Question 1

What is the difference between a primary and a secondary source of tax authority?

Accepted Answer

Primary sources of tax authority come from statutory, administrative, and judicial sources. Secondary sources consist of tax services (reference services), books, journals and newsletters; these are used to assist researchers in locating and interpreting the primary sources.

Question 2

Acquiescence by the Internal Revenue Service's Commissioner means that the IRS will follow the decision in the future.

Accepted Answer

A) True 
 B)False  True

Question 3

Joaquin did not have any money to pay his $2,000 tax liability on April 15 so he did not file his tax return. He finally filed the return on July 25 and paid $1,000 of the tax due. He paid the remaining tax due on October 18. What is his total penalty?

Accepted Answer

$415; (4 months x .05 x $2,000) + (3 months x .005 x $1,000) = $415.

Question 4

The business purpose doctrine requires a transaction to have an economic purpose other than one based solely on tax avoidance.

Accepted Answer

A) True 
 B)False

Question 5

An individual may apply for an automatic extension of time to file a return of

Accepted Answer

A)  Extensions are not permitted 
B)  3 months 
C)  4 months 
D)  6 months 
A)  Extensions are not permitted 
B)  3 months 
C)  4 months 
D)  6 months

Question 6

What is the unextended due date for a corporation with a March 31 year-end?

Accepted Answer

A)  April 15 
B)  May 15 
C)  June 15 
D)  July 15 
A)  April 15 
B)  May 15 
C)  June 15 
D)  July 15

Question 7

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

Accepted Answer

A closed fact transaction is one in whic

Question 8

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.

Accepted Answer

A) True 
 B)False

Question 9

The Internal Revenue Code is divided into

Accepted Answer

A)  Chapters and sections only 
B)  Titles and subtitles only 
C)  Subtitles, chapters, subchapters and sections 
D)  Titles, chapters and sections 
A)  Chapters and sections only 
B)  Titles and subtitles only 
C)  Subtitles, chapters, subchapters and sections 
D)  Titles, chapters and sections

Question 10

A closed-fact situation means that

Accepted Answer

A)  all of the client's transactions have occurred and the research focuses on finding support for the action already taken. 
B)  all of the client's transactions have not yet occurred so the events may be carefully planned. 
C)  the client's tax return has not yet been filed. 
D)  the client is requesting tax planning advice for a future transaction. 
A)  all of the client's transactions have occurred and the research focuses on finding support for the action already taken. 
B)  all of the client's transactions have not yet occurred so the events may be carefully planned. 
C)  the client's tax return has not yet been filed. 
D)  the client is requesting tax planning advice for a future transaction.

Question 11

William just did not like figuring out his taxes each year and he usually had so little income that he didn't owe taxes. He never filed an extension even though he seldom got around to filing before October or November. He finally filed his 2017 return in September of 2018 when he remembered he had sold some stock in early 2017 for a small profit. Unfortunately, he owed $125 in taxes because of the sale. What is William's failure to file penalty?

Accepted Answer

$125; William's failure to fil

Question 12

The primary source of tax authority that provides explanations, definitions, and examples of tax laws is the

Accepted Answer

A)  Internal Revenue Code 
B)  Revenue rulings 
C)  Regulations 
D)  Letter rulings 
A)  Internal Revenue Code 
B)  Revenue rulings 
C)  Regulations 
D)  Letter rulings

Question 13

Crispen Corporation can invest in a project that costs $400,000. The project is expected to have an after-tax return of $250,000 in each of years 1 and 2. Crispen normally uses a 10 percent discount rate to evaluate projects but feels it should use 12 percent to compensate for inflation. How much difference does the rate make in the after-tax net present value of the project?

Accepted Answer

A)  $50,000 
B)  $22,500 
C)  $20,000 
D)  $11,250 
A)  $50,000 
B)  $22,500 
C)  $20,000 
D)  $11,250

Question 14

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

Accepted Answer

The three courts of original jurisdictio

Question 15

What is meant by the phrase "substance-over-form"?

Accepted Answer

The phrase "substance-over-form" means t

Question 16

A six-year statute of limitations applies if the taxpayer

Accepted Answer

A)  understates adjusted gross income by 25% 
B)  understates taxable income by 25% 
C)  understates gross income by 25% 
D)  overstates deduction by 25% 
A)  understates adjusted gross income by 25% 
B)  understates taxable income by 25% 
C)  understates gross income by 25% 
D)  overstates deduction by 25%

Question 17

The Internal Revenue Service has the burden of proof when it is asserting fraud with the intent to evade taxes on the part of the taxpayer.

Accepted Answer

A) True 
 B)False

Question 18

Merced Company has invested $200,000 in a project. It had before tax net income of $100,000 in year 1, $150,000 in year 2, and $125,000 in year 3. What is the net present value of this project's after-tax net cash flow if Merced's discount rate is 8 percent and its marginal tax rate is 21 percent in all years?

Accepted Answer

A)  $53,116 
B)  $120,000 
C)  $253,116 
D)  $320,400 
A)  $53,116 
B)  $120,000 
C)  $253,116 
D)  $320,400

Question 19

Explain the step transaction doctrine.

Accepted Answer

The step transaction doctrine is normall

Question 20

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?

Accepted Answer

A)  S corporations 
B)  C Corporations 
C)  Individuals 
D)  Trusts 
A)  S corporations 
B)  C Corporations 
C)  Individuals 
D)  Trusts

What is the difference between a primary and a secondary source of tax authority?

Acquiescence by the Internal Revenue Service's Commissioner means that the IRS will follow the decision in the future.

Joaquin did not have any money to pay his $2,000 tax liability on April 15 so he did not file his tax return. He finally filed the return on July 25 and paid $1,000 of the tax due. He paid the remaining tax due on October 18. What is his total penalty?

The business purpose doctrine requires a transaction to have an economic purpose other than one based solely on tax avoidance.

An individual may apply for an automatic extension of time to file a return of

What is the unextended due date for a corporation with a March 31 year-end?

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

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.

The Internal Revenue Code is divided into

A closed-fact situation means that

The primary source of tax authority that provides explanations, definitions, and examples of tax laws is the

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

What is meant by the phrase "substance-over-form"?

A six-year statute of limitations applies if the taxpayer

The Internal Revenue Service has the burden of proof when it is asserting fraud with the intent to evade taxes on the part of the taxpayer.

Explain the step transaction doctrine.

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?

Introduction to Taxation

Determining Gross Income

Employee Compensation

Deductions for Individuals and Tax Determination

Business Expenses

Property Acquisitions and Cost Recovery Deductions

Property Dispositions

Tax-Deferred Exchanges

Taxation of Corporations

Sole Proprietorships and Flow-Through Entities

Estates, Gifts, and Trusts

Filters

Exam 2: The Tax Practice Environment

What is the difference between a primary and a secondary source of tax authority?

Acquiescence by the Internal Revenue Service's Commissioner means that the IRS will follow the decision in the future.

Joaquin did not have any money to pay his $2,000 tax liability on April 15 so he did not file his tax return. He finally filed the return on July 25 and paid $1,000 of the tax due. He paid the remaining tax due on October 18. What is his total penalty?

The business purpose doctrine requires a transaction to have an economic purpose other than one based solely on tax avoidance.

An individual may apply for an automatic extension of time to file a return of

What is the unextended due date for a corporation with a March 31 year-end?

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

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.

The Internal Revenue Code is divided into

A closed-fact situation means that

The primary source of tax authority that provides explanations, definitions, and examples of tax laws is the

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

What is meant by the phrase "substance-over-form"?

A six-year statute of limitations applies if the taxpayer

The Internal Revenue Service has the burden of proof when it is asserting fraud with the intent to evade taxes on the part of the taxpayer.

Explain the step transaction doctrine.

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?

Introduction to Taxation

Determining Gross Income

Employee Compensation

Deductions for Individuals and Tax Determination

Business Expenses

Property Acquisitions and Cost Recovery Deductions

Property Dispositions

Tax-Deferred Exchanges

Taxation of Corporations

Sole Proprietorships and Flow-Through Entities

Estates, Gifts, and Trusts

Filters