Deck 1: Understanding and Working With the Federal Tax Law

Question 1

Income from patents can qualify for capital gain treatment.

Answer 1

True

Question 2

Revenue-neutral tax laws reduce deficits.

Answer 2

False

Question 3

The Internal Revenue Code is a compilation of Federal tax legislation that appears in Title 28 of the Internal Revenue Code.

Answer 3

False

Question 4

Proposed Regulations have the force and effect of law.

Question 5

Neither the 1939 nor the 1954 Code substantially changed all the tax law existing on the date of its enactment.

Question 6

Many states have balanced budgets because laws or constitutional amendments preclude deficit spending.

Question 7

Saving leads to capital formation and thus makes funds available to finance home construction and industrial expansion.

Question 8

Allowing a taxpayer to choose either a credit or a deduction for foreign taxes paid can be explained by equity considerations.

Question 9

The adoption tax credit can be explained by social considerations.

Question 10

The corporate tax rate of 34 percent applies only to taxable income in excess of $75,000.

Question 11

Temporary Regulations have the same authoritative value as Finalized Regulations.

Question 12

The Hope scholarship credit can be explained by economic considerations.

Question 13

Some Regulations are arranged in different sequence than the Code.

Question 14

The deduction for charitable contributions can be explained by social considerations.

Question 15

Longer class lives for depreciable property and the required use of straight-line method of depreciation should dampen the tax incentive for purchasing capital assets.

Question 16

The earned income tax credit is refundable.

Question 17

Federal tax legislation generally originates in the Senate Finance Committee.

Question 18

Subchapter C refers to the "Corporate Distributions and Adjustments" section of the Code.

Question 19

Subchapter K refers to the "Partners and Partnerships" section of the Code.

Question 20

The U.S. Federal government has a provision in the Constitution which precludes deficit spending.

Question 21

Regulations are issued by the Treasury Department.

Question 22

Letter rulings may not be substantial authority for purposes of the accuracy-related penalty in § 6662.

Question 23

A taxpayer must pay any tax deficiency assessed by the IRS and sue for a refund to bring suit in the U.S. District Court.

Question 24

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 25

Revenue Procedures deal with the internal management practices and procedures of the IRS.

Question 26

Which provision could best be justified as encouraging small business?

A) S corporation election.
B) Percentage depletion.
C) Domestic production activities deduction.
D) Interest deduction on home mortgage.
E) None of the above.

Question 27

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

Question 28

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

Question 29

A Revenue Ruling is a legislative source of Federal tax law.

Question 30

Which provision could best be justified as a means of controlling the economy?

A) Write-off of research and development expenditures.
B) Accelerated depreciation method for depreciable capital expenditures.
C) Amortization of pollution control facilities.
D) The rehabilitation tax credit.
E) None of the above.

Question 31

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

Question 32

The CPA examination is now computer-based with increased emphasis on information technology.

Question 33

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

Question 34

In a U.S. District Court, a jury can decide both questions of fact and questions of law.

Question 35

Unlike determination letters, letter rulings are issued by the National Office of the IRS.

Question 36

Revenue Rulings carry the same legal force and effect as Regulations.

Question 37

Proposed Regulations are not published in the Federal Register.

Question 38

Treasury Decisions are issued by the Treasury Department to promulgate new Regulations.

Question 39

Determination letters usually involve proposed transactions.

Question 40

In a courtroom challenge, the burden of proof is on the IRS to show that a Regulation is right.

Question 41

Interpret the following citation: 64-1 USTC ¶ 9618, aff'd in 344 F. 2d 966.

A) A U.S. Tax Court Small Cases Division decision that was affirmed on appeal.
B) A U.S. Tax Court decision that was affirmed on appeal.
C) A U.S. District Court decision that was affirmed on appeal.
D) A U.S. Circuit Court of Appeals decision that was affirmed on appeal.
E) None of the above.

Question 42

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 43

Which of these citations does not refer to an administrative release?

A) Notice 90-20, 1980-1 C.B. 328.
B) Ltr. Rul. 9333032 (May 24, 1993).
C) TAM 9510001 (March 6, 1995).
D) T.C. Summary Opinion, 2005-111.
E) All of the above.

Question 44

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 45

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) § 351.
E) None of the above.

Question 46

Which state is a common law property state?

A) Arizona.
B) Louisiana.
C) New Mexico.
D) New York.
E) None of the above.

Question 47

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

A) Rev. Proc. 2010-3.
B) Joint Conference Committee Report.
C) Section 12(a) of the Internal Revenue Code.
D) All of the above.
E) None of the above.

Question 48

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 49

Determine the incorrect citation:

A) Ltr. Rul. 20012305.
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 50

Which state is located in the jurisdiction of the Ninth Circuit of Appeals?

A) Louisiana.
B) California.
C) New York.
D) South Carolina.
E) None of the above.

Question 51

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 52

Which trial court hears only tax disputes?

A) U.S. District Court.
B) U.S. Tax Court.
C) U.S. Court of Federal Claims.
D) U.S. Court of Appeals.
E) None of the above.

Question 53

The Golsen doctrine applies to which court?

A) U.S. Tax Court.
B) U.S. District Court.
C) U.S. Court of Federal Claims.
D) U.S. Supreme Court.
E) Some other court.

Question 54

Which citation refers to a Third Circuit Court of Appeals decision?

A) 40 T.C. 1018.
B) 159 F. 2d 848 (CA-2, 1947).
C) 354 F. Supp. 1003 (D. Ct. Ga, 1972).
D) 914 F. 2d 396 (CA-3, 1990).
E) None of the above.

Question 55

A taxpayer who loses in a U.S. District Court may appeal directly to the:

A) Supreme Court.
B) U.S. Tax Court.
C) U.S. Court of Federal Claims.
D) U.S. Circuit Court of Appeals.
E) All of the above.

Question 56

Doug and Heather, related parties, are landlord and tenant as to certain business property. If the IRS questions the amount of rent Heather is paying to Doug, 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 57

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 58

Which of the following sources has the highest tax validity?

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

Question 59

Identify the number of the Court(s) of Federal Claims.

A) 1.
B) 3.
C) 16.
D) 19.
E) None of the above is correct.

Question 60

Which of the following indicates that a decision has precedential value for future cases?

A) Stare decicis.
B) Golsen doctrine.
C) En banc.
D) Reenactment doctrine.
E) None of the above.

Question 61

Which trial court's jurisdiction depends on the geographical location of the taxpayer?

A) U.S. Tax Court.
B) U.S. District Court.
C) U.S. Court of Federal Claims.
D) Small Cases Division of the Tax Court.
E) None of the above.

Question 62

Explain simulations on the CPA examination.

Question 63

What are the key components of tax planning?

Question 64

Explain the Golsen doctrine.

Question 65

A Memorandum decision of the U.S. Tax Court could be cited as:

A) T.C. Memo. 1990-650.
B) 68-1 USTC ¶ 9200.
C) 37 AFTR 2d 456.
D) All of the above.
E) None of the above.

Question 66

Which is a primary source of tax law?
A) J.W. Yarbo v. Comm., 737 F. 2d 479 (CA-5, 1984).
B) Article by a Federal judge in Yale Law Review.
C) Determination letter.
D) Letter ruling.
E) All of the above are primary sources.

A) J.W. Yarbo v. Comm., 737
B) Article by a Federal judge in Yale Law Review.
C) Determination letter.
D) Letter ruling.
E) All of the above are primary sources.

Question 67

Which of the following statements about an acquiescence is correct?

A) An acquiescence is issued in the Federal Register.
B) Acquiescences are published only for certain regular decisions of the U.S. Tax Court.
C) An acquiescence is published in the Internal Revenue Bulletin.
D) The IRS does not issue acquiescences to adverse decisions that are not appealed.
E) All of the above are correct.

Question 68

Which citation refers to a U.S. Tax Court decision?

A) Appollo Computer, Inc. v. U.S., 95-1 USTC ¶ 50,015 (Fed. Cl., 1994).
B) Westreco, Inc., T.C. Memo. 1992-561 (1992).
C) Bausch & Lomb, Inc. v. Comm., 933 F. 2d 1084 (CA-2, 1991).
D) Portland Manufacturing Co. v. Comm., 35 AFTR 2d 1439 (CA-9, 1975).
E) None of the above.

Question 69

What is the wherewithal to pay concept? Give an example.

Question 70

Which trial court decision is generally less authoritative?

A) U.S. District Court.
B) U.S. Tax Court.
C) U.S. Court of Federal Claims.
D) Small Cases Division of the Tax Court.
E) All of the above are the same.

Question 71

If these citations appeared after a trial court decision, which one means that the decision was viewed favorably?

A) Aff'd 633 F. 2d 512 (CA-7, 1980).
B) Rem'd 399 F. 2d 800 (CA-5, 1968).
C) Rev'd 914 F. 2d 396 (CA-3, 1990).
D) Rev'd 935 F. 2d 203 (CA-5, 1991).
E) None of the above.

Question 72

Which court decision is generally more authoritative?

A) A U.S. Tax Court decision.
B) Court of Federal Claims decision.
C) District Court decision.
D) U.S. Court of Appeals decision.
E) U.S. Tax Court Memorandum decision.

Question 73

Explain the function of Temporary Regulations.

Question 74

Which trial court has 19 judges?

A) U.S. Tax Court.
B) U.S. Court of Federal Claims.
C) U.S. Supreme Court.
D) U.S. Court of Appeals.
E) None of the above.