Tax Authority Flashcards
Which of the following is the primary source of federal tax law?
A. The Internal Revenue Code of 1913.
B. Treasury Regulations.
C. The Internal Revenue Code of 1986.
D. The Internal Revenue Bulletin.
The Internal Revenue Code of 1986.
Answer (C) is correct.
The Internal Revenue Code of 1986 is the primary source of federal tax law. It imposes income, estate, gift, employment, and miscellaneous excise taxes and provisions controlling the administration of federal taxation. The Code is found at Title 26 of the United States Code.
Which of the following are useful tools in determining Congressional intent behind certain tax laws and helping examiners apply the law properly?
A. Committee reports.
B. Treasury regulations.
C. Revenue rulings.
D. Revenue procedures.
Committee reports.
Answer (A) is correct.
Congressional Committee Reports reflect Congress’s intent behind certain tax laws and help examiners apply the law properly.
The current Internal Revenue Code is the
A. Internal Revenue Code of 2008.
B. Internal Revenue Code of 1986.
C. Internal Revenue Code of 1954.
D. Internal Revenue Code of 1939.
Internal Revenue Code of 1986.
Answer (B) is correct.
The Tax Reform Act of 1986 represented the most extensive overhaul of the tax code in over 30 years, which led Congress to rename the code to the Internal Revenue Code of 1986.
In order to show that a tax preparer’s application of tax law was in line with the intent of the tax law, the preparer should cite which of the following types of authoritative sources to make the most convincing case?
A. IRS publication.
B. Technical Advice Memorandum of another, similar case.
C. Committee report.
D. Delegation order.
Committee report.
Answer (C) is correct.
Congressional committee reports are useful tools in determining Congressional intent behind certain tax laws and helping examiners apply the law properly. The committee reports are a very high authority to which the courts are bound.
Which of the following is the most authoritative source of tax law?
A. U.S. Constitution.
B. Internal Revenue Code.
C. Code of Federal Regulations.
D. Treasury Regulations.
Internal Revenue Code.
Answer (B) is correct.
The Internal Revenue Code is the body of tax statutes enacted by Congress as the law of federal taxation. It is not the sole source of tax law because it cannot possibly apply directly to every situation. The rest of the sources of tax law are generally interpretations and applications of the Internal Revenue Code.
In cases where the literal language of the Code is ambiguous, the courts may consider which of the following?
A. History of the Code section.
B. Relationship of the Code section to other Code sections.
C. Both the history of the Code section and its relationship to other Code sections.
D. Neither the history of the Code section nor its relationship to other Code sections.
Both the history of the Code section and its relationship to other Code sections.
Answer (C) is correct.
In cases where the literal language of the Code is ambiguous, the courts will consider the history of a particular Code section, including committee reports and other legislative history, Treasury regulations and other IRS published guidance interpreting the Code section, and the relationship of the particular Code section to other Code sections.
Which title of the U.S. Code contains the Internal Revenue Code?
A. Title 11 (bankruptcy).
B. Title 15 (commerce and trade).
C. Title 18 (crimes and criminal procedure).
D. Title 26 (IRC).
Title 26 (IRC).
Answer (D) is correct.
The IRC of 1986 is the primary source of federal tax law. It imposes income, estate, gift, employment, miscellaneous excise taxes, and provisions controlling the administration of federal taxation. The IRC is found at Title 26 of the 50 titles of the U.S. Code.
Which of the following is false with respect to classes of regulations?
A. Temporary regulations are issued to provide guidance for the public and IRS employees until final regulations are issued.
B. Public hearings are not held on temporary regulations unless written requests are made.
C. Proposed regulations have the same force and effect of law as temporary regulations.
D. Public hearings are held on proposed regulations if written requests are made.
Proposed regulations have the same force and effect of law as temporary regulations.
Answer (C) is correct.
Although proposed regulations provide guidance for tax planning, taxpayers may not ordinarily rely on them to support a tax position. Courts have generally determined that proposed regulations are not entitled to judicial deference. Temporary regulations have the same force and effect of law as final regulations until they are superseded.
Which of the following statements with respect to regulations is false?
A. All regulations are written by the Office of the Chief Counsel, IRS, and approved by the Secretary of Treasury.
B. Public hearings are not held on temporary regulations without a written request.
C. Although IRS employees are bound by the regulations, the courts are not.
D. Public hearings are not held on proposed regulations.
Public hearings are not held on proposed regulations.
Answer (D) is correct.
The purpose of proposed regulations is to give the public an opportunity to be heard before the regulations are promulgated in their final form. Public hearings are held if written requests for a hearing are made.
With regard to Treasury Regulations, which of the following statements is false?
A. Notices of proposed rulemaking are required for proposed regulations and are published in the Federal Register so that interested parties have an opportunity to participate in the rule-making process.
B. Until final regulations are issued, temporary regulations have the same force and effect of law as final regulations.
C. Legislative regulations are those for which the IRS is specifically authorized by the Internal Revenue Code to provide the details of the meaning and rules for particular Code sections.
D. Interpretative regulations, which explain the IRS’s position on the various sections of the Code, are not accorded great weight by the courts.
Interpretative regulations, which explain the IRS’s position on the various sections of the Code, are not accorded great weight by the courts.
Answer (D) is correct.
Treasury Regulations provide explanations, definitions, examples, and rules that explain the language of the Code. Both interpretative and legislative regulations that clarify an ambiguous term in the Code are given great weight by the courts.
Which of the following statements with respect to revenue rulings and revenue procedures is false?
A. Revenue procedures are official statements of procedures that either affect the rights or duties of taxpayers or other members of the public or should be a matter of public knowledge.
B. The purpose of revenue rulings is to promote uniform application of the tax laws.
C. Taxpayers cannot appeal adverse return examination decisions based on revenue rulings and revenue procedures to the courts.
D. IRS employees must follow revenue rulings.
Taxpayers cannot appeal adverse return examination decisions based on revenue rulings and revenue procedures to the courts.
Answer (C) is correct.
Revenue rulings and revenue procedures do not have the force and effect of regulations but are published to provide precedents to be used in the disposition of other cases. While taxpayers may rely on the rulings and procedures, they can also appeal adverse return examination decisions based on those rulings to the Tax Court or other federal courts.
Which of the following is NOT one of the three classes of Treasury Regulations?
A. Temporary.
B. Judicial.
C. Final.
D. Proposed.
Judicial.
Answer (B) is correct.
The three classes of Treasury Regulations are temporary, final, and proposed regulations. Judicial is not a class of Treasury Regulations.
Which of the following is NOT a type of administrative regulation?
A. Procedural.
B. Interpretive.
C. Legislative.
D. Executive.
Executive.
Answer (D) is correct.
Executive regulations are not a type of administrative rule or regulation.
Which of the following is an administrative authority of tax law?
A. Committee report.
B. Proposed regulation.
C. Tax treaty.
D. U.S. Tax Court.
Proposed regulation.
Answer (B) is correct.
Administrative authority is charged to the Treasury Department, which issues regulations as official interpretations of the IRC. Proposed regulations are the first classification of regulations. They are issued to elicit comments from the public. Public hearings are held if written requests are made. Proposed regulations might be used as somewhat of an authority for taking a tax position, but the regulations themselves do not state this and must be considered as a weak authority.
Which of the following may be cited to sustain a position?
A. Private Letter Rulings.
B. Announcements.
C. Technical Advice Memoranda.
D. General Counsel Memoranda.
Announcements.
Answer (B) is correct.
Announcements are public pronouncements on matters of general interest, such as effective dates of temporary regulations, clarification of rulings, and form instructions. They are issued when guidance of a substantive or procedural nature is needed quickly. Announcements can be relied on to the same extent as revenue rulings and revenue procedures.
Which of the following is bound by Treasury Regulations?
A. U.S. Supreme Court.
B. U.S. Tax Court.
C. IRS Appeals Office.
D. U.S. District Court.
IRS Appeals Office.
Answer (C) is correct.
The IRS is bound by the regulations, whereas the courts are not.
With regard to revenue rulings and revenue procedures, which of the following statements is false?
A. A revenue ruling is a published official interpretation of tax law by the IRS that sets forth the conclusion of the IRS on how the tax law is applied to an entire set of facts.
B. Revenue rulings have the force and effect of Treasury Regulations.
C. A revenue procedure is a published official statement of procedure that either affects the rights or duties of taxpayers or other members of the public under the Internal Revenue Code and related statutes and regulations or, if not necessarily affecting the rights and duties of the public, should be a matter of public knowledge.
D. Revenue procedures are directive and not mandatory so that a taxpayer has no vested right to the benefit of the procedures when the IRS deviates from its internal rules.
Revenue rulings have the force and effect of Treasury Regulations.
Answer (B) is correct.
While regulations nearly have the same force and effect of law, revenue rulings are merely published to provide precedents.
With regard to Treasury Regulations, which of the following statements is false?
A. Proposed regulations are issued to invite comment on regulations and suggest changes before the regulations become final.
B. Regulations provide an explanation to tax laws and have the force and effect of law.
C. Legislative regulations are those for which the IRS is specifically authorized by the Internal Revenue Code to provide the details of the meaning and rules for particular Code sections.
D. Section 7805(a) authorizes the issuing of income tax regulations.
Regulations provide an explanation to tax laws and have the force and effect of law.
Answer (B) is correct.
Treasury Regulations provide explanations, definitions, examples, and rules that explain the language of the Code. Regulations and Treasury Decisions on matters of administration or procedure, or exercising a discretion conferred by statute, do not have the force and effect of law upon the taxpayer to the same extent as the statute itself. However, the courts generally grant them great weight.
With regard to revenue rulings and revenue procedures, which of the following statements is false?
A. Revenue rulings do not have the force and effect of regulations.
B. A taxpayer cannot appeal adverse return examination decisions based on revenue rulings.
C. A revenue procedure is an official statement of procedure published in the Internal Revenue Bulletin.
D. Revenue rulings are published conclusions as to the application of the law.
A taxpayer cannot appeal adverse return examination decisions based on revenue rulings.
Answer (B) is correct.
The purpose of revenue rulings is to promote a uniform application of the tax laws, and therefore IRS employees must follow the rulings. While taxpayers can rely on the rulings, they can also appeal adverse return examination decisions based on those rulings to the Tax Court or other federal courts.
Which of the following statements regarding Treasury Regulations is false?
A. Regulations are binding on all courts except the U.S. Supreme Court.
B. Interpretative regulations are issued under the general mandate of Sec. 7805(a).
C. Some Code sections specifically authorize regulations to provide the details of the meaning and rules for that particular Code section. These are called legislative regulations.
D. Temporary regulations are issued to provide guidance for the public and IRS employees until final regulations are issued.
Regulations are binding on all courts except the U.S. Supreme Court.
Answer (A) is correct.
Treasury Regulations explain the language of the Internal Revenue Code by giving explanations, definitions, examples, and rules that clarify the intent of Congress. They are binding on any court unless they conflict with the Code.
Which of the following statements relating to Treasury Regulations is false?
A. Temporary regulations are issued to provide guidance for the public and IRS employees until final regulations are issued.
B. Public hearings are always held on temporary regulations.
C. Final regulations supersede temporary regulations.
D. Proposed regulations are issued to solicit public written comments.
Public hearings are always held on temporary regulations.
Answer (B) is correct.
The Treasury Department issues regulations as interpretations of the Internal Revenue Code. Regulations are generally first issued to the public in proposed form. Practitioners and the public are invited to comment on the regulation and suggest changes before the regulation becomes final. The Treasury Department sometimes issues temporary regulations. These regulations give the public, practitioners, and IRS personnel guidance until appropriate final regulations are issued. Any temporary regulation issued after November 20, 1988, will expire within 3 years after the date of issuance and must also be issued as a proposed regulation [Sec. 7805(e)]. Because temporary regulations are also issued in proposed form, public hearings are not held on the temporary regulations. While in effect, temporary regulations have the same authority as final regulations.
Which one of the following forms of law is created when regulatory agencies such as the IRS transform statutes into regulations and enforcement procedures?
A. Constitutional law.
B. Statutory law.
C. Administrative law.
D. Judicial law.
Administrative law.
Answer (C) is correct.
Administrative law is promulgated by the executive branch under a general grant of authority to an agency to regulate an industry. Administrative law may also be promulgated under a specific grant of authority to an agency to make detailed rules to achieve the objectives of a statute. For example, the IRS makes rules to carry out specific statutes but is not given the general authority to make rules for the collection of revenue. Administrative law may not go beyond the scope of the statutes under which it is promulgated.
The authority of an agency such as the IRS to make law is typically determined by
A. The Administrative Procedure Act (APA).
B. The executive branch.
C. The statute that created the agency.
D. The agency itself.
The statute that created the agency.
Answer (C) is correct.
Because an agency such as the IRS is bound by the procedural rules it adopts, IRS personnel must comply with Manual procedures (the statute that created the agency).
The IRS promulgates regulations that have the force and effect of law. This process is known as
A. Rulemaking.
B. Enforcement.
C. Adjudication.
D. Delegation.
Rulemaking.
Answer (A) is correct.
The process by which agencies promulgate regulations that have the force and effect of law is known as rulemaking. The Administrative Procedure Act (APA) defines a rule as “an agency statement of general or particular applicability and future effect designed to interpret, complement, or prescribe law or policy.” In promulgating regulations, the IRS must follow the procedures provided in their enabling legislation and in the APA.
The Internal Revenue Bulletin (IRB) is the authoritative instrument of the Commissioner of Internal Revenue. It is published by the Government Printing Office on a
A. Daily basis.
B. Weekly basis.
C. Monthly basis.
D. Annual basis.
Weekly basis.
Answer (B) is correct.
The IRB is the authoritative instrument of the Commissioner of Internal Revenue for announcing official IRS rulings and procedures and for publishing Treasury Decisions, Executive Orders, Tax Conventions, legislation, court decisions, and other items of general interest. It is published on a weekly basis by the Government Printing Office.
IRS notices and announcements are identified by a number representing the
A. Section number.
B. Volume and paragraph number.
C. Year and a sequence number.
D. Chapter and subchapter.
Year and a sequence number.
Answer (C) is correct.
Notices and announcements are identified by a number representing the year and a sequence number. Notices are public announcements issued by the IRS. They appear in the Internal Revenue Bulletin and are included in the bound Cumulative Bulletin. Announcements are public pronouncements on matters of general interest. They are issued when guidance of a substantive or procedural nature is needed quickly.
Which of the following explain the law in plain language for taxpayers and their advisors?
A. IRS Publications.
B. General Counsel Memoranda (GCMs).
C. Technical Memoranda (TMs).
D. Technical Advice Memoranda (TAMs).
IRS Publications.
Answer (A) is correct.
IRS Publications explain the law in plain language for taxpayers and their advisors. They typically highlight changes in the law, provide examples illustrating IRS positions, and include worksheets. Publications are nonbinding on the IRS and do not necessarily cover all positions for a given issue.
Which of the following types of regulations appear to be given the force and effect of law when describing obligations to file forms and information?
A. Legislative regulations.
B. Interpretative regulations.
C. Procedural regulations.
D. None of the choices are correct.
Procedural regulations.
Answer (C) is correct.
Procedural regulations are promulgated by the Commissioner of the IRS and not the Secretary of the Treasury. Procedural regulations are binding on the IRS insofar as they affect a vital or personal interest of the taxpayer. Procedural regulations describing obligations to file forms and information appear to be given the force and effect of law.
