes. c. not appearing before tax officials. d. postponing deductions.

The Commissioner of the Internal Revenue Service (IRS) is appointed by the: a. President of the United States b. Secretary of the Treasury c. Senate d. Congress

The IRS is now organized into what kind of lines: a. Type of taxpayer b. Remedy requested c. Functional d. Type of tax

The Lowell Bar Association v. Loeb case addressed the issue of: a. unauthorized practice of law by nonattorneys engaged in tax practice b. legal research by taxpayers c. attorneys and CPAs working together in a practice d. all of the above

The Tax Management Portfolios are published by: a. CCH b. RIA c. Bureau of National Affairs (BNA) d. LexisNexis

The heart of tax research communication is: a. the File Memo b. primary source material. c. secondary source material. d. network links.

The tax rate that is applied on the next dollar of taxable income is referred to as the: a. marginal tax rate. b. effective tax rate. c. before-tax cost. d. None of the above.

To whom does the Chief Council of the Internal Revenue Service report to: a. The Commissioner of the Internal Revenue Service b. Secretary of the Treasury c. The Regional Council in National Office d. The Attorney General

When a taxpayer does not agree with the IRS agent's proposed adjustments a: a. 30-day letter is issued b. RAR is issued c. 10-day notice is issued d. 21-day notice is issued

Where ATC = after-tax cost, BTC = before-tax cost, and MTR = marginal tax rate, the after-tax cost of tax planning can be expressed as: a. ATC = BTC * (1-MTR). b. a factor of the time value of money. c. MTR * taxable income =ATC. d. ATC = BTC ÷ (1-MTR).

Where are current U.S. Court of Federal Claims decisions published? a. West's U.S. Court of Federal Claims reporter (Fed. Cl.) b. West's Federal Reporter, Third Edition (F.3d.) c. West's Federal Supplement series (F. Supp.) d. None of the above.

Which of the following IRS pronouncement citations is INCORRECT? a. Notice 07-10, 2007 C.B. 324 b. Publication 519 c. Rev. Proc. 2011-14, 2011 I.R.B. 532 d. Action on Decision 2010-002 e. All of the above citations are correct

Which of the following IRS pronouncements has the highest weight of authority? a. IRS Revenue Rulings b. IRS Taxpayer Publications c. IRS Announcements d. All of the above IRS pronouncements have equal weight of authority.

Which of the following Regulations bears the greatest precedential value? a. Legislative Regulations b. Proposed Regulations c. General Regulations d. Income Tax Regulations

Which of the following is CORRECT with respect to Private Letter Rulings? a. They are issued by the IRS National Office in response to a specific taxpayer request. b. They can be cited as precedent by other taxpayers. c. They are published weekly by the IRS in the Internal Revenue Bulletin. d. They are also known as Technical Advice Memoranda. e. None of the above statements is correct

Which of the following is a secondary court reporter? a. USTC b. U.S. c. F.Supp. d. F.2d. e. None of the above.

Which of the following is true about the Tax Reform Act of 1986? a. It lowered the top individual income tax rate from 50 percent to 28 percent. b. It decreased the capital gains rate. c. It lowered the bottom individual income tax rate from 15 percent to 11 percent. d. All of the above.

Which of the following sections of the Internal Revenue Code deal with partnerships? a. the 700s b. the 300s c. Section 162 d. Section 501

Which of the following statements is CORRECT regarding the use of visual aids in oral presentations? a. Visual aids should be used to illustrate ideas that are difficult to convey strictly with words. b. On average, allow at least six minutes of spoken presentation for each slide. c. Slides should be colorful with substantial amounts of text. d. Only (a) and (c).

Which of the following statements is INCORRECT regarding effective dates in the Internal Revenue Code: a. All sections of a new tax law go into effect at the same time. b. New Code provisions may not go into effect immediately upon adoption by Congress. c. Some effective dates can precede passage of the act. d. All of the above are correct.

Which of the following statements is INCORRECT regarding the effective date of Regulations? a. A Regulation becomes effective 18 months after the statute on which it is based was enacted. b. A Regulation is effective on the date on which the Regulation is filed with the Federal Register. c. Temporary regulations are effective immediately upon publication. d. All of the above statements are correct.

Which of the following statements is INCORRECT regarding the structure of the Internal Revenue Code: a. Code section numbers start over in each chapter. b. Each Code section is used only once in the Internal Revenue Code. c. Code sections inserted between existing section numbers are indicated by adding a capital letter to the Section number (e.g. Section 25A) d. The Internal Revenue Code is Title 26 of the United States Code.

Which of the following would be a disadvantage to filing a protest in an IRS audit? a. The cost involved in filing the protest. b. Preserves the option for further litigation. c. The protest will delay the ultimate resolve of the issue. d. The protest will provide greater information to the taxpayer.

Which statement is CORRECT regarding the proper form for a client letter? a. Client letters should be brief. b. Client letters should be lengthy and detailed in order to avoid malpractice problems. c. Client letters should not exceed four pages. d. All of the above statements are correct.

Briefly discuss the difference between a letter to a sophisticated client and to an unsophisticated client.

A letter to an unsophisticated client should not include any detailed references to the controlling law, but should only discuss the research results in a general way. A letter to an unsophisticated client should not use technical tax terms, but instead should be written in a more conversational style. The file memo should not be attached to an unsophisticated client letter, but may be attached for a more sophisticated client.

What is a tax protestor and what types of sanctions are tax protestors subject to?

A tax protestor is someone who refuses to cooperate with the tax laws or pay tax based on frivolous or groundless legal positions. Frequently, tax protestors challenge the constitutionality of the federal income tax. Congress has passed several laws to discourage tax protestors. A taxpayer is subject to a $5,000 fine if he or she files a "frivolous" tax return as a form of protest against the IRS or the U.S. budgetary process. Also, the Tax Court can impose a penalty of up to $25,000 if the taxpayer brings a frivolous matter before the Court.

Some taxpayers may request to have their taxes assessed in 18 months.

True

There are 11 Circuit Courts of Appeals in the Federal court system.

False, 13 including D.C. and Federal Circuits

A fraudulent failure to file tax returns is subject to a 25 percent monthly penalty.

False, 15%

Trade or business deductions are contained in Code Section 62.

False, 162

The IRS was established by Congress on July 1, 1682, to meet the fiscal needs of the Civil War.

False, 1862

In most tax cases, the Internal Revenue Code places the burden of proof on the government.

False, BOP on taxpayer usually

T.D. 9479 refers to a Treasury Determination letter

False, DECISION, which is a temporary or final regulation

The IRS is responsible for administering and enforcing the internal revenue laws of the United States.

False, Department of Treasury is.

The Tax Exempt and Government Entities (TEGE) Division of the IRS comprises three business divisions: employer plans, export organizations, and government entities.

False, EMPLOYEE plans, EXEMPT organizations

The IRS's official publication for its pronouncements is the Internal Revenue Manual

False, IRB

Both Revenue Rulings and Letter Rulings have the same precedential value as far as authority in tax matters is concerned

False, Revenue Rulings > Letter Rulings Revenue Rulings can be cited as precedent

Spreading income among related taxpayers is one of the goals of tax planning behavior.

True

Statutory sources of Federal tax law come out of the legislative branch of the U.S. government.

True

Even if all of the judicial precedent supports a taxpayer's position, the court still may hold against the taxpayer.

True

Form 911 is a Request for Taxpayer Advocate Assistance.

True

Generally, an overpayment can be refunded or credited to the person who was subject to the original tax.

True

Generally, it is better to cite more recent court decisions than older decisions to support one's position.

True

Generally, the IRS selects returns for examination through the use of mathematical models, including correlations and discriminant functions.

True

Generally, the file memo should be accompanied in the file by briefs of one or more pertinent cases or administrative pronouncements.

True

Historically, the 1913 income tax was a tax on wealthy and high-income taxpayers.

True

IRS Technical Memoranda summarize and explain regulations

True

If a computer search generates too much information, the research may use fewer libraries or more unique keywords.

True

If a taxpayer disagrees with the scope or language of a Regulation, he or she has the burden of proving that the Regulation is improper

True

If a taxpayer never files a tax return then there is an endless Statute of Limitations on assessment.

True

If a taxpayer understates gross income by 25 percent, the IRS has a 6-year Statute of Limitations on assessment.

True

If the Statute of Limitations on assessment is about to expire, the IRS may request an extension, but the taxpayer is not required to agree to such extension.

True

In Pollock v. Farmers' Loan and Trust Co., the Supreme Court held that the income tax was unconstitutional because it was a constitutionally prohibited 'direct tax'.

True

In absence of an administrative summons, a taxpayer cannot be required to accompany the representative to an interview.

True

In cases where IRS examiner questions only one or two items on a selected return, an examination is typically conducted by mail called a correspondence examination.

True

Kleinrock's ATX service is designed for small firm practitioners conducting tax research.

True

More research engagements entail closed-fact settings than open-fact situations.

True

Most tax legislation begins in the House of Representatives.

True

One of the issues a tax researcher should be concerned about is how definitive a research result must be.

True

Proposed Regulations do not have the effect of law

True

Public speaking is an important part of the tax practitioner's professional life and can be an accurate predictor of success.

True

The best way for a practitioner to confirm his or her understanding of the discussion in a telephone conversation with a client is to: a. tape all client telephone calls. b. take accurate notes during the conversation. c. send a hard copy of a follow-up letter to the client. d. Important discussions with clients should only take place face-to-face.

The burden of proof in a fraud case is on the: a. tax payer b. tax court c. IRS d. tax practitioner

The citation ABC v. U.S, 967 U.S. 567 (2012) tells the tax researcher that this is a decision by which court? a. District Court b. Tax Court c. Supreme Court d. Court of Appeals

The citation ABC v. U.S., 375 F.2d. 456 (1992) tells the tax researcher that this is a decision by which court? a. a U.S. District Court b. the Tax Court c. a U.S. Circuit Court of Appeals d. Only (a) and (b)

The program that is designed to furnish the IRS with statistics concerning the type and number of errors that are made on a representative sample of individual income tax returns is the: a. Unallowable Items Program b. Mathematical/clerical Error Program c. National Research Program d. Discriminant Function Program

The two major elements of a client file are: a. invoices and full-text court opinions. b. internal firm memos and invoices. c. a client letter and a file memo. d. a written summary of telephone conversations and emails.

A taxpayer's return is classified for audit after receiving a high DIF score and being manually screened by an IRS classifier. Which of the following statements best describes whether the taxpayer will be contacted by an auditor or revenue agent: a. Yes, the taxpayer will be contacted since a high DIF score always will mean some type of audit. b. Yes, the taxpayer will be contacted because only the National Office has the power to decide that after screening the return need not be audited. c. No, the taxpayer will not necessarily be contacted since after the Service Center review, it may be decided that an audit is unwarranted. d. No, the taxpayer will not necessarily be contacted by an auditor or revenue a agent since after the return is screened by the Service Center, it then is randomly selected for audit.

An acquiescence indicates that a court decision will be: a. appealed by the IRS. b. followed in similar situations only if it favors the IRS. c. followed in similar situations, even if it is adverse to the IRS. d. ignored by the IRS

As of 2009, the percentage of U.S. households who did not pay any Federal income tax was roughly: a. 74 percent b. 30 percent c. 47 percent d. All U.S. houses pay some Federal income tax.

Choosing tax-free fringe benefits instead of an equivalent hike in salary is an example of tax planning by: a. accelerating income recognition. b. changing the timing of recognition of taxable income. c. avoiding income recognition. d. All of the above.

David Jacob, a salaried person, incurred a loss of $4,000 from passive activities. This loss can be applied as a deduction to offset taxable income from: a. his salary. b. his long-term capital gains for the year. c. passive activities. d. any source.

IRS General Counsel Memoranda are legal analyses which: a. convey the IRS decision to acquiesce/nonacquiesce in a court decision. b. summarize and explain published IRS Regulations. c. assist in preparation of both Revenue Rulings and Private Letter Rulings. d. have only short-term value.

If any differences exist between the House- and Senate-passed versions of a tax bill, the bill is referred to: a. the Finance Committee b. the President c. the Joint Conference Committee d. the Supreme Court

If taxpayers choose not to pay a tax deficiency, then they must petition which court? a. the District Court b. the U.S. Court of Federal Claims c. the Tax Court d. the U.S. Court of Appeal

In Walter H. Johnson, 34 TCM 1056, '34' stands for the: a. year of decision b. page number c. volume number d. paragraph number

In case of underpayment of taxes, if the deficiency is not paid in a timely fashion, interest is imposed on the unpaid amount for a period that begins on the date of: a. Filing return and ends on the date of payment or the last working day of the respective year, whichever is later. b. Filing return and ends on the date of payment. c. The notice and demand and ends on the date of payment. d. The notice and demand and ends on the date when the taxpayer receives the notice.

Most CPAs and other tax advisors include some form of blanket disclaimer in the tag line of all their e-mail and other written correspondence sent to clients because of: a. malpractice avoidance. b. The 10-80-10 rules. c. Circular 230 covered opinions rules. d. all of the above.

Regulations may have retroactive effect in which of the following circumstances: a. The Regulation is designed to prevent abuse by taxpayers. b. The Regulation relates to internal Treasury Department policies, practices, or procedures. c. Both (a) and (b). d. Regulations can never be effective retroactively.

Revenue Procedures deal with: a. Specific taxpayer requests for the IRS's position on a tax issue. b. Applying the Code and Regulations to a specific factual situation. c. The internal practice and procedures of the IRS in the administration of the tax laws. d. All of the above.

Subtitle A of the Internal Revenue Code deals with: a. estate and gift taxes b. employment taxes c. income taxes d. excise taxes

The IRS's general authority to issue binding rules and regulations comes from which source? a. The United States Constitution b. An Executive Order of the President c. A section of the Internal Revenue Code itself. d. None of the above.

The Taxpayer Assistance Order (TAO) is issued by the: a. Secretary of Treasury b. Chief Counsel c. National Taxpayer Advocate d. Commissioner of IRS

The United States Tax Cases reporter is published by: a. RIA. b. CCH. c. West Publishing. d. the Government Printing Office (GPO).

A tax return preparer (TRP) is: a. Necessarily a CPA as required by the IRS. b. Not subject to any kind of penalty as he/she prepares return on behalf of taxpayer. c. Any person who prepares tax returns gratuitously. d. Any person who prepares tax return for compensation.

A taxpayer who files a corrected 1040 after filing a fraudulent 1040 will have a statute of limitations on the assessment of that return of: a. 3 years b. 6 years c. 1 and a half years d. None

A "tax protestor" is: a. a person who files a 'frivolous' return with the IRS b. a person who brings a "frivolous" matter before the Tax Court c. can be subject to a penalty for frivolous Tax Court petitions d. all of the above e. only a and b

A 'large corporation' as defined in the Code is one which had a taxable income of: a. $10 million or more in any of the 10 immediately preceding taxable years. b. $2 million or more in any of the two immediately preceding taxable years. c. $5 million or more in any immediately preceding five taxable years. d. $1 million or more in any of the three immediately preceding taxable years.

A form 911 is filed by the Taxpayer for which of the following: a. National Research Program b. Appeals Conference c. Tax Court Hearing d. Taxpayer Assistance

A subtitle of the Internal Revenue Code: a. is indicated by a capital letter, such as "Subtitle A" b. relates to a well-defined area of the law c. is used as a short-hand reference to describe types of corporations d. only a and b e. all of the above

Which of the following Regulations deals with estate taxes? a. Reg. §1.162-21(a)(2) b. Reg. §25.2503-4 c. Reg. §1.6662-5T d. Reg. §31.3121(a)-2 e. None of the above.

Which of the following statements is CORRECT regarding Committee Reports? a. They are published in the Internal Revenue Bulletin. b. They are produced by the Treasury Department. c. They explain the elements of proposed tax law changes and reasons for the changes. d. all of the above e. only a and c

Which of the following statements is CORRECT regarding the U.S. Court of Federal Claims? a. It hears monetary claims against the Federal government, including tax refund claims. b. It is a national court based in Washington, D.C. c. It must apply the law in of the U.S. Court of Appeals in the taxpayer's circuit. d. All of the above statements are correct. e. Only (a) and (b) are correct.

A Regulation can never be made effective retroactively

False

Assessable penalties are subject to review by the Tax Court.

False

If a taxpayer is convicted of criminal fraud, he or she can contest a civil fraud determination.

False

Taxpayers who file frivolous returns are subject to a $25,000 fine.

False, $5,000. Tax Court penalty is $25K.

The Small Cases Division of the Tax Court can only hear cases involving a disputed deficiency, including penalties, of $15,000 or less.

False, $50,000 or less

Individual Taxpayers have around a 20% chance of being audited.

False, 1-6% chance

List out some of the possible defenses that a tax payer may resort to against a charge of criminal tax offence.

Possible defenses to establish some doubt: • Unreported income would have been fully offset by unreported deductions • Unreported income was in reality a gift or some other excludible receipt • TP was ignorant or confused as to the applicable law • TP relied on the erroneous advice of a competent tax advisor • TP's mental/emotional abilities would not allow TP to form and execute plan to evade tax • The statute of limitations had expired • TP enters a plea bargain and accepts conviction on a lesser offense

What are the "Pros" and "Cons" of filing a protest to an IRS Audit?

Pros: 1) Allows for another review of issue by independent Appeals Officer. 2) No reason to retain an attorney, anyone authorized to practice before the IRS may represent TP. 3) Will delay the resolution of the issue. 4) Matter can still be taken to U. S. TC, DC's or CoFC's. Cons: 1) The interest and penalties continue to run if protest not filed. 2) Professional assistance usually required if not filed. 3) If not filed, new issues can be discovered.

What is a statutory tax trap? Give an example.

Statutory tax traps are rules designed by Congress to prevent certain techniques of tax avoidance. i.e. Section 482 of the Internal Revenue Code gives the IRS the power to reallocate both income and deductions among related companies to reflect "true taxable income." - The IRS may make an allocation of income from one foreign subsidiary to another foreign subsidiary of a U.S. multinational corporation to reflect the market value of services provided by one subsidiary to the other. - if the subsidiary providing the services does not charge market value for those services.

Return preparers are subject to criminal prosecution for willful misconduct.

True

A Power of Attorney is necessary when a qualified representative goes to the IRS to represent a Taxpayer.

True

A failure to pay penalty is imposed when the taxpayer fails to pay either a tax shown on his or her return or an assessed deficiency within 10 days of an IRS notice or demand.

True

A field examination is usually limited to an examination of corporations and individual business returns.

True

A nonacquiescence indicates that the IRS disagrees with the adverse decision in the case and will follow the decision only for the specific taxpayer whose case resulted in the adverse ruling

True

A regular Tax Court decision generally involves a new or unusual point of law, as determined by the Chief Judge of the Court.

True

A report of Floor Debate is included in the Congressional Record and may include some detailed or technical information that is excluded from a Committee Report.

True

A taxpayer's appeal must be in written form if the total proposed additional tax and penalties exceed $2,500.

True

Actions on Decision are published by the IRS in the Internal Revenue Bulletin first and thereafter in the Cumulative Bulletin

True

An IRS Technical Advice Memorandum applies strictly to the taxpayer for whose audit it was requested and cannot be relied upon by other taxpayers

True

An RAR contains a brief explanation of the proposed adjustments and lists the balance due or the overpayment.

True

An individual should make a claim for refund or credit in the Form 1040X.

True

Assessment of an internal revenue tax must be made within three years of the later of: - date that the return was actually filed - the actual (i.e., not extended) due date of the return.

True

District Court decisions can vary significantly among the districts.

True

District Courts hear cases based on the entire U.S. Code, not just the Internal Revenue Code.

True

Each U.S. Court of Appeals is independent and need not follow other Circuits in making their decisions.

True

Either the taxpayer or the IRS may initiate legal proceedings in the Federal court system.

True

En banc refers to a court decision by the full court.

True

Could a taxpayer make such a small amount of income that a tax return not be filed and still have an unlimited Statute of Limitations on Assessment?

Yes, a taxpayer who innocently fails to file a tax return is subject to an unlimited period of assessment for the tax (§6501(c)(3).

What are the requirements to be satisfied for the issue of an injunction by the IRS against a TRP who is guilty of misconduct to prohibit him or her from engaging in such misconduct or from practicing as a return preparer?

preparer must have (Any one of): • violated a preparer penalty/criminal provision of the Code, • misrepresented eligibility to practice before the IRS, • guaranteed payment of any tax refund/allowance of a credit, • engaged in other fraudulent or deceptive conduct that substantially interferes with the administration of the tax laws.

Tax planning has been said to offer an opportunity for the most psychologically and financially rewarding work in tax practice. What is it about tax planning that would lead one to his conclusion?

tax planning represents the "glamour" end of the practice because properly accomplished tax planning: (1) forces the client to identify broad financial goals and general means by which to accomplish them, thereby engaging the practitioner in more activities than otherwise might be the case (2) allows the tax professional to show a higher degree of creativity than in any other part of the practice and (3) provides the practitioner the greatest degree of control over the prescribed transactions and their tax consequences, especially in open-fact situations.

Describe the types of factual issues of importance in a tax research case.

• The client's tax entity, for example, individual, corporation, or trust. • The client's family status and stability. • The client's past, present, and projected marginal tax rates. • The client's place of legal domicile and citizenship. • The client's motivation for the transaction. • The relationships among the client and other parties who are involved in the transaction. • Whether special tax rules apply to the taxpayer due to the type of business in which the taxpayer is engaged (i.e., he or she is a farmer, fisherman, or long-term contractor). • Whether the transaction is proposed or completed.

What are the guiding principles of the IRS?

• Understand and solve problems from the taxpayers' point of view. • Enable its managers to be accountable to taxpayers. • Use balanced measures of performance for taxpayer satisfaction, business results & employee satisfaction. • Foster open, honest communications. • Insist on total integrity.

State the purposes for which a file memorandum is designed.

• organize the facts, issues, and conclusions of the project • facilitate a review of the research activities by the practitioner's supervisors or colleagues • allow for a subsequent examination of the research issue, by the original researcher or by his or her successor, with respect to the same or another client's identical or related fact situation.

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