(Test Bank) Acc 307 Tax Law Complete Test Bank

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1. CHAPTER 1UNDERSTANDING AND WORKING WITH THE FEDERAL TAX LAW Que Many states have balanced budgets because laws or constitutional amendments preclude deficit spending. *a. True b. False 2. CHAPTER 1UNDERSTANDING AND WORKING WITH THE FEDERAL TAX LAW Q 2 The U.S. Federal government has a provision in the Constitution which precludes deficit spending. a. True *b. False 3. CHAPTER 1UNDERSTANDING AND WORKING WITH THE FEDERAL TAX LAW Q 3 Revenue-neutral tax laws reduce deficits. a. True *b. False 4. CHAPTER 1UNDERSTANDING AND WORKING WITH THE FEDERAL TAX LAW Q 4 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. *a. True b. False 5. CHAPTER 1UNDERSTANDING AND WORKING WITH THE FEDERAL TAX LAW Q 5 The Internal Revenue Code is a compilation of Federal tax legislation that appears in Title 28 of the Internal Revenue Code. a. True *b. False 6. CHAPTER 1UNDERSTANDING AND WORKING WITH THE FEDERAL TAX LAW Q 6 Income from patents can qualify for capital gain treatment. *a. True b. False 7. CHAPTER 1UNDERSTANDING AND WORKING WITH THE FEDERAL TAX LAW Q 7 Saving leads to capital formation and thus makes funds available to finance home construction and industrial expansion. *a. True b. False 8. CHAPTER 1UNDERSTANDING AND WORKING WITH THE FEDERAL TAX LAW Q 8 The corporate tax rate of 34 percent applies only to taxable income in excess of $75,000. *a. True b. False 9. CHAPTER 1UNDERSTANDING AND WORKING WITH THE FEDERAL TAX LAW Q 9 The earned income tax credit is refundable. *a. True b. False 10. CHAPTER 1UNDERSTANDING AND WORKING WITH THE FEDERAL TAX LAW Q10 The deduction for charitable contributions can be explained by social considerations. *a. True b. False 11. CHAPTER 1UNDERSTANDING AND WORKING WITH THE FEDERAL TAX LAW Q11 The Hope scholarship credit can be explained by economic considerations. a. True *b. False12. CHAPTER 1UNDERSTANDING AND WORKING WITH THE FEDERAL TAX LAW Q12 The adoption tax credit can be explained by social considerations. *a. True b. False 13. CHAPTER 1UNDERSTANDING AND WORKING WITH THE FEDERAL TAX LAW Q13 Allowing a taxpayer to choose either a credit or a deduction for foreign taxes paid can be explained by equity considerations. *a. True b. False 14. CHAPTER 1UNDERSTANDING AND WORKING WITH THE FEDERAL TAX LAW Q14 Neither the 1939 nor the 1954 Code substantially changed all the tax law existing on the date of its enactment. *a. True b. False 15. CHAPTER 1UNDERSTANDING AND WORKING WITH THE FEDERAL TAX LAW Q15 Federal tax legislation generally originates in the Senate Finance Committee. a. True *b. False 16. CHAPTER 1UNDERSTANDING AND WORKING WITH THE FEDERAL TAX LAW Q16 Subchapter K refers to the “Partners and Partnerships” section of the Code. *a. True b. False 17. CHAPTER 1UNDERSTANDING AND WORKING WITH THE FEDERAL TAX LAW Q17 Subchapter C refers to the “Corporate Distributions and Adjustments” section of the Code. *a. True b. False 18. CHAPTER 1UNDERSTANDING AND WORKING WITH THE FEDERAL TAX LAW Q18 Some Regulations are arranged in different sequence than the Code. a. True *b. False 19. CHAPTER 1UNDERSTANDING AND WORKING WITH THE FEDERAL TAX LAW Q19 Proposed Regulations have the force and effect of law. a. True *b. False 20. CHAPTER 1UNDERSTANDING AND WORKING WITH THE FEDERAL TAX LAW Q20 Temporary Regulations have the same authoritative value as Finalized Regulations. *a. True b. False 21. CHAPTER 1UNDERSTANDING AND WORKING WITH THE FEDERAL TAX LAW Q21 Proposed Regulations are not published in the Federal Register. a. True *b. False 22. CHAPTER 1UNDERSTANDING AND WORKING WITH THE FEDERAL TAX LAW Q22 Regulations are issued by the Treasury Department. *a. True b. False23. CHAPTER 1UNDERSTANDING AND WORKING WITH THE FEDERAL TAX LAW Q23 Revenue Rulings carry the same legal force and effect as Regulations. a. True *b. False 24. CHAPTER 1UNDERSTANDING AND WORKING WITH THE FEDERAL TAX LAW Q24 A Revenue Ruling is a legislative source of Federal tax law. a. True *b. False 25. CHAPTER 1UNDERSTANDING AND WORKING WITH THE FEDERAL TAX LAW Q25 Revenue Procedures deal with the internal management practices and procedures of the IRS. *a. True b. False 26. CHAPTER 1UNDERSTANDING AND WORKING WITH THE FEDERAL TAX LAW Q26 Treasury Decisions are issued by the Treasury Department to promulgate new Regulations. *a. True b. False 27. CHAPTER 1UNDERSTANDING AND WORKING WITH THE FEDERAL TAX LAW Q27 Determination letters usually involve proposed transactions. a. True *b. False 28. CHAPTER 1UNDERSTANDING AND WORKING WITH THE FEDERAL TAX LAW Q28 Unlike determination letters, letter rulings are issued by the National Office of the IRS.*a. True b. False 29. CHAPTER 1UNDERSTANDING AND WORKING WITH THE FEDERAL TAX LAW Q29 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. *a. True b. False 30. CHAPTER 1UNDERSTANDING AND WORKING WITH THE FEDERAL TAX LAW Q30 In a U.S. District Court, a jury can decide both questions of fact and questions of law. a. True *b. False 31. CHAPTER 1UNDERSTANDING AND WORKING WITH THE FEDERAL TAX LAW Q31 A district court must abide by the precedents set by the court of appeals of jurisdiction. *a. True b. False 32. CHAPTER 1UNDERSTANDING AND WORKING WITH THE FEDERAL TAX LAW Q32 The Supreme Court must hear all cases appealed from the U.S. Court of Appeals for the Federal Circuit. a. True *b. False 33. CHAPTER 1UNDERSTANDING AND WORKING WITH THE FEDERAL TAX LAW Q33 A cite such as 372 U.S. 39 indicates a memorandum decision of the Court of Federal Claims. a. True *b. False34. CHAPTER 1UNDERSTANDING AND WORKING WITH THE FEDERAL TAX LAW Q34 Generally, neither a tax law nor a tax treaty takes general precedence over the other. *a. True b. False 35. CHAPTER 1UNDERSTANDING AND WORKING WITH THE FEDERAL TAX LAW Q35 In a courtroom challenge, the burden of proof is on the IRS to show that a Regulation is right. a. True *b. False 36. CHAPTER 1UNDERSTANDING AND WORKING WITH THE FEDERAL TAX LAW Q36 Letter rulings may not be substantial authority for purposes of the accuracy-related penalty in § 6662. a. True *b. False 37. CHAPTER 1UNDERSTANDING AND WORKING WITH THE FEDERAL TAX LAW Q37 The CPA examination is now computer-based with increased emphasis on information technology. *a. True b. False 38. CHAPTER 1UNDERSTANDING AND WORKING WITH THE FEDERAL TAX LAW Q38 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.39. CHAPTER 1UNDERSTANDING AND WORKING WITH THE FEDERAL TAX LAW Q39 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. 40. CHAPTER 1UNDERSTANDING AND WORKING WITH THE FEDERAL TAX LAW Q40 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. 41. CHAPTER 1UNDERSTANDING AND WORKING WITH THE FEDERAL TAX LAW Q41 Which state is a common law property state? a. Arizona. b. Louisiana. c. New Mexico. *d. New York. e. None of the above. 42. CHAPTER 1UNDERSTANDING AND WORKING WITH THE FEDERAL TAX LAW Q42 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.43. CHAPTER 1UNDERSTANDING AND WORKING WITH THE FEDERAL TAX LAW Q43 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. 44. CHAPTER 1UNDERSTANDING AND WORKING WITH THE FEDERAL TAX LAW Q44 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. 45. CHAPTER 1UNDERSTANDING AND WORKING WITH THE FEDERAL TAX LAW Q45 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. 46. CHAPTER 1UNDERSTANDING AND WORKING WITH THE FEDERAL TAX LAW Q46 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.47. CHAPTER 1UNDERSTANDING AND WORKING WITH THE FEDERAL TAX LAW Q47 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. 48. CHAPTER 1UNDERSTANDING AND WORKING WITH THE FEDERAL TAX LAW Q48 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. 49. CHAPTER 1UNDERSTANDING AND WORKING WITH THE FEDERAL TAX LAW Q49 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. 50. CHAPTER 1UNDERSTANDING AND WORKING WITH THE FEDERAL TAX LAW Q50 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.51. CHAPTER 1UNDERSTANDING AND WORKING WITH THE FEDERAL TAX LAW Q51 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. 52. CHAPTER 1UNDERSTANDING AND WORKING WITH THE FEDERAL TAX LAW Q52 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. 53. CHAPTER 1UNDERSTANDING AND WORKING WITH THE FEDERAL TAX LAW Q53 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. 54. CHAPTER 1UNDERSTANDING AND WORKING WITH THE FEDERAL TAX LAW Q54 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.55. CHAPTER 1UNDERSTANDING AND WORKING WITH THE FEDERAL TAX LAW Q55 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. 56. CHAPTER 1UNDERSTANDING AND WORKING WITH THE FEDERAL TAX LAW Q56 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. 57. CHAPTER 1UNDERSTANDING AND WORKING WITH THE FEDERAL TAX LAW Q57 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. 58. CHAPTER 1UNDERSTANDING AND WORKING WITH THE FEDERAL TAX LAW Q58 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. 59. CHAPTER 1UNDERSTANDING AND WORKING WITH THE FEDERAL TAX LAW Q59 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. 60. CHAPTER 1UNDERSTANDING AND WORKING WITH THE FEDERAL TAX LAW Q60 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. 61. CHAPTER 1UNDERSTANDING AND WORKING WITH THE FEDERAL TAX LAW Q61 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. 62. CHAPTER 1UNDERSTANDING AND WORKING WITH THE FEDERAL TAX LAW Q62 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. 63. CHAPTER 1UNDERSTANDING AND WORKING WITH THE FEDERAL TAX LAW Q63 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. 64. CHAPTER 1UNDERSTANDING AND WORKING WITH THE FEDERAL TAX LAW Q64 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. 65. CHAPTER 1UNDERSTANDING AND WORKING WITH THE FEDERAL TAX LAW Q65 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. 66. CHAPTER 1UNDERSTANDING AND WORKING WITH THE FEDERAL TAX LAW Q66 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. 67. CHAPTER 1UNDERSTANDING AND WORKING WITH THE FEDERAL TAX LAW Q67 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. 68. CHAPTER 1UNDERSTANDING AND WORKING WITH THE FEDERAL TAX LAW Q68 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. 69. CHAPTER 1UNDERSTANDING AND WORKING WITH THE FEDERAL TAX LAW Q69 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. 70. CHAPTER 1—UNDERSTANDING AND WORKING WITH THE FEDERAL TAX LAW Q70 What is the wherewithal to pay concept? Give an example. Correct Answer: The wherewithal to pay concept recognizes the inequity of taxing a transaction when the taxpayer lacks the means with which to pay the tax. It is particularly suited to situations when the taxpayer’s economic position has not changed significantly as a result of a transaction. Some examples include like-kind exchanges, involuntary conversions, incorporating a corporation, transfers to a partnership, and tax-free reorganizations. 71. CHAPTER 1—UNDERSTANDING AND WORKING WITH THE FEDERAL TAX LAW Q71