Fundamental Tax Law - Review Questions Flashcards
Into which group are tax bills usually initially introduced?
Choose the best answer.
1) House of Representatives
2) House Ways and Means Committee
3) Senate
4) President
1) House of Representatives
Tax bills are usually introduced in the House of Representatives and are referred to the House Ways and Means Committee.
_____ regulations make statutory language easier to understand.
Interpretive regulations make the statutory language easier to understand and apply and usually provide helpful illustrations.
What do the first two digits in a letter ruling indicate ?
Choose the best answer.
1)Year the ruling was initiated
2) The ruling number for the week
3) Week the ruling was made public
4) Year the ruling was made public
4) Year the ruling was made public
The numbering system for all letter rulings consists of seven digits. The first two digits indicate the year in which the ruling was made public.
A taxpayer who thinks that a jury trial would be especially favorable should litigate in ——————— Court
U.S. district court
A taxpayer who thinks that a jury trial would be especially favorable should litigate in a U.S. district court, the only forum where a jury trial is possible.
Which of the following conditions must be met in order for an abandoned spouse to claim head-of-household status? (Check all that are true.)
1) The taxpayer is unmarried as of the last day of the tax year.
2) The taxpayer lived apart from his or her spouse for the last six months of the year.
3) The taxpayer pays over half of the cost of maintaining a household in which the taxpayer and a dependent son or daughter live for over half of the year.
4) The taxpayer is a U.S. citizen or resident.
2) The taxpayer lived apart from his or her spouse for the last six months of the year.
3) The taxpayer pays over half of the cost of maintaining a household in which the taxpayer and a dependent son or daughter live for over half of the year.
4) The taxpayer is a U.S. citizen or resident.
An abandoned spouse can claim head-of-household status if he or she lived apart from his or her spouse for the last six months of the year, pays over half of the cost of maintaining a household in which a dependent son or daughter lives for over half of the year, and is a U.S. citizen or resident.
During an office audit, the individual is audited on all items on the tax return.
Choose the best answer.
1)True
2) False
2) False
In most cases, an individual is asked to substantiate a particular deduction, credit, or income item, such as charitable contributions that appear to be excessive. The office audit procedure does not involve a complete audit of all items on the return.
Which of the following cannot be used as a precedent?
1) Letter Rulings
2) Technical Advice Memos
3) Revenue Procedures
4) Revenue Rulings
1) Letter Rulings
Only the taxpayer for whom the ruling is written may rely on its authority.
There are three trial courts that may be used to resolve tax disputes. They are:
U.S. Tax Court
U.S. District Courts
U.S. Court of Federal Claims In which two of the three courts must the taxpayer pay the tax deficiency before beginning litigation?
1) U.S. Tax Court and U.S. District Courts
2) U.S. Tax Court and U.S Court of Federal Claims
3) U.S. District Courts and U.S. Court of Federal Claims
3) U.S. District Courts and U.S. Court of Federal Claims
Only in Tax Court, may the taxpayer pay the deficiency after the case has been decided.
Susan Roman filed her income tax return three months late. The return showed a balance due of $10,000. What is Susan’s penalty, if any, for filing her income tax return late?
1) $0
2) $150
3) $1,500
4) $2,000
5) $3,000
3) $1,500
5% per month for three months.
Which one of the following describes the step transaction doctrine as a potential tax trap?
1) Items may be reallocated among taxpayers to clearly reflect income.
2) The substance of a transaction and not merely its form governs its tax consequences.
3) Multiple transactions may be collapsed and treated as taking place in one transaction.
4) Income is taxed to the tree that grows the fruit, even though the income is assigned to another prior to receipt.
3) Multiple transactions may be collapsed and treated as taking place in one transaction.
The IRS may treat several transactions as a single transaction.
Which one of the following best describes the tax benefit rule?
1) Stock owned by one person may be attributed to another related person who receives the benefits of ownership.
2) Income is taxed to the tree that grows the fruit, even though the income is assigned to another prior to receipt.
3) A solvent taxpayer may have to realize income upon the forgiveness of a debt by a creditor.
4) Nontaxable receipts may be converted into taxable income.
