Deck 3: Constitutional and Legislative Sources

Question 1

Discuss the powers of taxation that are granted to Congress by the U.S. Constitution. Are any limits placed on the powers of Congress to so tax

Answer 1

US Federal Tax Laws : The very first step in discovering possible authority in the matter of tax generally consists of recognizing the relevant code section. The statutory source in current is Internal Revenue code (IRC) which is written by the congress and it is also termed as tax code.
U.S. constitution is the basis of all federal laws of United States. In addition to 16 th amendment constitution have other provisions also that may have an effect on taxation process. Some of powers of the constitution granted to the congress are as mentioned below -
1) Constitution make available to the congress that they may impose import taxes but not export taxes.
2) Constitution directs congress to impose applicability of tax in United States in a uniform manner.
Limits placed on powers of congress by constriction is that the constitution puts a restriction on per capita and other taxes which are direct in nature, unless these taxes produce revenues which get dispensed to the state's population from where collection of same is made.

Question 2

In the citation § 101(a)(2)(B), what does the "a" stand for What do the "2" and the "B" indicate to a tax researcher

Answer 2

US Federal Tax Laws: The very first step in discovering possible authority in the matter of tax generally consists of recognizing the relevant code section. The statutory source in current is Internal Revenue code (IRC) which is written by the congress and it is also termed as tax code. IRC is responsible for direction of tax collection, enforcement of rules of taxation and issuing tax refunds.
In the citation §101(a) (2)(B), denotations which can be concluded are as follows
1. (a) stands for subsection (a)
2. (2) stands for paragraph (2)
3. (B) stands for subparagraph (B) of section 101.

Question 3

Identify the general content of each of the following chapters of the Internal Revenue Code:
a. Chapter 11
b. Chapter 61
c. Chapter 1
d. Chapter 12

Answer 3

IRC also known as Internal Revenue Code of 1986 is the domestic part of federal statutory tax law in the US, distributed in different volumes of the US Statutes everywhere, and independently as Title 26 of the US Code (USC).
a.
The general content of the chapter 11 of IRC is related to the estate taxes.
b.
The general content of the chapter 61 of IRC is related to the portion of code and administration information. It is applicable to the taxes related to the income and estate taxes and gift taxes. It also includes the information regarding the taxpayer recording and requirement of filing.
c.
The general content of the chapter 1 of IRC is related to the surtaxes and normal taxes.
d.
The general content of the chapter 12 of IRC is related to the gift taxes.

Question 4

Identify the general contents of each of the following Internal Revenue Code sections:
a. § 62
b. § 163
c. § 11
d. § 164

Question 5

In which subtitle, chapter, and subchapter of the 1986 Code are each of the following sections found
a. § 32
b. § 172
c. § 2039
d. § 6013

Question 6

George and Linda are divorced and own a house from the marriage. Under the divorce decree, Linda pays George $5,000 per month alimony. Because the real estate market has collapsed in the area where they live, George and Linda cannot sell the house. Since they are still friends, they decide to live in separate wings of the house until the real estate market recovers. If George and Linda live together for the entire current year, can Linda claim a deduction for the alimony paid to George In answering this case, use an online tax service with only the Internal Revenue Code database selected. State your keywords and which online tax service you used to arrive at your answer.

Question 7

Have the federal courts ever held federal estate and gift taxes to be unconstitutional

Question 8

In the citation § 1031(a)(3)(B), what does the "a" stand for What do the "3" and the "B" indicate to a tax researcher

Question 9

Chapters of the Internal Revenue Code are subdivided into subchapters. How are subchapters identified What generally is contained in a subchapter

Question 10

Locate Section 217 of the Code. It is found in which:
a. Subtitle of the Code
b. Chapter
c. Subchapter
d. Part

Question 11

List the first three section numbers and titles of each of the following subchapters of Chapter 1 of the Internal Revenue Code:
a. Subchapter B
b. Subchapter E
c. Subchapter J
d. Subchapter S

Question 12

Juan sold IBM stock to Richard for a $10,000 loss. Richard is the husband of Juan's sister, Carla. How much of the loss can Juan deduct in the current year if Juan's taxable income is $55,000 and he has no other capital transactions In answering this case, use an online tax service with only the Internal Revenue Code database selected. State your keywords and which online tax service you used to arrive at your answer.

Question 13

What is a tax treaty Explain the purpose of a tax treaty. What matters generally are covered in a tax treaty

Question 14

Are there any exceptions to the general formatting rules for a Code section Give examples.

Question 15

Correctly cite the italicized sentence indicated by the dart ( ) in the following passage from the Code:
SECTION 74. PRIZES AND AWARDS
a. General rule
Except as otherwise provided in this section or in section 117 (relating to qualified scholarships), gross income includes amounts received as prizes and awards.
b. Exception for certain prizes and awards transferred to charities
Gross income does not include amounts received as prizes and awards made primarily in recognition of religious, charitable, scientific, educational, artistic, literary, or civic achievement, but only if-
1. the recipient was selected without any action on his part to enter the contest or proceeding;
2. The recipient is not required to render substantial future services as a condition to receiving the prize or award ; and
3. the prize or award is transferred by the payor to a governmental unit or organization described in paragraph (1) or (2) of section 170(c) pursuant to a designation made by the recipient.

Question 16

Locate Section 2036 of the Code. It is found in which:
a. Subtitle of the Code
b. Chapter
c. Subchapter
d. Part

Question 17

Identify the equivalent section of the current Code for each of the following sections of the 1939 Code. If there is no equivalent section, say so.
a. § 1
b. § 113(a)
c. § 22(a)
d. § 115(a)
e. § 181

Question 18

Tex is a rancher. This year her herd of cattle was infested with hoof-and-mouth disease and had to be destroyed. Tex's insurance policy reimburses her for an amount in excess of the tax basis in the cattle, thereby creating an "insurance gain." After receiving the insurance proceeds, Tex buys a new herd of cattle. Can Tex defer the recognition of this insurance gain on the destroyed herd In answering this case, use an online tax service with only the Internal Revenue Code database selected. State your keywords and which online tax service you used to arrive at your answer.

Question 19

How is a tax treaty terminated

Question 20

Which subchapter of Chapter 1, Subtitle A contains the Code sections relating to:
a. Corporations
b. Mutual funds
c. Tax-exempt organizations

Question 21

Correctly cite the italicized sentence indicated by the dart ( ) in the following passage from the Code:
SECTION 263A. CAPITALIZATION AND INCLUSION IN INVENTORY COSTS OF CERTAIN EXPENSES
a. Nondeductibility of certain direct and indirect costs
1. In general-In the case of any property to which this section applies, any costs described in paragraph (2)-
A. in the case of property which is inventory in the hands of the taxpayer, shall be included in inventory costs, and
B. in the case of any other property, shall be capitalized.
2. Allocable costs

Question 22

Use an online tax service (e.g., Checkpoint, LexisNexis, CCH IntelliConnect) to answer the following questions:
a. What is the general content of Internal Revenue Code § 28
b. What is the general content of Internal Revenue Code § 141
c. What is the general content of Internal Revenue Code § 166
d. Print a copy (maximum of one page) of any one of the above Code sections and attach it to your answer.

Question 23

Use an online tax service (e.g., Checkpoint, LexisNexis, CCH IntelliConnect) to locate the following Code sections. What other Code sections reference each of the sections you found State which online tax service you used to complete this assignment.
a. § 72
b. § 307
c. § 446

Question 24

Betty owed Martha $5,000. In payment of this debt, Betty transferred to Martha a life insurance policy on Betty, with a cash surrender value of $5,000. The face value of the policy is $100,000. Martha names herself as beneficiary of the policy and continues to make the premium payments. After Martha has paid $15,000 in premiums, Betty dies and Martha collects $100,000. Is any of the $100,000 Martha received taxable In answering this case, use an online tax service with only the Internal Revenue Code database selected. State your keywords and which online tax service you used to arrive at your answer.

Question 25

When an Internal Revenue Code section and a tax treaty provision appear to conflict, which usually prevails

Question 26

Which Code section contains the statute for the definition of:
a. Gross income
b. The interest deduction
c. Depreciation and cost recovery

Question 27

What is the general content of each of the following subchapters of Chapter 1, Subtitle A, of the Internal Revenue Code
a. Subchapter C
b. Subchapter K
c. Subchapter S
d. Subchapter E

Question 28

Use an online tax service (e.g., Checkpoint, LexisNexis, CCH IntelliConnect) to answer the following questions:
a. What is the general content of Internal Revenue Code § 117
b. What is the general content of Internal Revenue Code § 165
c. What is the general content of Internal Revenue Code § 304
d. Print a copy (maximum of one page) of any one of the above Code sections and attach it to your answer.

Question 29

Name the article and section of the U.S. Constitution that gives Congress the power to levy a tax.

Question 30

On May 1, Rick formed a new corporation, Red, Inc. He spent $3,000 in legal fees and paid the state $600 in incorporation fees. Red, Inc. started operating its business on May 10. Can Rick or Red, Inc. deduct either of these organizational fees In answering this case, use an online tax service with only the Internal Revenue Code database selected. State your keywords and which online tax service you used to arrive at your answer.

Question 31

Describe the ratification process for a tax treaty between the United States and another country.

Question 32

Which Code section contains the statute for the definition of:
a. A dependent
b. Bad debts
c. Alimony payments

Question 33

What is found in each of the following subchapters of Subtitle A, Chapter 1 of the Internal Revenue Code
a. Subchapter B
b. Subchapter E
c. Subchapter L
d. Subchapter F

Question 34

Use an online tax service (e.g., Checkpoint, LexisNexis, CCH IntelliConnect) to answer the following questions:
a. What is the general content of Internal Revenue Code § 25A
b. What is the general content of Internal Revenue Code § 67
c. What is the general content of Internal Revenue Code § 280G
d. Print a copy (maximum of one page) of any one of the above Code sections and attach it to your answer.

Question 35

Enumerate the Code sections that contain the chief tax law provisions on the following topics:
a. S corporations
b. Personal holding company tax
c. Gift tax
d. Tax accounting methods

Question 36

This year, there were massive brush fires in the interior of Mexico. Amy gave $10,000 to the Mexican Relief Foundation, which is organized in Mexico City. The funds were used to provide food, clothing, and shelter to the victims of the Mexican fires. Is Amy's charitable contribution deductible for income tax purposes In answering this case, use an online tax service with only the Internal Revenue Code database selected. State your keywords and which online tax service you used to arrive at your answer.

Question 37

The tax researcher must be able to find descriptions of tax treaties to solve certain tax problems. List different locations where a tax researcher might find a tax treaty.

Question 38

The tax researcher must be careful not to overlook connecting words such as "and," "or," "at least," and "more than." Explain why this is important.

Question 39

Which subchapter of Subtitle A, Chapter 1 of the Internal Revenue Code contains the provisions related to the following
a. Deferred compensation
b. Partners and partnerships
c. Corporate distribution and adjustments
d. Banks

Question 40

Name several locations where a tax researcher would find the text of the current Internal Revenue Code.

Question 41

Use an online site to determine how many senators are on the Senate Finance Committee. Who is the chair of the Finance Committee State where you found this information.

Question 42

Curtis is 50 years old and has an individual retirement account (IRA) that contains substantial funds. His son, Curtis Jr., was accepted to Yale University upon graduating from high school. Curtis had not planned for this and needs to draw $25,000 per year out of his IRA to help pay the tuition and fees at Yale. What are the tax consequences of the withdrawals from the IRA In answering this case, use an online tax service with only the Internal Revenue Code database selected. State your keywords and which online tax service you used to arrive at your answer.

Question 43

Briefly summarize the usual steps of the legislative process for the development of federal tax legislation.

Question 44

Not all statutory tax laws are found in the Internal Revenue Code. Is this statement true or false Discuss briefly.

Question 45

Which Internal Revenue Code sections are found in each of these subchapters of Subtitle A, Chapter 1
a. Subchapter J
b. Subchapter A
c. Subchapter I
d. Subchapter P

Question 46

If a tax researcher wants to know if there is an equivalent 1939 Code section for a specific 1986 Code section, how would he or she locate it

Question 47

Use an online site to determine how many representatives are on the House Ways and Means Committee. Who is the chair of the Ways and Means Committee State where you found this information.

Question 48

Cathy Coed is a full-time senior student at Big Research University (BRU). Cathy is considered by most as a brilliant student and has been given a $35,000-per-year scholarship. In the current year, Cathy pays the following amounts to attend BRU:

What are the tax consequences (i.e., how much is income) of the $35,000 current year's scholarship to Cathy In answering this case, use an online tax service with only the Internal Revenue Code database selected. State your keywords and which online tax service you used to arrive at your answer.

Question 49

As a bill proceeds through Congress, various committee reports are generated. List the three committee reports that typically are prepared for a new tax law.

Question 50

Locate section 163 of the Code and answer the following. Section 163 is part of which:
a. Title
b. Subtitle
c. Chapter
d. Subchapter

Question 51

Which Internal Revenue Code sections are found in each of these parts of Subtitle A
a. Subchapter A, Part IV
b. Subchapter C, Part II
c. Subchapter B, Part VIII
d. Subchapter A, Part I

Question 52

One important problem that faces a tax researcher is interpretation of the Internal Revenue Code. Comment on each of the following interpretation problems:
a. Exceptions to a Code section
b. Words that connect phrases, such as "and" and "or"
c. Recent changes in the Code
d. Effective dates
e. Words that modify percentages, dollar amounts, or time

Question 53

Use an online site to determine what is contained in each of the following. State where you found this information.
a. U.S. Const. Art. I, § 9 cl. 3
b. U.S. Const. Art. I, § 8 cl. 1
c. U.S. Const. Art. II, § 2 cl. 2

Question 54

Dennis is an executive of Gold Corporation. He receives a one-for-one distribution of stock rights for each share of common stock he owns. On the date of distribution, the stock rights have a fair market value of $2 per right, and the stock has a fair market value of $20 per share. Dennis owns 10,000 shares of the stock with a basis of $5 per share. If Dennis does not make any special elections with regard to the stock rights, what is his basis in the rights
a. Locate the Code section(s) that deals with this situation. State the section number(s).
b. Review the Code section(s). Does it raise a need for new information to solve this question
c. Are you able to reach a conclusion about the research question from this Code section If so, what is your conclusion(s)

Question 55

When are committee reports useful to a tax researcher

Question 56

Locate section 1245 of the Code and answer the following. Section 1245 is part of which:
a. Title
b. Subtitle
c. Chapter
d. Subchapter

Question 57

What is covered in Subtitle A, Chapter 2 of the Internal Revenue Code What Internal Revenue Code sections are included in Chapter 2

Question 58

Comment on the statement, "All tax questions can be answered using the Internal Revenue Code."

Question 59

Locate and print the first page of a House Ways and Means Committee report using an online site. State where you found this information.

Question 60

Monica purchased two acres of land with an old building on it for $1 million. The purchase was made to acquire the land for a new store she wanted to open on the property. Shortly after completing the purchase, Monica pays $80,000 to have the old building demolished. How does Monica treat the $80,000 demolition payment for tax purposes
a. Locate the Code section(s) that deals with this situation. State the section number(s).
b. Review the Code section(s). Does it raise a need for new information to solve this question
c. Are you able to reach a conclusion about the research question from this Code section If so, what is your conclusion(s)

Question 61

What are the three primary statutory sources of U.S. federal tax law

Question 62

What is a public law number In P.L. 100-203, what do the "100" and the "203" indicate

Question 63

Locate the committee reports associated with each of the following Code sections using a tax service such as Checkpoint. Give the public law (P.L.) number of the most recent committee report for each Code section.
a. Section 25A
b. Section 117
c. Section 162

Question 64

What is found in each of the following subchapters of Chapter 1, Subtitle A, of the Internal Revenue Code
a. Subchapter D
b. Subchapter H
c. Subchapter P
d. Subchapter L

Question 65

Does the United States have an income tax treaty with any of the following countries If it does, in what year was the treaty signed State where you found this information.
a. Japan
b. United Kingdom
c. Egypt
d. Germany

Question 66

Staff sergeant G. I. Jane was a soldier in the Iraq War. Her salary was $2,600 per month, and she was in the war zone for eight months. How much of her salary is taxable for the eight months In answering this case, use only the Internal Revenue Code for your research.

Question 67

Lihue Inc. sells timeshares in Hawaii. Gene buys a timeshare from Lihue Inc. Gene agrees to pay $10,000 down, and Lihue Inc. will finance a seven-year note for the balance of the purchase price at the current market rate of interest. Can Lihue Inc. use the installment method to report its gain on the sale of the Hawaiian timeshare to Gene
a. Locate the Code section(s) that deals with this situation. State the section number(s).
b. Review the Code section(s). Does it raise a need for new information to solve this question
c. Are you able to reach a conclusion about the research question from this Code section If so, what is your conclusion(s)

Question 68

Discuss the effect of Pollock v. Farmers' Loan Trust Co. on the development of U.S. income tax laws.

Question 69

Where would a tax researcher find pertinent committee reports List at least four publications and their publishers that include tax-related committee reports. Is there an index that would help a tax researcher locate a specific committee report If so, where might such an index be found

Question 70

Locate the Committee Reports associated with each of the following Code sections (if any) using a tax service such as Checkpoint. Give the Public Law (P.L.) number of the most recent committee for each Code section.
a. Section 24
b. Section 243
c. Section 222

Question 71

What is the official name of P.L. 108-27 What year was that law enacted Where did you find your answer

Question 72

Does the United States have an income tax treaty with any of the following countries If it does, in what year was the treaty signed State where you found this information.
a. Australia
b. Iceland
c. Jamaica
d. Sri Lanka

Question 73

Carol received a gift of stock from her favorite uncle. The stock had a fair market value of $30,000 and a basis to the uncle of $10,000 at the date of the gift. How much is taxable to Carol from this gift In answering this case, use only the Internal Revenue Code for your research.

Question 74

Sara Student is a full-time first-year student at Small State University (SSU). Her tuition for the year is $42,000, which is paid by Sara's mother, Susan. Sara also has a job as a model, earning substantial money; therefore, Sara does not qualify as Susan's dependent. Can Sara's mother claim the American Opportunity Credit for the tuition she paid Can Sara claim the American Opportunity Credit on any unused portion of the tuition
a. Locate the Code section(s) that deals with this situation. State the section number(s).
b. Review the Code section(s). Does it raise a need for new information to solve this question
c. Are you able to reach a conclusion about the research question from this Code section If so, what is your conclusion(s)

Question 75

The 16th Amendment to the Constitution had a significant effect on the U.S. income tax. What was it

Question 76

In addition to committee reports, which are byproducts to the development of tax legislation, what other report may be of value to the tax researcher analyzing a new provision of the tax law Why

Question 77

Log on to http://waysandmeans.house.gov, the Website for the Ways and Means Committee of the U.S. House of Representatives Website, and answer the following questions:
a. Who is the chair of the committee
b. What is the total number of members on the committee
c. How many of the members are from your home state If none, say so.
d. The Ways and Means Committee has several subcommittees. Name three of these subcommittees and indicate who chairs each subcommittee.

Question 78

What is the official name of P.L. 99-514 What year was that law enacted Where did you find your answer

Question 79

Use an online tax service (e.g., Checkpoint, LexisNexis, CCH IntelliConnect) to locate § 117 of the Internal Revenue Code. Answer the following questions:
a. How many subsections does § 117 include
b. How many paragraphs does § 117(b) include
c. How many subparagraphs does § 117(d)(2) include
d. Print a copy (maximum of one page) of this section and attach it to your answer.

Question 80

Maria is an independent long-haul trucker. She receives a speeding ticket for $500, which she pays. Can Maria deduct the cost of the ticket on her Schedule C In answering this case, use only the Internal Revenue Code for your research.