Deck 2: Tax Compliance, the IRS, and Tax Authorities

Question 1

11) Office examinations are the most common type of IRS audit.

Answer 1

False

Question 2

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

Answer 2

True

Question 3

14) The "90-day" letter gives the taxpayer the opportunity to pay a proposed IRS tax adjustment or file a petition in the U.S. District Court to contest the adjustment and hear the case.

Answer 3

False

Question 4

10) Joel reported a high amount of charitable contributions as a deduction on his individual 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.

Question 5

3) If a taxpayer is due a refund, she does not have to file a tax return.

Question 6

9) The IRS DIF system checks each tax return for mathematical mistakes and errors.

Question 7

16) In researching a tax issue, Eric finds that the U.S. Circuit Court of Appeals for the Federal Circuit previously has ruled in favor of his tax position, whereas the 11ᵗʰ Circuit (Eric's circuit) previously has ruled against his tax position. If Eric is contemplating litigating his tax position with the IRS, he should prefer to have his case first tried by the U.S. Tax Court.

Question 8

5) If an individual taxpayer is unable to file a tax return by its original due date, the taxpayer can request an automatic 9-month extension to file the return.

Question 9

15) If a taxpayer has little cash and a very technical tax case that 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.

Question 10

19) Revenue rulings and revenue procedures are examples of primary authorities.

Question 11

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

Question 12

6) An extension to file a tax return does not extend the due date for tax payments.

Question 13

12) The three basic types of IRS examinations are computer exams, office exams, and business exams.

Question 14

4) If April 15ᵗʰ falls on a Saturday, the due date for individual tax returns will be on Monday, April 17ᵗʰ.

Question 15

13) The "30-day" letter gives the taxpayer the opportunity to request an appeals conference or agree to a proposed IRS adjustment on the taxpayer's income tax return.

Question 16

8) For fraudulent tax returns, the statute of limitations for IRS assessment is ten years.

Question 17

1) Corporations are required to file a tax return annually regardless of their taxable income.

Question 18

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

Question 19

2) The tax return filing requirements for individual taxpayers only depend on the taxpayer's filing status.

Question 20

18) Secondary authorities are official sources of the tax law with a lesser "weight" than primary authorities.

Question 21

23) Proposed and Temporary Regulations have the same authoritative weight.

Question 22

25) The Internal Revenue Code of 1986 is the name of the current income tax code of the United States of America.

Question 23

40) Generally, if April 15ᵗʰ falls on a Saturday, individual tax returns will be due on:

A) April 14ᵗʰ.
B) April 15ᵗʰ.
C) April 16ᵗʰ.
D) April 17ᵗʰ.
E) None of the choices are correct.

Question 24

24) An acquiescence indicates that the IRS lost a court case and that it has decided to follow the court's ruling in the future.

Question 25

26) As required by the Constitution, all tax bills are supposed to originate in the House of Representatives.

Question 26

33) Under the tax law, taxpayers may be subject to both civil and criminal penalties for underpaying their tax liability (e.g., due to fraud).

Question 27

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

Question 28

37) If Paula requests an extension to file her individual tax return, the latest she could file her return without a failure-to-file penalty is:

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

Question 29

31) 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.

Question 30

39) Corporations are required to file a tax return only if their taxable income is greater than:

A) $0.
B) $1,000.
C) $600.
D) $750.
E) None of the choices are correct. Corporations are always required to file a tax return.

Question 31

29) Of the two basic types of tax services, beginning tax researchers often prefer topical tax services.

Question 32

21) Because the U.S. District Court hears a broader set of cases, decisions by the U.S. District Court may be considered to have more authoritative weight than the U.S. Court of Federal Claims.

Question 33

22) Temporary Regulations have more authoritative weight than revenue rulings.

Question 34

36) Which of the following is not a factor that determines whether a taxpayer is required to file a tax return?

A) Filing status.
B) Taxpayer's gross income.
C) Taxpayer's employment.
D) Taxpayer's age.
E) None of the choices are correct.

Question 35

27) The Senate Ways and Means Committee is in charge of drafting tax bills in the U.S. Senate.

Question 36

30) In researching a question of fact, the researcher should focus her efforts on identifying authorities with fact patterns similar to her client's facts.

Question 37

32) In general, a CPA will satisfy his professional responsibilities under the Statement on Standards for Tax Services when recommending a tax return position if he complies with the standards imposed by the applicable tax authority.

Question 38

28) Closed facts are especially conducive to tax planning.

Question 39

35) If the IRS assesses additional tax on a tax return upon audit, a taxpayer may be subject to interest and penalties on the underpayment.

Question 40

38) If Lindley requests an extension to file her individual tax return, the latest she could pay her tax due without penalty is:

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

Question 41

49) Leslie made a mathematical mistake in computing her tax liability. Which audit program will likely catch Leslie's mistake?

A) DIF System.
B) Mathematical correction.
C) Document perfection.
D) Information matching.
E) None of the choices are correct.

Question 42

52) Which of the following audits is the most common and typically less comprehensive?

A) Correspondence.
B) Random.
C) Office.
D) Field.
E) None of the choices are correct.

Question 43

50) 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?

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

Question 44

43) Bill filed his 2018 tax return on March 15ᵗʰ, 2019. The statute of limitations for IRS assessment on Bill's 2018 tax return should end:

A) March 15ᵗʰ, 2021.
B) April 15ᵗʰ, 2021.
C) March 15ᵗʰ, 2022.
D) April 15ᵗʰ, 2022.
E) None of the choices are correct.

Question 45

42) Greg earned $25,500 this year and had $1,500 of federal income taxes withheld from his salary. Assuming that Greg is single, 25 years old, and will have a total tax liability of $1,430 (and thus will receive a $70) refund, he:

A) is required to file a tax return.
B) is not required to file a tax return but should file a return anyway.
C) is required to file a tax return but should not file because he owes no tax.
D) is not required to file a tax return and should not file a return.
E) None of the choices are correct.

Question 46

45) Allen filed his 2018 tax return on May 15ᵗʰ, 2019 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 2018 tax return should end:

A) May 15ᵗʰ, 2021.
B) April 15ᵗʰ, 2021.
C) May 15ᵗʰ, 2022.
D) April 15ᵗʰ, 2022.
E) None of the choices are correct.

Question 47

46) Andy filed a fraudulent 2018 tax return on May 1, 2019. The statute of limitations for IRS assessment on Andy's 2018 tax return should end:

A) May 1ˢᵗ, 2022.
B) April 15ᵗʰ, 2022.
C) May 1ˢᵗ, 2025.
D) April 15ᵗʰ, 2025.
E) None of the choices are correct.

Question 48

44) Henry filed his 2018 tax return on May 15ᵗʰ, 2019. The statute of limitations for IRS assessment on Henry's 2018 tax return should end:

A) May 15ᵗʰ, 2021.
B) April 15ᵗʰ, 2021.
C) May 15ᵗʰ, 2022.
D) April 15ᵗʰ, 2022.
E) None of the choices are correct.

Question 49

53) Which of the following audits is the least common, broadest in scope, and typically most complex?

A) Correspondence.
B) Targeted.
C) Office.
D) Field.
E) None of the choices are correct.

Question 50

59) Rowanda could not settle her tax dispute with the IRS at the appeals conference. If she wants to litigate the issue but does not have sufficient funds to pay the proposed tax deficiency, Rowanda should litigate in the:

A) U.S. District Court.
B) U.S. Circuit Court of Appeals.
C) U.S. Court of Federal Claims.
D) Tax Court.
E) None of the choices are correct.

Question 51

60) Which of the following is not considered a primary authority?

A) Tax Court case.
B) Treasury Regulation.
C) Revenue Ruling.
D) Tax service.
E) None of the choices are correct.

Question 52

57) Lavonda discovered that the 5ᵗʰ Circuit (where Lavonda resides) has recently issued a favorable opinion with respect to an issue that she is going to litigate with the IRS. Lavonda should choose which of the following trial courts to hear her case:

A) Tax Court only.
B) U.S. Court of Federal Claims only.
C) U.S. District Court only.
D) Tax Court or the U.S. District Court.
E) Tax Court or the U.S. Court of Federal Claims.

Question 53

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

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 the choices are correct.

Question 54

54) Dan received a letter from the IRS that gave him the choice of (1) requesting a conference with an Appeals Officer or (2) agreeing to a proposed tax adjustment. Dan received the:

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

Question 55

41) Dominic earned $1,500 this year, and his employer withheld $200 of federal income tax from his salary. Assuming that Dominic is single, 30 years old, and will have zero tax liability this year, he:

A) is required to file a tax return.
B) is not required to file a tax return but should file a return anyway.
C) is required to file a tax return but should not file because he owes no tax.
D) is not required to file a tax return and should not file a return.
E) None of the choices are correct.

Question 56

55) 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:

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

Question 57

58) Lavonda discovered that the U.S. Circuit Court of Appeals for the Federal Circuit has recently issued a favorable opinion with respect to an issue that she is going to litigate with the IRS. Lavonda should choose which of the following trial courts to hear her case:

A) Tax Court only.
B) U.S. Court of Federal Claims only.
C) U.S. District Court only.
D) Tax Court or the U.S. District Court.
E) Tax Court or the U.S. Court of Federal Claims.

Question 58

47) Martin has never filed a 2018 tax return despite earning approximately $30,000 providing landscaping work in the community. In what tax year, will the statute of limitations expire for Martin's 2018 tax return?

A) 2021.
B) 2022.
C) 2025.
D) 2026.
E) None of the choices are correct.

Question 59

51) Ramon's tax return was randomly selected for audit. Which IRS program likely selected Ramon's return for audit?

A) DIF System.
B) National Research Program.
C) Document perfection.
D) Information matching.
E) None of the choices are correct.

Question 60

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

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

Question 61

73) If the President vetoes tax legislation, Congress:

A) cannot override the President's veto.
B) can override the President's veto with a 50 percent positive vote in the House and Senate.
C) can override the President's veto with a 2/3ʳᵈ positive vote in the House and Senate.
D) can override the President's veto with a 75 percent positive vote in the House and Senate.
E) None of the choices are correct.

Question 62

74) Jeremy has a new client. He has identified a research question that relates to a transaction that the client completed several months ago. This type of research question will primarily involve:

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

Question 63

72) Edie would like to better understand a new code section enacted four weeks ago. Which of the following authorities will help Edie understand the newly enacted code section?

A) IRS regulations.
B) U.S. Tax Court cases.
C) Committee reports.
D) IRS revenue rulings.
E) None of the choices are correct.

Question 64

64) Josephine is considering taking a 6-month rotation in Paris for her job. Which type of authority may be especially helpful in determining the tax consequences of Josephine's job in Paris?

A) Determination letter.
B) Private letter ruling.
C) Tax treaty.
D) Regulation.
E) Revenue procedure.

Question 65

78) Which of the following is not a source of a tax practitioner's professional responsibilities?

A) AICPA Code of Professional Conduct.
B) Statements on Standards for Tax Services.
C) Circular 230.
D) State Board of Accountancy statutes.
E) None of the choices are correct.

Question 66

79) According to Statement on Standards for Tax Services No. 1, a tax practitioner can recommend a tax return position:

A) if the position is frivolous and disclosed on the tax return.
B) if the position complies with the standards imposed by the applicable tax authority.
C) only if the position meets the "more likely than not" standard.
D) only if the position meets the "clear and convincing evidence" standard.
E) None of the choices are correct.

Question 67

66) Which of the following has the lowest authoritative weight?

A) Legislative regulation.
B) Private letter ruling.
C) Revenue ruling.
D) Interpretative regulation.
E) Revenue procedure.

Question 68

68) The regulation with the lowest authoritative weight is the:

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

Question 69

65) Generally, code sections are arranged (grouped together):

A) chronologically.
B) by topic.
C) randomly.
D) by length.
E) None of the choices are correct.

Question 70

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

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

Question 71

63) Which of the following has the highest authoritative weight?

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

Question 72

77) Which of the following is not a common tool used in conducting tax research?

A) Citator.
B) Annotated tax service.
C) Topical tax service.
D) Keyword search.
E) None of the choices are correct.

Question 73

75) In a planning context,

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 74

61) Which of the following is not considered a secondary authority?

A) Text book.
B) Private Letter Ruling.
C) Tax article.
D) Tax service.
E) None of the choices are correct.

Question 75

80) Circular 230 was issued by:

A) AICPA.
B) State Boards of Accountancy.
C) American Bar Association.
D) IRS.
E) None of the choices are correct.

Question 76

69) Princess, who resides in the 2ⁿᵈ Circuit, recently found a circuit court case that is favorable to her income tax research question. Which of the following circuits would she prefer to have issued the opinion?

A) 2ⁿᵈ Circuit.
B) Federal Circuit.
C) 1ˢᵗ Circuit.
D) 2ⁿᵈ Circuit or the Federal Circuit.
E) None of the choices are correct.

Question 77

76) Which of the following types of tax services are arranged by code section?

A) legal tax service.
B) annotated tax service.
C) professional tax service.
D) topical tax service.
E) None of the choices are correct.

Question 78

71) Which of the following committees typically initiates tax legislation?

A) House Ways and Means Committee.
B) Joint Conference Committee.
C) Senate Finance Committee.
D) Senate Tax Committee.
E) None of the choices are correct.

Question 79

62) Which of the following has the highest authoritative weight?

A) Text book.
B) Private letter ruling.
C) Revenue ruling.
D) Tax service.
E) Tax article.

Question 80

70) Jaime recently found a "favorable" trial level court opinion directly on point for her tax question. Which trial level court would she prefer to have issued the opinion?

A) Tax Court.
B) District Court.
C) Circuit Court.
D) Divorce Court.
E) None of the choices are correct.