Question 1

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 2

The statute of limitations for IRS assessment generally ends four years after the date a tax return is filed.

Accepted Answer

A) True 
 B)False

Question 3

Under the Statement on Standards for Tax Services, a CPA may recommend a tax return position if the position is frivolous and the position is not disclosed on the tax return.

Accepted Answer

A) True 
 B)False

Question 4

Allen filed his 2014 tax return on May 15th, 2015 and underreported his gross income by 30 percent. Assuming Allen's underreporting is not due to fraud, the statute of limitations for IRS assessment on Allen's 2013 tax return should end:

Accepted Answer

A)  May 15th, 2017. 
B)  April 15th, 2017. 
C)  May 15th, 2018. 
D)  April 15th, 2018. 
E)  None of these. 
A)  May 15th, 2017. 
B)  April 15th, 2017. 
C)  May 15th, 2018. 
D)  April 15th, 2018. 
E)  None of these.

Question 5

A taxpayer can avoid an underpayment penalty if there is substantial authority that supports her tax return position.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following committees typically initiates for tax legislation?

Accepted Answer

A)  House Ways and Means Committee 
B)  Joint Conference Committee 
C)  Senate Finance Committee 
D)  Senate Tax Committee 
E)  None of these. 
A)  House Ways and Means Committee 
B)  Joint Conference Committee 
C)  Senate Finance Committee 
D)  Senate Tax Committee 
E)  None of these.

Question 7

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 8

Which of the following has the highest authoritative weight?

Accepted Answer

A)  Legislative regulation. 
B)  Private letter ruling. 
C)  Revenue ruling. 
D)  Action on decision. 
E)  Revenue procedure. 
A)  Legislative regulation. 
B)  Private letter ruling. 
C)  Revenue ruling. 
D)  Action on decision. 
E)  Revenue procedure.

Question 9

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 these. 
A)  DIF system. 
B)  Tax select system. 
C)  Information matching. 
D)  Document perfection. 
E)  None of these.

Question 10

Hong, an introductory tax student, is beginning his 1st research project. He has a complete understanding of the relevant facts for his project and has identified the initial research questions. He is now ready to begin using a tax service to identify relevant authorities. What are some suggestions for him on how to use tax services to identify relevant authorities?

Accepted Answer

A novice may conduct a keyword search in

Question 11

A taxpayer can avoid a substantial understatement of tax penalty:

Accepted Answer

A)  if the position is frivolous and disclosed on the tax return. 
B)  if the position has a realistic possibility of being sustained by the IRS or courts. 
C)  if there is substantial authority to support the position. 
D)  if the position has a reasonable basis and is not disclosed on the tax return. 
E)  None of these. 
A)  if the position is frivolous and disclosed on the tax return. 
B)  if the position has a realistic possibility of being sustained by the IRS or courts. 
C)  if there is substantial authority to support the position. 
D)  if the position has a reasonable basis and is not disclosed on the tax return. 
E)  None of these.

Question 12

The IRS DIF system checks each tax return for mathematical mistakes.

Accepted Answer

A) True 
 B)False

Question 13

Joel claimed a high amount of charitable contributions as a deduction on his tax return relative to taxpayers with similar income levels. The information matching program is the IRS program most likely to identify Joel's tax return for audit.

Accepted Answer

A) True 
 B)False

Question 14

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 15

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

Accepted Answer

A)  if the position is frivolous and disclosed on the tax return. 
B)  if the position has a realistic possibility of being sustained by the IRS or courts. 
C)  if there is substantial authority to support the position. 
D)  if the position has a reasonable basis and is not disclosed on the tax return. 
E)  None of these. 
A)  if the position is frivolous and disclosed on the tax return. 
B)  if the position has a realistic possibility of being sustained by the IRS or courts. 
C)  if there is substantial authority to support the position. 
D)  if the position has a reasonable basis and is not disclosed on the tax return. 
E)  None of these.

Question 16

Lindy, a tax intern, is beginning her 1st tax research case for her employer. Her manager has given her a basic understanding of the facts and has identified the basic research question. Lindy is now ready to begin searching for relevant tax authorities. Describe the different types of research tools available to help a tax researcher locate relevant authority and identify which type may be especially useful for Lindy.

Accepted Answer

Tax services aid the researcher in ident

Question 17

The Internal Revenue Code and tax treaties are examples of statutory authorities.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following courts is the only court that provides for a jury trial?

Accepted Answer

A)  Tax Court. 
B)  U.S. Court of Federal Claims. 
C)  U.S. District Court. 
D)  U.S. Circuit Court of Appeals. 
E)  None of these. 
A)  Tax Court. 
B)  U.S. Court of Federal Claims. 
C)  U.S. District Court. 
D)  U.S. Circuit Court of Appeals. 
E)  None of these.

Question 19

For the following taxpayers, please recommend the most advantageous trial level court(s) to litigate a tax issue with the IRS.
a. Joe is litigating a tax issue with the IRS that is considered a question of fact (i.e., the answers depends on the facts of the case). There is not a lot of authority on point for this case but Joe has a very appealing story to justify his position that is likely to be viewed sympathetically by his peers.
b. The Circuit Court of Appeals for the Federal Circuit recently issued an opinion that is very favorable to the issue that Jesse plans to litigate with the IRS.
c. The Circuit Court of Appeals for the Federal Circuit recently issued an opinion that is not favorable to the issue that Hank plans to litigate with the IRS.
d. The 7th Circuit (where Elizabeth resides) recently issued an opinion that is very favorable to the issue that Elizabeth plans to litigate with the IRS.

Accepted Answer

(a) U.S. District Court because it is th

Question 20

Circular 230 was issued by:

Accepted Answer

A)  AICPA. 
B)  State Boards of Accountancy. 
C)  American Bar Association. 
D)  IRS. 
E)  None of these. 
A)  AICPA. 
B)  State Boards of Accountancy. 
C)  American Bar Association. 
D)  IRS. 
E)  None of these.

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

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

The statute of limitations for IRS assessment generally ends four years after the date a tax return is filed.

Under the Statement on Standards for Tax Services, a CPA may recommend a tax return position if the position is frivolous and the position is not disclosed on the tax return.

Allen filed his 2014 tax return on May 15th, 2015 and underreported his gross income by 30 percent. Assuming Allen's underreporting is not due to fraud, the statute of limitations for IRS assessment on Allen's 2013 tax return should end:

A taxpayer can avoid an underpayment penalty if there is substantial authority that supports her tax return position.

Which of the following committees typically initiates for tax legislation?

Which of the following has the lowest authoritative weight?

Which of the following has the highest authoritative weight?

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

A taxpayer can avoid a substantial understatement of tax penalty:

The IRS DIF system checks each tax return for mathematical mistakes.

Joel claimed a high amount of charitable contributions as a deduction on his tax return relative to taxpayers with similar income levels. The information matching program is the IRS program most likely to identify Joel's tax return for audit.

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:

The Internal Revenue Code and tax treaties are examples of statutory authorities.

Which of the following courts is the only court that provides for a jury trial?

Circular 230 was issued by:

An Introduction to Tax

Tax Planning Strategies and Related Limitations

Individual Income Tax Overview, Exemptions, and Filing Status

Gross Income and Exclusions

Individual Deductions

Individual Income Tax Computation and Tax Credits

Business Income, Deductions, and Accounting Methods

Property Acquisition and Cost Recovery

Property Dispositions

Investments

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 of the Cfa Institute

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