Question 1

Tyrone claimed a large amount of charitable contributions as a tax deduction relative to taxpayers with similar levels of income. If Tyrone's tax return is chosen for audit because of his large charitable contributions, which audit program likely identified Tyrone's tax return for audit?

Accepted Answer

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

Question 2

Roddy was researching an issue and found a favorable tax court decision that addresses his issue. He also determined that there was a nonacquiescence for the case. Who issued the nonacquiescence? What is it? What does it mean and how would it affect Roddy's reliance on the court case?

Accepted Answer

Except for Supreme Court cases, whenever the IRS loses, it may issue an acquiescence or nonacquiescence as guidance for how the IRS intends to respond to the loss. An acquiescence indicates that the IRS has decided to "follow" the court's adverse ruling in the future-i.e., the IRS will no longer litigate this issue. A nonacquiescence has the exact opposite implications. A nonacquiescence alerts taxpayers that the IRS plans to continue to litigate this issue. Roddy can still rely on the favorable tax court case but should alert his client that the IRS has stated very clearly that it does not agree with the tax court opinion and will continue to litigate this issue.

Question 3

If a taxpayer has little cash and a very technical tax case about which she feels very strongly that the tax rules are "on her side," she should prefer to have her case tried in the U.S. Tax Court.

Accepted Answer

A) True 
 B)False  True

Question 4

Which of the following is not considered a secondary authority?

Accepted Answer

A)  Textbook
B)  Private letter ruling
C)  Tax article
D)  Tax service
E)  None of the choices are correct.

Question 5

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 depend 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 7 ^th 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

The answer of For the following taxpayers, please recommend the...

Question 6

If an individual taxpayer is unable to file a tax return by its original due date, the taxpayer can request an automatic nine-month extension to file the return.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following is a false statement? A taxpayer filing a fraudulent tax return:

Accepted Answer

A)  is potentially subject to criminal penalties.
B)  is potentially subject to civil penalties.
C)  is potentially subject to fines and a prison sentence.
D)  will have an unlimited statute of limitations for the fraudulent tax return.
E)  None of the choices are correct.

Question 8

Campbell was researching a tax issue and found a favorable tax court opinion and an IRC Code Section that appear to answer the question. Is she finished with the research process? If so, why? If not, what must she do?

Accepted Answer

The answer of Campbell was researching a tax issue and...

Question 9

Lakeisha, a first-year staff accountant, was researching a tax issue and found what appears to be the answer to her question in her introductory tax textbook that she bought three years ago. She is thrilled because she thought it would take much longer to find her answer. What type of authority is the textbook? What are other examples of this type of authority? Can Lakeisha base her research conclusion on the textbook or similar authorities? Any suggestions for Lakeisha?

Accepted Answer

The answer of Lakeisha, a first-year staff accountant, was researching...

Question 10

In a planning context,

Accepted Answer

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

Question 11

Caitlin is a tax manager for an accounting firm, and Duff is a first-year staff accountant. Describe the differences in the manner in which Caitlin and Duff may identify research issues and in general how one may identify research questions.

Accepted Answer

The answer of Caitlin is a tax manager for an...

Question 12

Rebecca is at a loss. A new tax law was recently passed, and she needs to get a better understanding of why the tax law was passed and the intent of the law from an official authority. Describe what authorities may be especially helpful to Rebecca and why she can't find many authorities that discuss the new law.

Accepted Answer

The answer of Rebecca is at a loss. A new...

Question 13

Basu received a letter from the IRS that gave him the choice of (1)paying a proposed deficiency or (2)filing a petition with the U.S. Tax Court. Basu received the:

Accepted Answer

A)  30-day letter.
B)  90-day letter.
C)  Appeals letter.
D)  Tax adjustment letter.
E)  None of the choices are correct.

Question 14

Nolene suspects that one of her new clients may be intentionally underreporting his taxable income. What are the potential ramifications to her client for this behavior? What are the consequences to Nolene if she assists the client in underreporting income? Any advice for Nolene?

Accepted Answer

The answer of Nolene suspects that one of her new...

Question 15

The regulation with the lowest authoritative weight is the:

Accepted Answer

A)  Procedural regulation.
B)  Interpretative regulation.
C)  Proposed regulation.
D)  Legislative regulation.
E)  None of the choices are correct.

Question 16

Mary Ann is working on a pretty big research project. Her manager has alerted her to the possibility that some of her research questions are likely to be questions of fact, whereas others are likely to be questions of law. Explain the difference between the two types of questions and how this would influence her research.

Accepted Answer

The answer of Mary Ann is working on a pretty...

Question 17

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 18

If Lindley requests an extension to file her individual tax return in a timely manner, the latest she could pay her tax due without penalty is:

Accepted Answer

A)  April 15 th.
B)  October 15 th.
C)  August 15 th.
D)  November 15 th.
E)  None of the choices are correct.

Question 19

Which of the following types of tax services is arranged by code section?

Accepted Answer

A)  Legal tax service
B)  Annotated tax service
C)  Professional tax service
D)  Topical tax service
E)  None of the choices are correct.

Question 20

Which judicial doctrine means that a court will rule consistently with its previous rulings and the rulings of higher courts with appellate jurisdiction?

Accepted Answer

A)  Judicial hierarchy
B)  The Goldman rule
C)  Judicial consistency
D)  Stare decisis
E)  None of the choices are correct.

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