Deck 1: Understanding and Working With the Federal Tax Law

Question 1

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

Answer 1

True

Question 2

Regulations are issued by the Internal Revenue Service.

Answer 2

False
They are issued by the U.S.Treasury Department.

Question 3

A § 179 election allows the immediate expensing of certain capital assets (up to $128,000 in 2008).

Answer 3

True

Question 4

The Federal tax laws allow a taxpayer to claim a deduction for state and local income taxes.

Question 5

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

Question 6

Under the concept of revenue neutrality,one taxpayer's increased tax liability can be another's tax savings.

Question 7

Before a tax bill can become law,it must be approved (signed)by the President of the U.S.

Question 8

Subchapter C refers to the subchapter in the Internal Revenue Code that deals with Corporate Distributions and Adjustments.

Question 9

The citation § 280H is not a proper reference to a section in the Internal Revenue Code.

Question 10

The domestic production activities deduction is structured so as to create jobs.

Question 11

The foundation of the U.S.tax system is the raising of revenue to absorb the cost of government operations.

Question 12

Mississippi and North Carolina are community property states.

Question 13

Revenue measures typically originate in the Senate Finance Committee of the U.S.Congress.

Question 14

When the Senate version of a tax bill differs from that passed by the House,a Joint Conference Committee drafts a compromise tax bill.

Question 15

Certain costs incurred in the installation of pollution control facilities may be amortized over 30 months.

Question 16

Shorter class lives for depreciable property and the use of accelerated depreciation will dampen the tax incentive for capital outlays.

Question 17

Since interest and taxes are deductible by a home owner,a person who rents an apartment may deduct as an itemized deduction 20% of rent payments.

Question 18

An international treaty takes precedence over a provision in the Internal Revenue Code.

Question 19

Currently,the Internal Revenue Code of 1986 does not contain §§ 308,309,and 310.This absence means those sections were repealed by Congress.

Question 20

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

Question 21

Stare decisis applies to Small Cases Division decisions.

Question 22

CCH's Tax Research Consultant is an annotated tax service.

Question 23

The RIA and CCH Citators are only available through their paper (i.e.,hard copy)services.

Question 24

In general,the "Blue Book" is a primary source of tax law.

Question 25

Revenue Rulings are published weekly by the U.S.Government in the Internal Revenue Bulletin.

Question 26

Letter rulings are available for public inspection.

Question 27

Which state is a separate property state?

A)Louisiana.
B)Texas.
C)New Mexico.
D)Georgia.
E)None of the above.

Question 28

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 write-off.
C)Amortization of pollution control facilities.
D)The rehabilitation tax credit.
E)None of the above.

Question 29

A district court must abide by the precedents set by the court of appeals of jurisdiction.

Question 30

The U.S.Tax Court has 16 regular judges,and the Court of Federal Claims has 19 judges.

Question 31

Taxation is included in the Regulation section of the CPA examination.

Question 32

Generally,neither a tax law nor a tax treaty takes general precedence over the other.

Question 33

A cite such as 372 U.S.39 indicates a memorandum decision of the U.S.Tax Court.

Question 34

There are three Courts of Federal Claims.

Question 35

Proposed Regulations issued simultaneously with Temporary Regulations carry more weight than traditional Proposed Regulations.

Question 36

The Supreme Court must hear all cases appealed from the U.S.Court of Appeals for the Federal Circuit.

Question 37

Determination letters usually involve completed,as opposed to proposed,transactions.

Question 38

The U.S.Tax Court follows a policy of always deciding cases based upon what it thinks the results should be.

Question 39

A taxpayer who lives in Louisiana and loses in the U.S.Tax Court can appeal to the Fifth Court of Appeals.

Question 40

A taxpayer may select the District Court that will hear his or her tax dispute.

Question 41

Which of these notations would appear after a U.S.Tax Court citation if the IRS agrees 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 the above.

Question 42

Regulations may first be found in:

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

Question 43

What company or group publishes Supreme Court cases?

A)U.S. Government Printing Office.
B)Commerce Clearing House.
C)Research Institute of America.
D)Lawyer's Co-operative Publishing Company.
E)All of the above.

Question 44

Which of the following statements relating to nonacquiescence is not true?

A)A nonacquiescence is published in the Cumulative Bulletin.
B)This procedure may be followed for other than regular U.S. Tax Court decisions.
C)The IRS can retroactively revoke an acquiescence.
D)The IRS must acquiesce or nonacquiesce in every tax case.
E)All of the above statements are true.

Question 45

Revenue Rulings are published semiannually in the:

A)Cumulative Bulletin.
B)Federal Revenue Bulletin.
C)Internal Revenue Bulletin.
D)I.R.S. Digest.
E)None of the above.

Question 46

Which citation is considered to be a legislative citation?

A)Ltr. Rul. 199952058.
B)Ann. 94-5, 1994-2 I.R.B. 39.
C)Reg. § 1.1014-1(c)(1).
D)§ 7519(c).
E)None of the above.

Question 47

Which citation refers to a Third 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 the above.

Question 48

Federal tax legislation generally originates in what body?

A)Internal Revenue Service.
B)Senate Finance Committee.
C)House Ways and Means Committee.
D)House Taxation Committee.
E)None of the above.

Question 49

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 does not choose to disagree or agree 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 the above.

Question 50

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 the above.

Question 51

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

A)Rev. Proc. 2002-39.
B)Joint Conference Committee Report.
C)§ 752(c) of the Internal Revenue Code.
D)All of the above.
E)None of the above.

Question 52

Which of the following sources has the highest tax validity?

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

Question 53

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 the above.

Question 54

Determine the incorrect citation:

A)TAM 20002704.
B)George W. Guill, 112 T.C.__, No. 22 (1999).
C)Ltr. Rul. 200108052.
D)Rev. Rul, 98-32, I.R.B. No. 25, 4.
E)None of the above.

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

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 the above.

Question 57

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 the above.

Question 58

Which of the following courts has the lowest tax validity?

A)U.S. Court of Appeals for the Federal Circuit.
B)U.S. Court of Appeals for the Fifth Circuit.
C)U.S. District Court.
D)U.S. Supreme Court.
E)All have the same validity.

Question 59

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 the above.

Question 60

Which provision could best be justified as encouraging small business?

A)Section 1244 stock.
B)Percentage depletion.
C)Domestic production activities deduction.
D)Interest deduction on home mortgage.
E)None of the above.

Question 61

Which of the following types of Regulations has the lowest tax validity?

A)Temporary.
B)Legislative.
C)Interpretative.
D)Proposed.
E)None of the above.

Question 62

What symbol in the RIA Citator indicates that a case has reconciled a particular court decision?

A)1
B)c
C)k
D)q
E)o

Question 63

What is meant by revenue neutrality?

Question 64

What is the Golsen rule?

Question 65

What authority may be cited in the RIA Citator?

A)Legislative Regulation.
B)Revenue Procedure.
C)House Ways and Means Committee Reports.
D)I.R.C. § 167.
E)None of the above.

Question 66

Which service allows a researcher to locate a particular journal article by Code section?

A)Tax Notes.
B)CCH's Federal Tax Articles.
C)Tax Articles Index.
D)Federal Tax Coordinator 2d.
E)All of the above.

Question 67

How does a treaty with a foreign country impact a section in the Internal Revenue Code?

Question 68

Which tax service is an annotated service?

A)Standard Federal Tax Reporter.
B)Federal Tax Coordinator 2d.
C)Tax Management Portfolios.
D)Mertens Law of Federal Income Taxation.
E)None of the above.

Question 69

What would be considered a primary source of tax law?

A)Yale Law Review article.
B)Revenue Procedure.
C)Technical advice memoranda.
D)General counsel memoranda.
E)None of the above.

Question 70

What are the two major types of conventional tax services?

Question 71

Which is not a substantial authority for purposes of the accuracy-related penalty?

A)Revenue Procedure.
B)General counsel memorandum (post-1984).
C)Tax Notes.
D)Technical advice memorandum (post-1984).
E)None of the above.

Question 72

Explain simulations on the CPA examination.