Chapter 1 – Introduction To Federal Income Tax System

Question 1

Which amendment, adopted in 1909, forms the basic foundation and framework for income tax law?

Answer 1

The 16th amendment

Question 2

What are the four goals of income taxation?

Answer 2

1. Revenue
2. Economic
3. Regulatory
4. Social

Question 3

What is the primary goal of income taxation?

Answer 3

Revenue production

Question 4

Higher taxes will lead to reduced consumer spending, causing a…

Answer 4

reduction in inflation or inflationary trends.

Question 5

Lower taxes results in increased consumer spending, possibly preventing or reducing the impact of…

Answer 5

recessions.

Question 6

What deduction can cause business owners to invest in their businesses?

Answer 6

Depreciation deduction

Question 7

Which body of Congress initiates revenue bills?

Answer 7

Legislative branch

Question 8

Which body of Congress is responsible for the internal revenue code?

Answer 8

Legislative branch

Question 9

Which body of Congress delegates the responsibility of collecting taxes to the Department of the Treasury?

Answer 9

Executive branch

Question 10

Who explains and interpret particular Internal Revenue Code sections?

Answer 10

Treasury Regulations

Question 11

Who has the force and effect of the law?

Answer 11

Treasury regulations

Question 12

The treasury regulations are written by…

Answer 12

IRS and approved by the treasury

Question 13

The official interpretation of the tax laws by the National Office of the IRS are called…

Answer 13

Revenue Rulings

Question 14

Private letter ruling’s ______ be cited as a precedent in court.

Answer 14

cannot

Question 14

An interpretation of a transaction of a specific taxpayer.

Answer 14

Private letter rulings

Question 14

This goal of taxation is imposed to discourage the purpose of weapons.

Answer 14

Regulatory goals

Question 15

This goal of taxation helps to redistribute wealth and sometimes will require higher income individuals will pay more taxes.

Answer 15

Social goals

Question 16

This tax research services is organize by code section.

Answer 16

Commerce Clearing House (CCH)

Question 17

This tax research services is organize by topic and chapter.

Answer 17

Research Institute of America (RIA)

Question 18

the highest tax authority

Answer 18

Internal Revenue Code

Question 19

Who initiates revenue bills?

Answer 19

House of Representatives

Question 20

Rank the hierarchy for tax authority and regulations for the following.

Treasury Regulations
Private Letter Rulings
Revenue Rulings
Internal Revenue Code

Answer 20

Internal Revenue Code
Treasury Regulations
Revenue Rulings
Private Letter Rulings

Question 21

Official interpretations of the tax laws and do not have the authority of regulations.

Answer 21

Revenue Rulings

Question 22

This is a letter that is written to answer a question that is specifically covered by a statute.

Answer 22

Determination letter

Question 23

Can treasury regulations be challenged by taxpayers without going to court?

Answer 23

Yes, they may file objections or participate in public hearings, but they do not have to do a “formal” court.

Question 24

How long does the IRS have, if fraud is involved, to assess additional taxes?

Answer 24

Unlimited time

Question 25

These procedures are often use to announce procedures to guide the public and dealing with the IRS.

Answer 25

Revenue procedures

Question 26

How long does the IRS have to assess additional taxes if your taxes were filed incorrectly?

Answer 26

Three years

Question 27

What is the hierarchy for the three court systems?

Answer 27

1. Supreme Court
2. Court of Appeals or Appellate Court
3. Trial Courts (District, Federal Claims, Tax Court)

Question 28

This is the “only trial court” that allows you to use a jury.

Answer 28

US District Court

Question 29

This is the only trial court where taxpayers do not have to pay the tax deficiency prior to bringing the case to court.

Answer 29

US Tax Court

Question 30

This is the highest court of the land and the only cord that the IRS is bound to court decisions.

Answer 30

US Supreme Court