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

Answer 2

False

Question 3

Revenue rulings and revenue procedures are examples of primary authorities.

Answer 3

True

Question 4

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

Question 5

The "30-day" letter gives the taxpayer the opportunity to request an appeals conference or agree to the proposed IRS adjustment.

Question 6

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 7

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

Question 8

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

Question 9

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

Question 10

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

Question 11

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

Question 12

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

Question 13

If a 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 14

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

Question 15

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

Question 16

Office examinations are the most common type of IRS audit.

Question 17

Joel claimed a high amount of charitable contributions as a deduction on his 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 18

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

Question 19

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

Question 20

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

Question 21

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

Question 22

Proposed and Temporary Regulations have the same authoritative weight.

Question 23

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

Question 24

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 25

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

Question 26

If Lindley requests an extension to file her 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 these.

Question 27

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

Question 28

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 29

Closed facts are especially conducive to tax planning.

Question 30

This year 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 these.

Question 31

The Internal Revenue Code of 1986 is the name of the current tax code.

Question 32

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

Question 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 34

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 35

If Paula requests an extension to file her tax return, the latest she could file her return without penalty is:

A) September 15th.
B) October 15th.
C) August 15th.
D) November 15th.
E) None of these.

Question 36

Temporary Regulations have more authoritative weight than revenue rulings.

Question 37

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

Question 38

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 these.

Question 39

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 40

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

Question 41

Henry filed his 2014 tax return on May 15th, 2015. The statute of limitations for IRS assessment on Henry's 2014 tax return should end:

A) May 15th, 2017.
B) April 15th, 2017.
C) May 15th, 2018.
D) April 15th, 2018.
E) None of these.

Question 42

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 these.

Question 43

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 these.

Question 44

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 these.

Question 45

Andy filed a fraudulent 2014 tax return on May 1, 2015. The statute of limitations for IRS assessment on Andy's 2014 tax return should end:

A) May 1st, 2017.
B) April 15th, 2017.
C) May 1st, 2018.
D) April 15th, 2018.
E) None of these.

Question 46

Allen filed his 2014 tax return on May 15th, 2015 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 2013 tax return should end:

A) May 15th, 2017.
B) April 15th, 2017.
C) May 15th, 2018.
D) April 15th, 2018.
E) None of these.

Question 47

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 these.

Question 48

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 49

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 these.

Question 50

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 these.

Question 51

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 these.

Question 52

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 these.

Question 53

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

A) Correspondence.
B) Random.
C) Office.
D) Field.
E) None of these.

Question 54

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 these.

Question 55

Bill filed his 2014 tax return on March 15th, 2015. The statute of limitations for IRS assessment on Bill's 2014 tax return should end:

A) March 15th, 2017.
B) April 15th, 2017.
C) March 15th, 2018.
D) April 15th, 2018.
E) None of these.

Question 56

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 these.

Question 57

Martin has never filed a 2014 tax return despite earning approximately $20,000 providing landscaping work in the community. When does the statute of limitations expire for Martin's 2014 tax return?

A) 2017.
B) 2018.
C) 2021.
D) 2022.
E) None of these.

Question 58

Rowanda could not settle 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) U.S. Tax Court.
E) None of these.

Question 59

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 60

Which of the following is not considered a primary authority?

A) Tax Court case
B) Regulation
C) Revenue ruling
D) Tax service
E) None of these.

Question 61

Princess, who resides in the 2nd Circuit, recently found a circuit court case that is favorable to her 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 these

Question 62

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 these.

Question 63

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 these.

Question 64

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 these

Question 65

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 these.

Question 66

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 67

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 68

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 these.

Question 69

Which of the following committees typically initiates for tax legislation?

A) House Ways and Means Committee
B) Joint Conference Committee
C) Senate Finance Committee
D) Senate Tax Committee
E) None of these.

Question 70

Circular 230 was issued by:

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

Question 71

The regulation with the lowest authoritative weight is the:

A) procedural regulation
B) interpretative regulation
C) proposed regulation
D) legislative regulation
E) None of these

Question 72

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 these.

Question 73

Generally, code sections are arranged (grouped together):

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

Question 74

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 these.

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 these.

Question 76

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 these

Question 77

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 78

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 these.

Question 79

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 these.

Question 80

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.