Question 1

An acquiescence indicates that the IRS lost a court case and that it has decided to follow the court's ruling in the future.

Accepted Answer

A) True 
 B)False

Question 2

A tax practitioner can avoid IRS penalty relating to a tax return position:

Accepted Answer

A) only if the position has a more likely than not chance of being sustained by the IRS or courts. 
B) if the position has a realistic possibility of being sustained by the IRS or courts. 
C) if there is not substantial authority to support the position. 
D) if the position has a reasonable basis and is disclosed on the tax return. 
E) None of the choices are correct. 
A) only if the position has a more likely than not chance of being sustained by the IRS or courts. 
B) if the position has a realistic possibility of being sustained by the IRS or courts. 
C) if there is not substantial authority to support the position. 
D) if the position has a reasonable basis and is disclosed on the tax return. 
E) None of the choices are correct.

Question 3

A client has recently learned of a proposed tax bill that would increase the tax rates on investment gains by 5 percent. The president does not support this increase. Please describe for your client the process by which new tax legislation is created and how the president's disapproval may influence the enactment of the bill.

Accepted Answer

As required by the U.S. Constitution (Ar

Question 4

Which of the following has the lowest authoritative weight?

Accepted Answer

A) Legislative regulation 
B) Private letter ruling 
C) Revenue ruling 
D) Interpretative regulation 
E) Revenue procedure 
A) Legislative regulation 
B) Private letter ruling 
C) Revenue ruling 
D) Interpretative regulation 
E) Revenue procedure

Question 5

According to Statements on Standards for Tax Services No. 1, a tax practitioner can recommend a tax return position:

Accepted Answer

A) if the position is frivolous and disclosed on the tax return. 
B) if the position complies with the standards imposed by the applicable tax authority. 
C) only if the position meets the "more likely than not" standard. 
D) only if the position meets the "clear and convincing evidence" standard. 
E) None of the choices are correct. 
A) if the position is frivolous and disclosed on the tax return. 
B) if the position complies with the standards imposed by the applicable tax authority. 
C) only if the position meets the "more likely than not" standard. 
D) only if the position meets the "clear and convincing evidence" standard. 
E) None of the choices are correct.

Question 6

Which of the following audits is the most common and typically less comprehensive?

Accepted Answer

A) Correspondence 
B) Random 
C) Office 
D) Field 
E) None of the choices are correct. 
A) Correspondence 
B) Random 
C) Office 
D) Field 
E) None of the choices are correct.

Question 7

For the following tax returns, identify the method the IRS likely used to select the return for audit.
a. Dan made a mistake in adding his income on his tax return.
b. Juanita failed to report her salary from her second job on her tax return.
c. Michael and Venita deducted a relatively large amount of travel expenses on their tax return for their business. The travel expense is large relative to other taxpayers in similar businesses with similar levels of income.
d. Paul and Melissa recently went through a very nasty divorce. One of the issues was Paul's less than forthright accounting of his income in determining the appropriate level of alimony.

Accepted Answer

)(a)Document perfect

Question 8

Which of the following has the highest authoritative weight?

Accepted Answer

A) Textbook 
B) Private letter ruling 
C) Revenue ruling 
D) Tax service 
E) Tax article 
A) Textbook 
B) Private letter ruling 
C) Revenue ruling 
D) Tax service 
E) Tax article

Question 9

Greg earned $25,500 this year and had $1,500 of federal income taxes withheld from his salary. Assuming that Greg is single, 25 years old, and will have a total tax liability of $1,375 (and thus will receive a $125 refund), he:

Accepted Answer

A) is required to file a tax return. 
B) is not required to file a tax return but should file a return anyway. 
C) is required to file a tax return but should not file because he owes no tax. 
D) is not required to file a tax return and should not file a return. 
E) None of the choices are correct. 
A) is required to file a tax return. 
B) is not required to file a tax return but should file a return anyway. 
C) is required to file a tax return but should not file because he owes no tax. 
D) is not required to file a tax return and should not file a return. 
E) None of the choices are correct.

Question 10

The "90-day" letter gives the taxpayer the opportunity to pay a proposed IRS tax adjustment or file a petition in the U.S. District Court to contest the adjustment and hear the case.

Accepted Answer

A) True 
 B)False

Question 11

For fraudulent tax returns, the statute of limitations for IRS assessment is 10 years.

Accepted Answer

A) True 
 B)False

Question 12

Jaime recently found a "favorable" trial- level court opinion directly on point for her tax question. Which trial- level court would she prefer to have issued the opinion?

Accepted Answer

A) Tax Court 
B) District Court 
C) Circuit Court 
D) Divorce Court 
E) None of the choices are correct. 
A) Tax Court 
B) District Court 
C) Circuit Court 
D) Divorce Court 
E) None of the choices are correct.

Question 13

Jeremy has a new client. He has identified a research question that relates to a transaction that the client completed several months ago. This type of research question will primarily involve:

Accepted Answer

A) open facts. 
B) new facts. 
C) old facts. 
D) closed facts. 
E) None of the choices are correct. 
A) open facts. 
B) new facts. 
C) old facts. 
D) closed facts. 
E) None of the choices are correct.

Question 14

Generally, code sections are arranged (grouped together):

Accepted Answer

A) chronologically. 
B) by topic. 
C) randomly. 
D) by length. 
E) None of the choices are correct. 
A) chronologically. 
B) by topic. 
C) randomly. 
D) by length. 
E) None of the choices are correct.

Question 15

If a taxpayer loses a case at the circuit court level, he is granted an automatic appeal hearing with the Supreme Court.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following is not a common method that the IRS uses to select returns for audit?

Accepted Answer

A) DIF system 
B) Tax Select system 
C) Information matching 
D) Document perfection 
E) None of the choices are correct. 
A) DIF system 
B) Tax Select system 
C) Information matching 
D) Document perfection 
E) None of the choices are correct.

Question 17

Chris and Chuck were recently debating whether the Internal Revenue Code is "logical." Chris offers that she has briefly reviewed the Code and could hardly understand its organizational structure, if there is one. Please describe the basic organization of the Code and how understanding its organization may be especially beneficial to the tax researcher.

Accepted Answer

The Internal Revenue Code is segregated

Question 18

Closed facts are especially conducive to tax planning.

Accepted Answer

A) True 
 B)False

Question 19

The Internal Revenue Code of 1986 is the name of the current income tax code of the United States of America.

Accepted Answer

A) True 
 B)False

Question 20

Temporary regulations have more authoritative weight than revenue rulings.

Accepted Answer

A) True 
 B)False

Exam 2: Tax Compliance, the Irs, and Tax Authorities

An acquiescence indicates that the IRS lost a court case and that it has decided to follow the court's ruling in the future.

A tax practitioner can avoid IRS penalty relating to a tax return position:

Which of the following has the lowest authoritative weight?

According to Statements on Standards for Tax Services No. 1, a tax practitioner can recommend a tax return position:

Which of the following audits is the most common and typically less comprehensive?

Which of the following has the highest authoritative weight?

Greg earned $25,500 this year and had $1,500 of federal income taxes withheld from his salary. Assuming that Greg is single, 25 years old, and will have a total tax liability of $1,375 (and thus will receive a $125 refund), he:

The "90-day" letter gives the taxpayer the opportunity to pay a proposed IRS tax adjustment or file a petition in the U.S. District Court to contest the adjustment and hear the case.

For fraudulent tax returns, the statute of limitations for IRS assessment is 10 years.

Jaime recently found a "favorable" trial- level court opinion directly on point for her tax question. Which trial- level court would she prefer to have issued the opinion?

Jeremy has a new client. He has identified a research question that relates to a transaction that the client completed several months ago. This type of research question will primarily involve:

Generally, code sections are arranged (grouped together):

If a taxpayer loses a case at the circuit court level, he is granted an automatic appeal hearing with the Supreme Court.

Which of the following is not a common method that the IRS uses to select returns for audit?

Closed facts are especially conducive to tax planning.

The Internal Revenue Code of 1986 is the name of the current income tax code of the United States of America.

Temporary regulations have more authoritative weight than revenue rulings.

An Introduction to Tax

Tax Planning Strategies and Related Limitations

Individual Income Tax Overview, Dependents, and Filing Status

Gross Income and Exclusions

Individual Deductions

Investments

Individual Income Tax Computation and Tax Credits

Business Income, Deductions, and Accounting Methods

Property Acquisition and Cost Recovery

Property Dispositions

Compensation

Retirement Savings and Deferred Compensation

Tax Consequences of Home Ownership

Entities Overview

Corporate Operations

Accounting for Income Taxes

Corporate Taxation: Nonliquidating Distributions

Corporate Formation, Reorganization, and Liquidation

Forming and Operating Partnerships

Dispositions of Partnership Interests and Partnership Distributions

S Corporations

State and Local Taxes

The Us Taxation of Multinational Transactions

Transfer Taxes and Wealth Planning

Filters