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

Question 1

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.

Answer 1

True

Question 2

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 2

False

Question 3

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

Answer 3

False

Question 4

Revenue rulings and revenue procedures are examples of primary authorities.

Question 5

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

Question 6

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

Question 7

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

Question 8

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 9

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

Question 10

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

Question 11

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 12

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

Question 13

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 11^th 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 14

Office examinations are the most common type of IRS audit.

Question 15

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

Question 16

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

Question 17

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

Question 18

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

Question 19

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 20

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

Question 21

Proposed and Temporary Regulations have the same authoritative weight.

Question 22

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 23

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

A) April 15^th.
B) October 15^th.
C) August 15^th.
D) November 15^th.
E) None of the above.

Question 24

Closed facts are especially conducive to tax planning.

Question 25

Temporary Regulations have more authoritative weight than revenue rulings.

Question 26

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 27

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 above.

Question 28

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 29

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

Question 30

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 31

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 32

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 15^th.
B) October 15^th.
C) August 15^th.
D) November 15^th.
E) None of the above.

Question 33

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

Question 34

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 35

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 36

This year April 15^th falls on a Saturday. Individual tax returns will be due on:

A) April 14^th.
B) April 15^th.
C) April 16^th.
D) April 17^th.
E) None of the above.

Question 37

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

Question 38

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

Question 39

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

Question 40

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 above. Corporations are always required to file a tax return.

Question 41

Lavonda discovered that the 5^th 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 42

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 above.

Question 43

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 above.

Question 44

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 above.

Question 45

Dominic earned $1,500 this year, and his employer withheld $200 of federal income tax from his salary. Assuming that Dominic 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 above.

Question 46

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 above.

Question 47

Allen filed his 2016 tax return on May 15^th, 2017 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 2016 tax return should end:

A) May 15^th, 2019.
B) April 15^th, 2019.
C) May 15^th, 2020.
D) April 15^th, 2020.
E) None of the above.

Question 48

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 above.

Question 49

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 50

Henry filed his 2016 tax return on May 15^th, 2017. The statute of limitations for IRS assessment on Henry's 2016 tax return should end:

A) May 15^th, 2019.
B) April 15^th, 2019.
C) May 15^th, 2020.
D) April 15^th, 2020.
E) None of the above.

Question 51

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 above.

Question 52

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 above.

Question 53

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 above.

Question 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 above.

Question 55

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 above.

Question 56

Bill filed his 2016 tax return on March 15^th, 2017. The statute of limitations for IRS assessment on Bill's 2016 tax return should end:

A) March 15^th, 2019.
B) April 15^th, 2019.
C) March 15^th, 2020.
D) April 15^th, 2020.
E) None of the above.

Question 57

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 above.

Question 58

Andy filed a fraudulent 2016 tax return on May 1, 2017. The statute of limitations for IRS assessment on Andy's 2016 tax return should end:

A) May 1^st, 2019.
B) April 15^th, 2019.
C) May 1^st, 2020.
D) April 15^th, 2020.
E) None of the above.

Question 59

Martin has never filed a 2016 tax return despite earning approximately $20,000 providing landscaping work in the community. In what tax year, will the statute of limitations expire for Martin's 2016 tax return?

A) 2019.
B) 2020.
C) 2023.
D) 2024.
E) None of the above.

Question 60

Greg earned $20,500 this year and had $1,500 of federal income taxes withheld from his salary. Assuming that Greg will have a total tax liability of $1,000 (and thus will receive a $500) 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 above.

Question 61

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 above.

Question 62

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 2/3^rd 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 above.

Question 63

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 above.

Question 64

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 above.

Question 65

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 above.

Question 66

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 above.

Question 67

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 above.

Question 68

Circular 230 was issued by:

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

Question 69

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 70

Generally, code sections are arranged (grouped together):

A) chronologically.
B) by topic.
C) randomly.
D) by length.
E) None of the above.

Question 71

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 above.

Question 72

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 73

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 74

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 above.

Question 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 above.

Question 76

Princess, who resides in the 2^nd 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) 2^nd Circuit.
B) Federal Circuit.
C) 1^st Circuit.
D) 2^nd Circuit or the Federal Circuit.
E) None of the above.

Question 77

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 above.

Question 78

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 above.

Question 79

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 above.

Question 80

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.