Exam 2: The Tax Practice Environment

The number appearing immediately to the right of the decimal in a regulation citation indicates

Explain the difference between a closed fact and an open fact transaction.

Which of the following types of returns does not have an unextended due date of the 15th day of the 4th month after the end of the tax year?

If a firm's discount rate is lower than another firm's, the present value of its future cash flows will be higher.

The Internal Revenue Service must pay interest on any refund that is not mailed within 30 days of the date the taxpayer's tax return is filed.

Which of the following does not deal with a CPA's standard of conduct

Explain what is meant by changing the character of income? Provide an example.

Changing which of the following factors as indicated would increase the after-tax net cash flow of a project:

Which of the following is not one of the Statements on Standards for Tax Services?

A closed-fact situation means that

To which trial courts may a taxpayer contest a decision of the IRS?

The statute of limitations for a return that inadvertently overstates expenses by 30 percent of gross revenues is

Which of the following paid tax return preparers must have a preparer tax identification number?

15 The Cumulative Bulletin contains reports of all the committees involved in tax writing as well as statements made on the floor of the House or Senate.

Jacko Corporation has two projects in which it can invest. Project A has a $500,000 initial cost and will return $700,000 after tax in 4 years. Project B has a $300,000 initial cost and its after-tax returns will be $150,000 in year 1 and $200,000 in year 2. Using a 7 percent discount rate for evaluation, which project(s) should Jacko invest in?

The document that provides the application of the law to a particular set of facts is a

If a CPA finds an error on a previously filed tax return of a client, he or she should advise the client to file an amended return to correct the error.

Carl is unsure of which rate he should use as a discount rate for project evaluations, 7 percent or 10 percent. If he can invest $30,000 in a project that will return $40,000 after-tax in four years, what is the result?

For each entry in the following list, indicate with a P if it is a primary source of tax law or an S if it is a secondary source of tax law. -A tax textbook f. Internal Revenue Code b. Tax Court Decision g. A Court of Federal Claims decision c. Kiplinger Tax Letter h. Committee reports d. Journal of Accountancy i. The Tax Adviser e. Legislative regulations j. Revenue ruling

Only CPAs, Enrolled Agents, and Attorneys who prepare tax returns for pay must obtain preparer tax identification numbers.