Deck 2: Tax Practice and Research

Question 1

It is not possible for the Appellate Court to affirm the decision of a lower court on one particular issue and reverse it on another.

Answer 1

False

Question 2

Taxpayers are subject to a penalty if there is a substantial underestimate of tax attributable to a particular treatment for which they have no substantial authority, unless the treatment is disclosed on the tax return.

Answer 2

True

Question 3

The Internal Revenue Service may exercise discretion in determining whether to issue a letter ruling to a particular taxpayer.

Answer 3

True

Question 4

The House Ways and Means Committee holds hearings on proposed revenue bills initiated by the Senate.

Question 5

A Writ of Certiorari is the means by which the United States Court of Appeals grants review to a decision of the Tax Court.

Question 6

Although temporary regulations have the same binding effect as final regulations, proposed regulations have no force or effect.

Question 7

The IRS announces its acquiescence or nonacquiescence to the memorandum decisions of the Tax Court.

Question 8

Once a tax law is enacted by Congress, any official interpretations of the law are by subsequent court decisions.

Question 9

The primary purpose of IRS regulations is to answer questions from taxpayers concerning specific tax problems.

Question 10

A letter ruling, or private ruling, is an individual response to a taxpayer, and it is generally understood to apply to all taxpayers.

Question 11

The three trial courts where tax matters may be litigated-the U.S.District Court, the U.S.Court of Federal Claims, and the U.S.Tax Court-are all courts of original jurisdiction.

Question 12

Under the Golsen rule, the Tax Court follows the decisions of the Circuit Court to which a particular case would be appealed.

Question 13

For a tax researcher, the weight (or value) accorded a particular court decision often may be determined by the reliance placed on that decision by other courts.

Question 14

In the Small Claims Section of the U.S.Tax Court, the taxpayer forgoes the right to appeal the decision if she or he loses.

Question 15

In the following citation, Eugene Coloman, 33 TCM 411, T.C.Memo ¶974-78, affd.in 76-2 USTC 19581, 38 AFTR2d 76-5523, 540 F.2d 427 (CA-9, 1976), the researcher would know that the original decision in the trial court was made by the Tax Court in a memorandum decision and that the case on appeal was affirmed by the Ninth Circuit, U.S.Court of Appeals.

Question 16

Both revenue rulings and revenue procedures are first published in the Internal Revenue Bulletin and then eventually published in the Cumulative Bulletin.

Question 17

A major difference between primary authorities and secondary authorities is that secondary sources are merely unofficial interpretations of tax law and have no legal authority.

Question 18

A tax service has limited value because it only summarizes court decisions on a particular point of tax law.

Question 19

An appeal of an adverse decision by the Tax Court may be taken as a matter of right to the appropriate U.S.Court of Appeals.

Question 20

Unlike interpretative regulations, legislative regulations are not controlling on a court.Thus, the courts will not hesitate to substitute their own judgment for that of the Treasury Department.

Question 21

Which of the following administrative interpretations would be generally accorded the force and effect of law?

A)Technical advice memoranda
B)Interpretative regulations
C)Letter rulings
D)Procedural regulations
E)Legislative regulations

Question 22

Which one of the following is not a secondary source of tax authority?

A)The Accountant's Index, American Institute of Certified Public Accountants
B)Kulsrud, "The Alternative Minimum Tax: Its Operation and Effect after TEFRA," The Review of Taxation of Individuals, 1 (Summer, 1983)
C)Crane v.Comm., 47-1 USTC 9217, 35 AFTR 776, 331 U.S.1 (USSC, 1947)
D)Harris, "The Effect of the Installment Sales Revision Act of 1980 on Like-Kind Exchanges: Non-simultaneous Exchanges Reviewed," Taxes-The Tax Magazine, (July, 1981)
E)The Tax Law Review

Question 23

Temporary regulations are generally issued

A)Shortly after enactment of a major change in the tax law so that a taxpayer has guidance until final regulations are formulated
B)To clarify existing regulations that are incomplete
C)To deal with taxpayers living temporarily overseas who may be subject to tax treaties between the United States and foreign countries
D)To define tax treatment for a general set of facts on which the Code is silent; they have the full force and effect of law until the Code addresses the issue
E)To interpret the Code, but they do not have the same binding effect as final regulations

Question 24

Which one of the following is not a primary authority of tax law?

A)Code § 1245(b)(3)
B)Regulations § 1.47-3(f)(2)
C)May v.U.S., 81-1 USTC ¶9286, 47 AFTR2d 81-1124, 644 F.2d 578 (CA-6, 1981)
D)Bailey, "Using Voting Preferred Stock to Avoid CFC Status," The International Tax Journal 2 (January 1976) pp.101-13
E)Revenue Rul.80-219, 1980-2 C.B.18

Question 25

When researching a complex tax question, a researcher with little previous experience with the issue would be best served at the outset by consulting

A)The Internal Revenue Code
B)The Treasury Regulations
C)The applicable legislative history
D)A "tax service" (e.g., CCH, RIA)

Question 26

Which of the following is not a characteristic of U.S.District Courts?

A)A District Court is not a national court.
B)A taxpayer need not pay any alleged deficiency in order to bring an action against the IRS.
C)The District Court hears many kinds of cases, including but not limited to tax cases.
D)The District Court judges are appointed for life.
E)The taxpayer may obtain a jury trial; the jury decides matters of fact but not matters of law.

Question 27

For the most accurate indication of Congressional intent for the enactment of a particular tax bill, a researcher would most likely consult the

A)Report issued by the House Ways and Means Committee
B)Report issued by the Senate Finance Committee
C)Report issued by the Joint Conference Committee on Taxation
D)Records of debate on the bill
E)Regulations and rulings of the Internal Revenue Service

Question 28

Which of the following sources of authority would most likely contain a review of Congress's intentions with respect to a particular piece of tax legislation?

A)Internal Revenue Code
B)Report of the House Ways and Means Committee
C)Code of Federal Regulations
D)Revenue procedures
E)Technical advice memoranda

Question 29

Which one of the following types of Regulations cannot be cited as authoritative?

A)Proposed regulations
B)Temporary regulations
C)Procedural regulations
D)Interpretative regulations
E)Legislative regulations

Question 30

Tax periodicals are an important source of information for the tax practitioner.Which of the following is not true about tax periodicals?

A)They may be cited as authority in disputes with the IRS during administrative review or appeal.
B)They may give insight into recent court interpretations of tax laws.
C)They may provide question and answer sections to ensure that the reader comprehends the concepts and ramifications of recent rulings.
D)They generally offer concise summaries of new tax laws.
E)They serve to convey new tax planning opportunities.

Question 31

Which of the following statements is false?

A)Tax benefits of an otherwise legal transaction may be denied if it lacks economic substance.
B)The economic substance doctrine is similar to the business purpose doctrine.
C)Reducing taxes is a good business purpose under the economic substance doctrine.
D)A transaction has economic substance if it changes the taxpayer's economic position or the taxpayer has a substantial business purpose.
E)More than one of the above statements is false.

Question 32

Which of the following is true of revenue rulings?

A)Although they represent the official policy of the IRS, courts may overrule them.
B)Lower courts are bound by them.
C)They are a subset of Treasury Regulations.
D)Once affirmed by an appellate court, they have the force of law.
E)All of the above are true.

Question 33

Which of the choices below is the publisher in this citation: Johnson v.Oregon, 86-1, USTC ¶322 (D.Ct.Cal, 1986).

A)Commerce Clearing House
B)Prentice Hall
C)West Publishing Co.
D)Research Institute of America
E)Senate Finance Committee

Question 34

Which of the statements below is not a characteristic of the Tax Court?

A)Appeal is taken to the U.S.Court of Appeals.
B)A jury trial is not available.
C)The Court accepts only tax cases.
D)Taxpayers must pay the alleged deficiency and then sue for a refund.
E)The Court has nationwide jurisdiction.

Question 35

Which of the following statements is not a characteristic of the Internal Revenue Code?

A)The basis of Congressional authority for the Federal income tax is the Sixteenth Amendment to the U.S.Constitution.
B)Changes made in the tax law after 1986 are incorporated into the 1986 Code as amended.
C)Any change in the Internal Revenue Code generally starts in the House of Representatives.
D)When a tax advisor is citing a particular item within the Internal Revenue Code, citation of the section number alone is usually sufficient.
E)The reasons why Congress made a particular change or addition to the Internal Revenue Code are given within the Code itself.

Question 36

A taxpayer may take a case into the District Court

A)Only in the district where he or she resides
B)Only if the disputed tax deficiency has not been paid
C)Only to appeal the decision of the Tax Court or U.S.Court of Federal Claims
D)Only if a Writ of Certiorari is granted
E)Only if the Tax Court or U.S.Court of Federal Claims declines to hear the case

Question 37

ASC 740 deals with which of the following.

A)The financial accounting treatment of transactions that lack business purpose
B)The economic substance doctrine
C)The financial reporting of uncertainty related to positions taken in a tax return
D)None of the above

Question 38

The body or group that generally initiates revenue bills is

A)The IRS
B)The House of Representatives
C)The Senate
D)The Joint Conference Committee on Taxation
E)The Ways and Means Committee

Question 39

The difference between regulations and revenue rulings is that

A)Revenue rulings are not limited to a given set of facts and regulations are limited.
B)Revenue rulings are the direct law-making powers of Congress and regulations are not.
C)Rulings require approval by the Secretary of the Treasury; regulations do not.
D)Revenue rulings do not have the authority of regulations; regulations are a direct extension of the law-making powers of Congress.
E)Only regulations are official pronouncements of the National Office of the IRS.

Question 40

Which one of the following is not a citation to a Tax Court decision?

A)Simon Shield v.U.S., 19-1 USTC ¶8431
B)Robert L.Lynch, 84 T.C.__________, 29 (1984)
C)James Pretzfelder, T.C.Memo 1983-147
D)Timothy Kirby, 47 TCM 814
E)/.Simpson Dean, 35 T.C.1083 (1961)

Question 41

Under ASC 740, a tax position is recognized for financial accounting purposes if it meets which of the following standards.

A)More likely than not
B)Realistic possibility of success
C)Reasonable basis
D)None of the above

Question 42

In this year's tax return, T Corporation decided to account for certain international transactions in a specific matter.However, the tax treatment is not certain and there is a chance that if audited, the company would not prevail.Which of the following statement is false regarding the corporation's requirement to report the transaction for tax purposes (i.e., file Schedule UTP)?

A)The corporation need not file if its assets are less than $100 million.
B)The corporation need not file if it is an S corporation.
C)The corporation need not file if it did not record a reserve for the position in its audited financial statements.
D)The corporation need not file if it did not issue audited financial statements.
E)More than one of the above is false.