exam 1 part 1

Question 1

private letter rulings

Answer 1

initiatd by taxpayers who ask the IRS to explain tax consequences of a transaction. Response is given to that taxpayer only. cost 50k

Question 2

revenue rulings

Answer 2

IRS indicates the tax consequences of a specific transaction. <50 annually, happens when they get an overwhelming request.

Question 3

revenue procedures

Answer 3

IRS pronouncements that deal with procedural aspect of practice ie non controversial

Question 4

temporary regulation

Answer 4

effective as of the date of publication. binding to the taxpayer. purpose is to stop a specific behavior right now.

Question 5

final regulation

Answer 5

effective as of 1) the date filed with the register 2) the date of the temporary regulation 3) the date of the expectation note

whatever comes first

Question 6

proposed regulation

Answer 6

carries no authoritative weight

Question 7

treasury regulations

Answer 7

gives examples that help taxpayers understand the IRC

Question 8

revenue agent report

Answer 8

list of what we reported, and what we should have reported

Question 9

form 870

Answer 9

if signed, we agree to changes and collections begin

Question 10

30 day letter

Answer 10

gives us 30 days to file a protest letter or the IRS starts to take our stuff (comes from cincy/local)

Question 11

protest letter

Answer 11

the taxpayer writes their experience (makes their case)

Question 12

offer in compromise

Answer 12

irs has the ability to evaluate litigation risk (they decide whether they want to fight.) if 60% likely the irs will win they may say just pay 60% and we’ll call it even)

Question 13

90 day letter

Answer 13

irs starts going at your stuff or you have 90 days to contact another court (comes from dc)

Question 14

equity

Answer 14

horizontal - similarly situated tps should pay the same tax
vertical - differently situated tps should pay different tax

Question 15

simplicity

Answer 15

tps should be able to understand and comply with any tax system (within reason)

Question 16

convenience

Answer 16

tax law should be easily assessed, collected, and administered. income tax is not very convenient, but sales tax is.

Question 17

certainty

Answer 17

provides stable government operating revenue & gives tps predictability in their tax liability

Question 18

economy

Answer 18

tax system should be cost efficient (irs costs less than .5% revs to run)

Question 19

what are the factors of a good tax system

Answer 19

equity (horizontal & vertical), simplicity, convenience, certainty, economy

Question 20

what are the three primary courts

Answer 20

tax court - judge, specializes in tax, in dc
claims court - judge, hears cases where the us govt is being sued, dc
local district court - jury, hears everything (mostly drug cases), local

Question 21

how are returns selected for audit?

Answer 21

high DFS score and differing information

Question 22

irs acquiescence

Answer 22

when the irs loses a case and they accept the loss

Question 23

irs non acquiescence

Answer 23

when the irs loses a case and they do not accept the loss, they want to fight it

Question 24

income tax formula

Answer 24

Unadjusted gross income
(exclusions)
gross income
(deductions for agi)
AGI
(deductions fro agi)
(greater of standard deduction or itemized deductions)
(qualified business income deduction)
taxable income
x tax rate
tax amount
(credits)
net tax liability
(payments)
liability due/refundable

Question 25

deductions for agi

Answer 25

contributions to traditional ira
student loan interest payments
1/2 self employment taxes paid

Question 26

constructive receipt doctrine

Answer 26

requires you to report income when it’s available to you, even if you choose not to physically receive it to avoid recognizing it for tax purposes.