Question 1

To which court can a taxpayer appeal an IRS deficiency notice without paying the tax?

Accepted Answer

A)  District Court 
B)  Tax Court 
C)  Court of Federal Claims 
D)  Court of Appeals for the Federal Circuit

Question 2

Walter did not file his 2017 tax return that was due April 17, 2018 until June 2, 2018.

Accepted Answer

A)  When does the statute of limitations expire for this return assuming he did not file for an automatic extension? 
B)  When does the statute of limitations expire if Walter forgot to report a land sale that occurred on January 10, 2017? He had a $20,000 gain on the transaction and he reported gross income for 2017 of $75,000? 
C)  When does the statute of limitations expire if Walter deliberately omitted the $20,000 gain on the land sale?

Question 3

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

Question 4

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

Accepted Answer

The answer of What is meant by the phrase "substance-over-form"?...

Question 5

The Golsen Rule

Accepted Answer

A)  requires the Tax Court to follow the decisions of the District Courts 
B)  can result in opposite holdings on identical facts in the Tax Court 
C)  requires the Supreme Court to hear cases in which the holdings of the Appellate Courts differ 
D)  applies to the US Federal District Court only

Question 6

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

Question 7

All of the following are part of the tax research process except:

Accepted Answer

A)  Establish the facts 
B)  Locate relevant authority 
C)  Identify the issues 
D)  Communicate the findings 
E)  All are part of the tax research process

Question 8

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

The answer of Joaquin did not have any money to...

Question 9

Berman Corporation can accept only one of two projects. The revenue and expenses for each of the projects is shown below. Which project should Berman accept if the corporation has a 10 percent cost of capital and a 21 percent marginal tax rate?

Accepted Answer

The answer of Berman Corporation can accept only one of...

Question 10

If the due date for a tax return is extended for a taxpayer who has a $2,000 balance due, the taxpayer

Accepted Answer

A)  must pay the tax due by the original due date to avoid interest 
B)  has 30 days following the original due date to pay the $2,000 due without interest 
C)  has 60 days following the original due date to pay the $2,000 due without interest 
D)  has 6 months following the original due date to pay the $2,000 due without interest

Question 11

Legal income shifting includes shifting income among relatives and between a business and its owner/employee.

Accepted Answer

A) True 
 B)False

Question 12

Explain how tax compliance differs from tax planning.

Accepted Answer

The answer of Explain how tax compliance differs from tax...

Question 13

The term "on all fours" is generally interpreted to mean

Accepted Answer

A)  the client's situation has been heard in four circuits 
B)  the client's situation is factually similar in its relevant issues 
C)  there are four issues that must be addressed 
D)  four similar cases have been identified and consulted

Question 14

In 2018, Coral Corporation (a C corporation) sold $100,000 of merchandise for which it paid $40,000. It also paid $35,000 of other expenses. All transactions were in cash. What is Coral Corporation's after-tax net cash inflow?

Accepted Answer

A)  $100,000 
B)  $60,000 
C)  $25,000 
D)  $19,750

Question 15

CK Corporation can invest $100,000 in a project. After taxes, the project is expected to generate $40,000 of net income the first year and $75,000 of net income the second year. If the company uses a 10 percent discount rate to evaluate projects, what is the project's net cash flow?

Accepted Answer

A)  $15,000 
B)  $1,690 
C)  ($1,690) 
D)  ($1,315)

Question 16

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

Accepted Answer

The answer of What is the difference between a primary...

Question 17

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

Question 18

The business purpose doctrine:

Accepted Answer

A)  Requires a transaction to be initiated by a business 
B)  Requires a transaction to benefit the business owner 
C)  Requires the transaction to have an economic purpose other than tax avoidance 
D)  Requires the treatment of a transaction to be based on reality not appearances

Question 19

What is the difference between a letter ruling and a revenue ruling?

Accepted Answer

The answer of What is the difference between a letter...

Question 20

Which tax return preparers are required to obtain preparer tax identification numbers?

Accepted Answer

The answer of Which tax return preparers are required to...

Exam 2: The Tax Practice Environment