Question 1

The statute of limitations for an error overstating expenses by more than 25 percent is 3 years.

Accepted Answer

A) True 
 B)False

Question 2

An open-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 assistance regarding a previously filed tax return. 
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 assistance regarding a previously filed tax return.

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

Which type of audit is most frequently used for examination of business returns?

Accepted Answer

A)  Correspondence audit 
B)  Office audit 
C)  Noncompliance audit 
D)  Field audit 
A)  Correspondence audit 
B)  Office audit 
C)  Noncompliance audit 
D)  Field audit

Question 5

When may a CPA use estimates in the preparation of a client's tax return?

Accepted Answer

A CPA may use estimates to prepare a tax

Question 6

The IRS must pay interest on

Accepted Answer

A)  tax refunds paid later than 30 days after the due date. 
B)  tax refunds paid later than 45 days after the due date. 
C)  all tax refunds. 
D)  The IRS never pays interest on tax refunds. 
A)  tax refunds paid later than 30 days after the due date. 
B)  tax refunds paid later than 45 days after the due date. 
C)  all tax refunds. 
D)  The IRS never pays interest on tax refunds.

Question 7

Which of the following committees is not involved in the tax writing process?

Accepted Answer

A)  Ways and Means 
B)  Joint Conference 
C)  Judiciary 
D)  Senate Finance 
A)  Ways and Means 
B)  Joint Conference 
C)  Judiciary 
D)  Senate Finance

Question 8

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

Accepted Answer

a. S; b. P; c. S; d.

Question 9

The Tax Cuts and Jobs Act is numbered H.R. 1 and after passage by Congress became P.L. 115-97. The prefix and the suffix of the public law number refer to the following, respectively:

Accepted Answer

A)  the session of Congress that passed the law; bills adopted during that Congressional session 
B)  bills adopted during that Congressional session; the session of Congress that passed the law 
C)  Neither a or b 
A)  the session of Congress that passed the law; bills adopted during that Congressional session 
B)  bills adopted during that Congressional session; the session of Congress that passed the law 
C)  Neither a or b

Question 10

A taxpayer will receive a 30-day letter

Accepted Answer

A)  only if the taxpayer is more than 30 days late in filing the tax return. 
B)  to provide notification that the taxpayer's return has been selected for audit. 
C)  after a 90-day notice of deficiency notifying the taxpayer there is only a 30-day period to file a protest in court 
D)  as the first notice of a proposed deficiency 
A)  only if the taxpayer is more than 30 days late in filing the tax return. 
B)  to provide notification that the taxpayer's return has been selected for audit. 
C)  after a 90-day notice of deficiency notifying the taxpayer there is only a 30-day period to file a protest in court 
D)  as the first notice of a proposed deficiency

Question 11

Explain what is meant by the statute of limitations.

Accepted Answer

The statute of limitations is the period

Question 12

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

Accepted Answer

A)  Delaying the years in which inflows occur 
B)  Delaying revenue recognition 
C)  Increasing the discount rate 
D)  All decrease cash flows 
E)  None decrease cash flows 
A)  Delaying the years in which inflows occur 
B)  Delaying revenue recognition 
C)  Increasing the discount rate 
D)  All decrease cash flows 
E)  None decrease cash flows

Question 13

A high DIF score indicates which of the following?

Accepted Answer

A)  The taxpayer is likely to get a refund 
B)  The taxpayer's chances of audit are substantially less than 2% 
C)  IRS will automatically grant an extension of time to appeal 
D)  The taxpayer's chances of audit are fairly high 
A)  The taxpayer is likely to get a refund 
B)  The taxpayer's chances of audit are substantially less than 2% 
C)  IRS will automatically grant an extension of time to appeal 
D)  The taxpayer's chances of audit are fairly high

Question 14

What is the minimum penalty for a taxpayer who fails to file his or her return for over 60 days past the due date without reasonable cause?

Accepted Answer

A)  The amount owed on the return 
B)  $135 
C)  The amount owed on the return or $210, whichever is less 
D)  4.5% of the amount owed on the return. 
A)  The amount owed on the return 
B)  $135 
C)  The amount owed on the return or $210, whichever is less 
D)  4.5% of the amount owed on the return.

Question 15

If a tax return preparer prepares a return that involves a "listed transaction," the preparer can avoid all penalties if

Accepted Answer

A)  the position is not unreasonable. 
B)  the position has a possibility of success. 
C)  the preparer has substantial authority for the position 
D)  the position has no support but there is no evidence of fraud. 
A)  the position is not unreasonable. 
B)  the position has a possibility of success. 
C)  the preparer has substantial authority for the position 
D)  the position has no support but there is no evidence of fraud.

Question 16

A decision in the small case division of the Tax Court can be appealed only to

Accepted Answer

A)  Supreme Court 
B)  Regular Tax Court 
C)  Federal District Court 
D)  There is no appeal. 
A)  Supreme Court 
B)  Regular Tax Court 
C)  Federal District Court 
D)  There is no appeal.

Question 17

Copp Co. can invest in a project that costs $200,000. It is expected to provide a lump sum after-tax return of $300,000. If Copp uses an 8 percent discount rate for evaluation, in what year must it recover the $300,000 to produce a positive net cash flow?

Accepted Answer

A)  3rd year 
B)  4th year 
C)  5th year 
D)  6th year 
A)  3rd year 
B)  4th year 
C)  5th year 
D)  6th year

Question 18

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.

Accepted Answer

A) True 
 B)False

Question 19

The principal reason a researcher uses a tax service is to

Accepted Answer

A)  provide explanations of relevant case law 
B)  provide discussions of key issued related to specific Code sections 
C)  provide citations to primary sources of authority 
D)  provide answers to specific issues 
A)  provide explanations of relevant case law 
B)  provide discussions of key issued related to specific Code sections 
C)  provide citations to primary sources of authority 
D)  provide answers to specific issues

Question 20

A citator

Accepted Answer

A)  provides a history of a court case 
B)  provides lists of other decisions that cite a particular case 
C)  provides an alphabetical listing of court cases 
D)  provides a numerical listing of Revenue Rulings 
E)  All of the above 
A)  provides a history of a court case 
B)  provides lists of other decisions that cite a particular case 
C)  provides an alphabetical listing of court cases 
D)  provides a numerical listing of Revenue Rulings 
E)  All of the above

The statute of limitations for an error overstating expenses by more than 25 percent is 3 years.

An open-fact situation means that

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

Which type of audit is most frequently used for examination of business returns?

When may a CPA use estimates in the preparation of a client's tax return?

The IRS must pay interest on

Which of the following committees is not involved in the tax writing process?

The Tax Cuts and Jobs Act is numbered H.R. 1 and after passage by Congress became P.L. 115-97. The prefix and the suffix of the public law number refer to the following, respectively:

A taxpayer will receive a 30-day letter

Explain what is meant by the statute of limitations.

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

A high DIF score indicates which of the following?

What is the minimum penalty for a taxpayer who fails to file his or her return for over 60 days past the due date without reasonable cause?

If a tax return preparer prepares a return that involves a "listed transaction," the preparer can avoid all penalties if

A decision in the small case division of the Tax Court can be appealed only to

Copp Co. can invest in a project that costs $200,000. It is expected to provide a lump sum after-tax return of $300,000. If Copp uses an 8 percent discount rate for evaluation, in what year must it recover the $300,000 to produce a positive net cash flow?

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.

The principal reason a researcher uses a tax service is to

A citator

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

The statute of limitations for an error overstating expenses by more than 25 percent is 3 years.

An open-fact situation means that

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

Which type of audit is most frequently used for examination of business returns?

When may a CPA use estimates in the preparation of a client's tax return?

The IRS must pay interest on

Which of the following committees is not involved in the tax writing process?

The Tax Cuts and Jobs Act is numbered H.R. 1 and after passage by Congress became P.L. 115-97. The prefix and the suffix of the public law number refer to the following, respectively:

A taxpayer will receive a 30-day letter

Explain what is meant by the statute of limitations.

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

A high DIF score indicates which of the following?

What is the minimum penalty for a taxpayer who fails to file his or her return for over 60 days past the due date without reasonable cause?

If a tax return preparer prepares a return that involves a "listed transaction," the preparer can avoid all penalties if

A decision in the small case division of the Tax Court can be appealed only to

Copp Co. can invest in a project that costs $200,000. It is expected to provide a lump sum after-tax return of $300,000. If Copp uses an 8 percent discount rate for evaluation, in what year must it recover the $300,000 to produce a positive net cash flow?

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.

The principal reason a researcher uses a tax service is to

A citator

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