Deck 1: Understanding and Working With the Federal Tax Law

Question 1

The Internal Revenue Code is a compilation of Federal tax legislation that appears in Title 26 of the United States Code.

Answer 1

True

Question 2

The favorable treatment of research and development expenses is one means of controlling the economy.

Answer 2

False

Question 3

Proposed Regulations have the force and effect of law.

Answer 3

False

Question 4

These Internal Revenue Code citations are incorrect: § 2121) and § 12211).

Question 5

Although a corporation is subject to a Federal income tax, a partnership is not.

Question 6

The Federal income tax law allows a taxpayer to claim a deduction for state and local income taxes but limits all state taxes to a maximum of $10,000.

Question 7

Alabama and South Carolina are community property states.

Question 8

The encouragement of private-sector pension plans can be justified under the encouragement of certain industries.

Question 9

A tax bill cannot originate in the Senate Finance Committee.

Question 10

One of the justifications for the enactment of the tax law governing corporate reorganizations was the economic benefit it would provide businesses including making them more efficient).

Question 11

The U.S. Federal government has a provision in the Constitution that precludes deficit spending.

Question 12

Temporary Regulations have the same authoritative value as Final Regulations for four years.

Question 13

Internal Revenue Code § 6 involves gross income and § 7 outlines itemized deductions.

Question 14

One Internal Revenue Code section enables shareholders in a small business corporation to obtain an ordinary deduction for any loss recognized on a stock investment.

Question 15

Longer class lives for depreciable property and the required use of the straight-line method of depreciation would likely dampen the tax incentive for purchasing capital assets.

Question 16

Revenue-neutral tax laws reduce deficits.

Question 17

Taxpayers may read Committee Reports to determine the intent of Congress.

Question 18

Subchapter P refers to the subchapter in the Internal Revenue Code that deals with partners and partnerships.

Question 19

Many states have balanced budgets because laws or constitutional amendments preclude deficit spending.

Question 20

Regulations are arranged in a different sequence than the Internal Revenue Code.

Question 21

A taxpayer must pay any tax deficiency assessed by the IRS and sue for a refund to bring suit in the U.S. District Court.

Question 22

Appeals from the U.S. Court of Federal Claims go to the U.S. Supreme Court.

Question 23

A Revenue Ruling is a legislative source of Federal tax law.

Question 24

"Legislative" regulations carry more weight than "interpretative" regulations.

Question 25

The like-kind tax free exchange treatment is an example of the wherewithal to pay concept.

Question 26

Proposed Regulations are published in the Federal Register.

Question 27

Revenue Procedures deal with the internal management practices and procedures of the IRS.

Question 28

A change in the individual tax rate has an almost immediate impact on the economy.

Question 29

The U.S. national debt is around $11 trillion.

Question 30

A U.S. District Court must abide by the precedents set by the U.S. Court of Appeals of its jurisdiction.

Question 31

Treasury Decisions are issued by the Treasury Department to promulgate new Regulations.

Question 32

Determination letters usually involve proposed transactions.

Question 33

When there is a direct conflict between an Internal Revenue Code section and a treaty provision, the most recent item takes precedence.

Question 34

The Golsen rule no longer applies to the U.S. Tax Court.

Question 35

Regulations are issued by the Treasury Department.

Question 36

Revenue Rulings carry the same legal force and effect as Regulations.

Question 37

A jury trial is available when a case is heard by a U.S. Court of Appeals.

Question 38

In a U.S. District Court, a jury can decide both questions of fact and questions of law.

Question 39

Letter rulings are issued by the National Office of the IRS.

Question 40

Only one judge hears a trial in a U.S. District Court.

Question 41

The annual gift tax exclusion in 2019 is $15,000.

Question 42

Which provision could best be justified as encouraging small business?

A) Ordinary loss allowed on § 1244 stock.
B) Percentage depletion.
C) Charitable contributions deduction.
D) Interest deduction on home mortgage.
E) None of these.

Question 43

Which provision is not justified by social considerations?

A) Refundable earned income credit.
B) Adoption tax credit.
C) Like-kind exchange treatment.
D) Disallowance of illegal kickbacks.
E) None of these.

Question 44

Which citation is considered to be a statutory legislative) citation?

A) Ltr. Rul. 199952058.
B) Ann. 94-5, 1994-2 I.R.B. 39.
C) Reg. § 1.1014-1c)1).
D) § 351.
E) None of these.

Question 45

Regulations are first published in:

A) Federal Register.
B) Cumulative Bulletin.
C) Internal Revenue Bulletin.
D) I.R.S. Digest.
E) All of these.

Question 46

Revenue Procedures are published in the:

A) Congressional Record.
B) Federal Revenue Bulletin.
C) Internal Revenue Bulletin.
D) I.R.S. Digest.
E) None of these.

Question 47

The taxation part of the CPA exam REG) is now one-third essay.

Question 48

Which of the following sources has the highest tax authority?

A) Treasury Regulation.
B) Revenue Procedure.
C) Internal Revenue Code.
D) Temporary Regulation.
E) All have the same weight.

Question 49

Which state is not a community property state?

A) Arizona.
B) Texas.
C) New Mexico.
D) Virginia.
E) None of these.

Question 50

The Standard Federal Tax Reporter is published by Research Institute of America.

Question 51

Douglas and Sue, related parties, are landlord and tenant as to certain business property. If the IRS questions the amount of rent Sue is paying to Douglas, this is an illustration of the:

A) Arm's length concept.
B) Continuity of interest concept.
C) Tax benefit rule.
D) Substance over form concept.
E) None of these.

Question 52

Internal Revenue Code Section 318, which deals with the definition of related parties with respect to stock redemptions, includes brothers and sisters in the related-party definition.

Question 53

A Technical Advice Memorandum is issued by:

A) Treasury Department.
B) National Office of the IRS.
C) Office of Chief Council.
D) Area Director.
E) None of these.

Question 54

Indexation of various income tax components was eliminated by the Tax Cuts and Jobs Act of 2017.

Question 55

Regarding Technical Advice Memoranda, which statement is incorrect?

A) Issued by the National Office of IRS.
B) Most often deal with a completed transaction.
C) May be cited and used as precedent.
D) Issued with multi-digit file numbers.
E) None are incorrect.

Question 56

Which provision could best be justified as a means of controlling the economy?

A) Write-off of research and development expenditures.
B) The § 179 immediate expensing of depreciable capital expenditures.
C) Amortization of pollution control facilities.
D) The rehabilitation tax credit.
E) None of these.

Question 57

Complete avoidance of a capital gain tax occurs when the owner of appreciated property transfers it by death.

Question 58

When there is a direct conflict between a tax treaty and the Internal Revenue Code, the Internal Revenue Code takes precedence.

Question 59

Determine the incorrect citation:

A) TAM 20002704.
B) George W. Guill, 112 T.C. , No. 22 1999).
C) John H. Wong, T.C. Summary Opinion 2009-152.
D) Rev. Rul. 98-32, 1998-25 I.R.B. 4.
E) None of these.

Question 60

Federal tax legislation generally originates in what committee?

A) House Budget Committee.
B) Senate Finance Committee.
C) House Ways and Means Committee.
D) House Taxation Committee.
E) None of these.

Question 61

Which citation refers to a Second Circuit Court of Appeals decision?

A) 40 T.C. 1018.
B) 159 F. 2d 848 CA-2, 1947).
C) 354 F. Supp. 1003 D. Ct. Ga, 1972).
D) 914 F. 2d 396 CA-3, 1990).
E) None of these.

Question 62

Which statement is not true about this citation: Bonkowski v. Comm., 29 TCM 1645 1970), aff'd 458 F.2d 709 CA- 7, 1972), cert. den.?

A) The Supreme Court decided not to agree or disagree with the Seventh Court of Appeals.
B) The Seventh Court of Appeals disagreed with the Tax Court.
C) The Tax Court decision starts on page 1645.
D) The Seventh Court of Appeals decision appears in Vol. 458.
E) All of these.

Question 63

Which trial court's jurisdiction depends on the geographical location of the taxpayer?

A) U.S. Tax Court.
B) U.S. District Court.
C) U.S. Court of Federal Claims.
D) Small Cases Division of the Tax Court.
E) None of these.

Question 64

Which trial court decision is generally less authoritative?

A) U.S. District Court.
B) U.S. Tax Court.
C) U.S. Court of Federal Claims.
D) Small Cases Division of the Tax Court.
E) All of these have the same authority.

Question 65

A landlord leases property upon which the tenant makes improvements. The improvements are significant and are not made in lieu of rent. At the end of the lease, the value of the improvements is not income to the landlord. This rule is an example of:

A) The wherewithal to pay concept.
B) The tax benefit rule.
C) The arm's length concept.
D) A clear reflection of income result.
E) None of these.

Question 66

A decision in which of the following courts carries the lowest tax authority?

A) U.S. Court of Appeals for the Federal Circuit.
B) U.S. Court of Appeals for the Second Circuit.
C) U.S. District Court.
D) U.S. Supreme Court.
E) U.S. Court of Appeals Federal Circuit.

Question 67

A Memorandum decision of the U.S. Tax Court could be cited as:

A) T.C. Memo. 1990-650.
B) 68-1 USTC ¶ 9200.
C) 37 AFTR 2d 456.
D) All of these.
E) None of these.

Question 68

In Forty-Four Cigar Co., 2 B.T.A. 1156, the 1156 stands for:

A) The volume number.
B) The year of the decision.
C) The paragraph number.
D) The page number.
E) None of these.

Question 69

If these citations appeared after a trial court decision, which one means that the decision was viewed favorably?

A) Aff'd 633 F. 2d 512 CA-7, 1980).
B) Rem'd 399 F. 2d 800 CA-5, 1968).
C) Rev'd 914 F. 2d 396 CA-3, 1990).
D) Rev'd 935 F. 2d 203 CA-5, 1991).
E) None of these.

Question 70

Which state is located in the jurisdiction of the Fifth Circuit Court of Appeals?

A) Louisiana.
B) California.
C) New York.
D) South Carolina.
E) None of these.

Question 71

Which of the following refers to a trial court rather than an appellate court decision?

A) Forgeus v. Comm., 6 B.T.A. 291 1927).
B) Farris v. Comm., 222 F.2d 320 CA-10, 1955).
C) Danville Plywood Corp., 899 F.2d 3 Fed Cir. 1990).
D) Boehm v. Comm., 326 U.S. 287 1945).
E) None of these.

Question 72

Which citation refers to a U.S. Court of Federal Claims decision?

A) Apollo Computer, Inc. v. U.S., 95-1 USTC ¶ 50,015 Fed. Cl., 1994).
B) Westreco, Inc., T.C. Memo. 1992-561 1992).
C) Bausch & Lomb, Inc. v. Comm., 933 F. 2d 1084 CA-2, 1991).
D) Portland Manufacturing Co. v. Comm., 35 AFTR 2d 1439 CA-9, 1975).
E) None of these.

Question 73

Which of the following is an administrative source of tax law?

A) Rev. Rul. 2010-19.
B) Joint Conference Committee Report.
C) Section 12a) of the Internal Revenue Code.
D) All of these..
E) None of these.

Question 74

Which citation refers to a Fourth Circuit Court of Appeals decision?

A) 40 T.C. 1018.
B) 2 TCM 205 1951).
C) 354 F.Supp. 1003 D. Ct. Ga, 1972).
D) 914 F.2d 396 CA-3, 1990).
E) None of these.

Question 75

Which court decision is generally more authoritative?

A) A U.S. Tax Court decision.
B) A U.S. Court of Federal Claims decision.
C) A U.S. District Court decision.
D) A U.S. Court of Appeals decision.
E) A U.S. Tax Court Memorandum decision.

Question 76

Interpret the following citation: 64-1 USTC ¶ 9618, aff'd in 344 F. 2d 966.

A) A U.S. Tax Court Small Cases Division decision that was affirmed on appeal.
B) A U.S. Tax Court decision that was affirmed on appeal.
C) A U.S. District Court decision that was affirmed on appeal.
D) A U.S. Court of Appeals decision that was affirmed on appeal.
E) None of these.

Question 77

Which of the following statements about an acquiescence is correct?

A) An acquiescence is issued in the Federal Register.
B) Acquiescences are published only for certain regular decisions of the U.S. Tax Court.
C) An acquiescence is published in the Internal Revenue Bulletin.
D) The IRS does not issue acquiescences to adverse decisions that are not appealed.
E) All of these are correct.

Question 78

Which of these notations would appear after a U.S. Tax Court citation if the IRS disagrees with the decision?

A) Rev'd 935 F.2d 203 1991).
B) Nonacq. 1979-1 C.B. 1.
C) Cert. den. 361 U.S. 875 1959).
D) Acq. 1990-1 C.B. 2.
E) None of these.

Question 79

Which is a primary source of tax law?

A) J.W. Yarbo v. Comm., 737 F. 2d 479 CA-5, 1984).
B) Article by a Federal judge in Harvard Law Review.
C) IRS Determination letter.
D) IRS Letter ruling.
E) All of these are primary sources.

Question 80

Which trial court normally has 16 judges?

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