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CHAPTER 1--UNDERSTANDING AND WORKING WITH
THE FEDERAL TAX LAW copy
1. A major, but not the sole, objective of the tax laws is to raise revenue.
True False
2. Revenue neutrality means that any one taxpayer’s tax liability remains the same.
True False
3. Shorter asset lives and accelerated methods increase the tax incentive for capital outlays.
True False
4. The Internal Revenue Code appears in Title 26 of the U.S. Code.
True False
5. There are two forms of fiscal policy: discretionary and automatic.
True False
6. The lowering of tax rates will lead to lower taxes and will achieve revenue neutrality.
True False
7. The desire to foster technological progress helps explain the favorable tax treatment accorded research and
development expenditures.
True False
8. The corporate tax rates are structured so as to favor small business.
True False
9. The refundable earned income tax credit is explained by economic considerations (i.e., the need to create
additional jobs).
True False
10. The deduction for charitable contributions can be explained by social considerations.
True False
11. The American Opportunity scholarship credit can be justified by economic considerations.
True False
12. The adoption tax credit can be explained by social considerations.
True False
13. Allowing a taxpayer to claim either a credit or a deduction for foreign taxes paid can be explained by equity
considerations.
True False
14. Neither the 1939 nor the 1954 Code substantially changed all the tax law existing on the date of its
enactment.
True False
15. Federal tax legislation generally originates in the House Ways and Means Committee.
True False
16. Subchapter P refers to the “Partners and Partnerships” section of the Code.
True False
17. Subchapter C refers to the “Corporate Distributions and Adjustments” section of the Code.
True False
18. Some Regulations are arranged in different sequence than the Code.
True False
19. Proposed Regulations have the force and effect of law.
True False
20. Temporary Regulations have the same authoritative value as Finalized Regulations for 3 years.
True False
21. Proposed Regulations are published in the Federal Register.
True False
22. Regulations are issued by the Treasury Department.
True False
23. Revenue Rulings carry the same legal force and effect as Regulations.
True False
24. A Revenue Ruling is a legislative source of Federal tax law.
True False
25. Revenue Procedures deal with the internal management practices and procedures of the IRS.
True False
26. Treasury Decisions are issued by the Treasury Department to promulgate new Regulations.
True False
27. Determination letters usually involve proposed transactions.
True False
28. Unlike determination letters, letter rulings are issued by the National Office of the IRS.
True False
29. 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.
True False
30. In a U.S. District Court, a jury can decide both questions of fact and questions of law.
True False
31. A district court must abide by the precedents set by the court of appeals of jurisdiction.
True False
32. Appeals from the Court of Federal Claims go to the U.S. Supreme Court.
True False
33. A jury trial is available in a court of appeals situation.
True False
34. Only one judge hears a trial in a U.S. District Court.
True False
35. The Golsen rule has been overturned.
True False
36. When there is a direct conflict between a Code section and a treaty provision, the most recent item takes
precedence.
True False
37. “Legislative regulations” are stronger than “interpretative” regulations.
True False
38. Near the end of 2011, the national debt per person was approximately:
A. $15,200.
B. $21,700.
C. $32,750.
D. $47,000.
E. $62,800.
39. Which is the major objective of our Federal tax laws?
A. Economic factors.
B. Social reasons.
C. Equity factors.
D. Raising revenue.
E. Political reasons.
40. What is the overall objective of the write-off of research and development expenditures?
A. Encouragement of certain activities.
B. Control of economy.
C. Encouragement of certain industries.
D. None of the above.
41. Which, if any, of the provisions in the tax law enumerated below cannot be justified under the wherewithal
to pay concept?
A. The taxation of prepaid income in the year of receipt and not in the year it is earned.
B. The installment method for reporting gain on the sale of property.
C. The nontaxability of a like-kind exchange.
D. The disallowance as a deduction of certain fines and penalties imposed for the violation of certain laws.
E. The rules governing the formation of corporations.
42. Which state is a community property state?
A. North Carolina.
B. California.
C. Vermont.
D. Florida.
E. All of the above.
43. Which, if any, of the provisions in the tax law below do not mitigate the effects of the annual accounting
period concept?
A. Post year-end contribution to retirement plans for a self-employed person.
B. Carrybacks of net operating losses.
C. Installment sales treatment.
D. Carryovers of excess charitable contributions.
E. The arm’s length concept.
44. Ralph sells property to Sam who, by prearranged plan, resells to Heather. If the IRS contends that the sale to
Sam is to be disregarded, this position is an application of the:
A. Substance over form concept.
B. Wherewithal to pay concept.
C. Tax benefit rule.
D. Arm’s length concept.
E. None of the above.
45. 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. 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. Revenue Procedures 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. Determine the incorrect citation:
A. Ltr. Rul. 20012305.
B. George W. Guill, 112 T.C.__, No. 22 (1999).
C. John H. Wong, T.C. Summary Opinion 2009-152.
D. Rev. Rul, 98-32, I.R.B. No. 25, 4.
E. None of the above.
49. 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. Which of the following sources has the highest tax validity?
A. Treasury Regulation.
B. Revenue Procedure.
C. Internal Revenue Code.
D. Temporary Regulation.
E. All have same weight.
51. Which of the following is an administrative source of tax law?
A. Rev. Rul. 2010-19.
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. 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. Memo. 2009-94.
E. All of the above.
53. 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. A taxpayer who loses in a U.S. Tax Court may appeal directly to the:
A. Supreme Court.
B. U.S. Tax Court.
C. U.S. Court of Federal Claims.
D. U.S. Court of Appeals.
E. All of the above.
55. 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. Which trial court allows a jury trial?
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. 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. Which state is located in the jurisdiction of the Fifth Court of Appeals?
A. Louisiana.
B. California.
C. New York.
D. South Carolina.
E. None of the above.
59. 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. Court of Appeals decision that was affirmed on appeal.
E. None of the above.
60. Which citation refers to a Second 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. Which citation refers to a U.S. Court of Federal Claims 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. 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. Which trial court has 16 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. 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. 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. 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. 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. 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. 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 Harvard Law Review.
C. Determination letter.
D. Letter ruling.
E. All of the above are primary sources.
70. What is the wherewithal to pay concept? Give an example.
71. Explain the function of Temporary Regulations.
72. Explain the Golsen doctrine.
73. What is the value of Actions on Decisions to a tax researcher?
74. What value is a tax citator to a tax researcher?
CHAPTER 1--UNDERSTANDING AND WORKING WITH
THE FEDERAL TAX LAW copy Key
1. A major, but not the sole, objective of the tax laws is to raise revenue.
TRUE
2. Revenue neutrality means that any one taxpayer’s tax liability remains the same.
FALSE
3. Shorter asset lives and accelerated methods increase the tax incentive for capital outlays.
TRUE
4. The Internal Revenue Code appears in Title 26 of the U.S. Code.
TRUE
5. There are two forms of fiscal policy: discretionary and automatic.
TRUE
6. The lowering of tax rates will lead to lower taxes and will achieve revenue neutrality.
FALSE
7. The desire to foster technological progress helps explain the favorable tax treatment accorded research and
development expenditures.
TRUE
8. The corporate tax rates are structured so as to favor small business.
TRUE
9. The refundable earned income tax credit is explained by economic considerations (i.e., the need to create
additional jobs).
FALSE
10. The deduction for charitable contributions can be explained by social considerations.
TRUE
11. The American Opportunity scholarship credit can be justified by economic considerations.
FALSE
12. The adoption tax credit can be explained by social considerations.
TRUE
13. Allowing a taxpayer to claim either a credit or a deduction for foreign taxes paid can be explained by equity
considerations.
TRUE
14. Neither the 1939 nor the 1954 Code substantially changed all the tax law existing on the date of its
enactment.
TRUE
15. Federal tax legislation generally originates in the House Ways and Means Committee.
TRUE
16. Subchapter P refers to the “Partners and Partnerships” section of the Code.
FALSE
17. Subchapter C refers to the “Corporate Distributions and Adjustments” section of the Code.
TRUE
18. Some Regulations are arranged in different sequence than the Code.
FALSE
19. Proposed Regulations have the force and effect of law.
FALSE
20. Temporary Regulations have the same authoritative value as Finalized Regulations for 3 years.
TRUE
21. Proposed Regulations are published in the Federal Register.
TRUE
22. Regulations are issued by the Treasury Department.
TRUE
23. Revenue Rulings carry the same legal force and effect as Regulations.
FALSE
24. A Revenue Ruling is a legislative source of Federal tax law.
FALSE
25. Revenue Procedures deal with the internal management practices and procedures of the IRS.
TRUE
26. Treasury Decisions are issued by the Treasury Department to promulgate new Regulations.
TRUE
27. Determination letters usually involve proposed transactions.
FALSE
28. Unlike determination letters, letter rulings are issued by the National Office of the IRS.
TRUE
29. 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.
TRUE
30. In a U.S. District Court, a jury can decide both questions of fact and questions of law.
FALSE
31. A district court must abide by the precedents set by the court of appeals of jurisdiction.
TRUE
32. Appeals from the Court of Federal Claims go to the U.S. Supreme Court.
FALSE
33. A jury trial is available in a court of appeals situation.
FALSE
34. Only one judge hears a trial in a U.S. District Court.
TRUE
35. The Golsen rule has been overturned.
FALSE
36. When there is a direct conflict between a Code section and a treaty provision, the most recent item takes
precedence.
TRUE
37. “Legislative regulations” are stronger than “interpretative” regulations.
TRUE
38. Near the end of 2011, the national debt per person was approximately:
A. $15,200.
B. $21,700.
C. $32,750.
D. $47,000.
E. $62,800.
39. Which is the major objective of our Federal tax laws?
A. Economic factors.
B. Social reasons.
C. Equity factors.
D. Raising revenue.
E. Political reasons.
40. What is the overall objective of the write-off of research and development expenditures?
A. Encouragement of certain activities.
B. Control of economy.
C. Encouragement of certain industries.
D. None of the above.
41. Which, if any, of the provisions in the tax law enumerated below cannot be justified under the wherewithal
to pay concept?
A. The taxation of prepaid income in the year of receipt and not in the year it is earned.
B. The installment method for reporting gain on the sale of property.
C. The nontaxability of a like-kind exchange.
D. The disallowance as a deduction of certain fines and penalties imposed for the violation of certain laws.
E. The rules governing the formation of corporations.
42. Which state is a community property state?
A. North Carolina.
B. California.
C. Vermont.
D. Florida.
E. All of the above.
43. Which, if any, of the provisions in the tax law below do not mitigate the effects of the annual accounting
period concept?
A. Post year-end contribution to retirement plans for a self-employed person.
B. Carrybacks of net operating losses.
C. Installment sales treatment.
D. Carryovers of excess charitable contributions.
E. The arm’s length concept.
44. Ralph sells property to Sam who, by prearranged plan, resells to Heather. If the IRS contends that the sale to
Sam is to be disregarded, this position is an application of the:
A. Substance over form concept.
B. Wherewithal to pay concept.
C. Tax benefit rule.
D. Arm’s length concept.
E. None of the above.
45. 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. 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. Revenue Procedures 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. Determine the incorrect citation:
A. Ltr. Rul. 20012305.
B. George W. Guill, 112 T.C.__, No. 22 (1999).
C. John H. Wong, T.C. Summary Opinion 2009-152.
D. Rev. Rul, 98-32, I.R.B. No. 25, 4.
E. None of the above.
49. 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. Which of the following sources has the highest tax validity?
A. Treasury Regulation.
B. Revenue Procedure.
C. Internal Revenue Code.
D. Temporary Regulation.
E. All have same weight.
51. Which of the following is an administrative source of tax law?
A. Rev. Rul. 2010-19.
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. 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. Memo. 2009-94.
E. All of the above.
53. 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. A taxpayer who loses in a U.S. Tax Court may appeal directly to the:
A. Supreme Court.
B. U.S. Tax Court.
C. U.S. Court of Federal Claims.
D. U.S. Court of Appeals.
E. All of the above.
55. 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. Which trial court allows a jury trial?
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. 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. Which state is located in the jurisdiction of the Fifth Court of Appeals?
A. Louisiana.
B. California.
C. New York.
D. South Carolina.
E. None of the above.
59. 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. Court of Appeals decision that was affirmed on appeal.
E. None of the above.
60. Which citation refers to a Second 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. Which citation refers to a U.S. Court of Federal Claims 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. 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. Which trial court has 16 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. 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. 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. 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. 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. 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. 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 Harvard Law Review.
C. Determination letter.
D. Letter ruling.
E. All of the above are primary sources.
70. What is the wherewithal to pay concept? Give an example.
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. Explain the function of Temporary Regulations.
Sometimes the U.S. Treasury Department issues Temporary Regulations relating to matters where immediate
guidance is important. These regulations are issued without the comment period required for Proposed
Regulations. Temporary Regulations have the same authoritative value as Final Regulations and may be cited as
precedents. Temporary Regulations also must be issued as Proposed Regulations, but they automatically expire
within three years after the date of issuance. Temporary Regulations and the simultaneous Proposed
Regulations carry more weight than traditional Proposed Regulations.
72. Explain the Golsen doctrine.
Because the Tax Court is a national court, it decides cases from all parts of the country. For many years, the Tax
Court followed a policy of deciding cases based on what it thought the result should be, even though its decision
might be appealed to a U.S. Circuit Court of Appeals that had previously decided a similar case differently. A
number of years ago this policy was changed in the Golsen decision. Now the Tax Court will decide a case as it
feels the law should be applied only if the Circuit Court of Appeals of appropriate jurisdiction has not yet
passed on the issue or has previously decided a similar case in accord with the Tax Court’s decision. If the
Circuit Court of Appeals of appropriate jurisdiction has previously held otherwise, the Tax Court will conform
under the Golsen rule even though it disagrees with the holding.
73. What is the value of Actions on Decisions to a tax researcher?
Actions on Decisions tell a taxpayer the IRS’s reaction to certain court decisions. The IRS follows a practice of
either acquiescing (agreeing) or nonacquiescing (not agreeing) with court decisions where guidance may be
helpful. This practice does not mean that a particular decision has no value if the IRS has nonacquiesced in the
result. It does, however, indicate that the IRS will continue to litigate the issue involved.
74. What value is a tax citator to a tax researcher?
The use of manual citators or a computer citator search is invaluable to tax research. A citator provides the
history of a case including the authority relied on (e.g., other judicial decisions) in reaching the result.
Reviewing the references listed in the citator discloses whether the decision was appealed and, if so, with what
result (e.g., affirmed, reversed, and remanded). It also reveals other cases with the same or similar issues and
how they were decided. Thus, a citator reflects on the validity of a case and may lead to other relevant judicial
material.
