IRS Practice and Procedure
Exam Solutions
Course Introduction
This course provides an in-depth examination of the practices and procedures of the Internal Revenue Service (IRS) in the United States. Students will explore the structure and functions of the IRS, the administrative processes related to federal tax law compliance, audits, appeals, and collection activities. The course covers topics such as taxpayer rights, audit techniques, penalty assessments, and dispute resolution mechanisms, with a focus on navigating IRS regulations, representing clients before the IRS, and ethical considerations for tax practitioners. Practical application and case studies are used to illustrate real-world scenarios and best practices.
Recommended Textbook Federal Tax Research 11th Edition by Roby B. Sawyers
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Chapter 1: Introduction to Tax Practice and Ethics
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Sample Questions
Q1) Enrolled actuaries are allowed to practice before the IRS.
A)True
B)False
Answer: True
Q2) Tax avoidance and tax evasion are both illegal.
A)True
B)False
Answer: False
Q3) What standard must tax practitioners meet under Section 6694 (preparer penalties) of the Internal Revenue Code with respect to undisclosed positions taken on tax returns?
Answer: Tax return positions which are not disclosed on the tax return must meet the standard of "substantial authority" to avoid the penalties under Code Section 6694, relating to understatement of taxpayer's liability by tax return preparer.
Q4) To become an enrolled agent, a person must either pass a special IRS examination or must work for the IRS for at least five years.
A)True
B)False
Answer: True
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Chapter 2: Tax Research Methodology
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Sample Questions
Q1) Which of the following statements describes the tax research process?
A)It is strictly linear.
B)It requires mechanical skills combined with critical thinking.
C)It requires the ability to use complex mathematical techniques to identify and locate tax authorities.
D)All of these are correct.
Answer: B
Q2) The U.S. Constitution is a statutory source of tax law.
A)True
B)False
Answer: True
Q3) Collateral estoppel is a legal concept which:
A)allows relitigation on the same facts or same issues
B)bars relitigation on the same facts or same issues
C)requires that the court resolve factual issues in a taxpayer's favor
D)none of these are correct
Answer: B
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4
Chapter 3: Constitutional and Legislative Sources
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Sample Questions
Q1) Whenever a major new tax law is passed, CCH and RIA both publish the related Committee Reports.
A)True
B)False
Answer: True
Q2) If any differences exist between the House- and Senate-passed versions of a tax bill, the bill is referred to:
A)the Finance Committee
B)the President
C)a Conference Committee
D)the Supreme Court
Answer: C
Q3) Trade or business deductions are contained in Code Section 62.
A)True
B)False
Answer: False
Q4) Treaties may expire because of a specific Congressional time limitation.
A)True
B)False
Answer: True
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Chapter 4: Administrative Regulations and Rulings
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Sample Questions
Q1) List the three types of IRS written determinations and briefly explain the differences.
Q2) Which of the following statements is INCORRECT regarding the effective date of Regulations?
A)A Regulation becomes effective 18 months after the statute on which it is based was enacted.
B)A Regulation is effective on the date on which the Regulation is filed with the Federal Register.
C)Temporary Regulations are effective immediately upon publication.
D)All of these are correct.
Q3) A Regulation can never be made effective retroactively.
A)True
B)False
Q4) The IRS issues General Regulations under the general authority granted to the IRS to interpret the language of the Code, usually under a specific Code (or committee report) directive of Congress.
A)True
B)False
Q5) Define General and Legislative Regulations and explain the distinction.
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Chapter 5: Judicial Interpretations
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Sample Questions
Q1) The citation ABC v. U.S, 967 U.S. 567 (2012) tells the tax researcher that this is a decision by which court?
A)District Court
B)Tax Court
C)Supreme Court
D)Court of Appeals
Q2) If taxpayers choose NOT to pay a tax deficiency, then they must petition which court?
A)the District Court
B)the U.S. Court of Federal Claims
C)the Tax Court
D)the U.S. Court of Appeal
Q3) A taxpayer who loses in the Small Cases Division of the Tax Court may appeal directly to the:
A)Appellate division of the IRS
B)District Court in the taxpayer's circuit
C)U.S. Court of Appeals in the taxpayer's circuit
D)Decisions in the Small Cases Division cannot be appealed
Q4) Why would a taxpayer want to bring a case in the U.S. Court of Federal Claims?
Q5) Briefly explain how the burden of proof concept is applied.
Page 7
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Chapter 6: Tax Services Ria Checkpoint
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Sample Questions
Q1) Explain the difference between an annotated tax service and a topical tax service. Give an example of each.
Q2) A citator is a tool through which a tax researcher can learn the history of a legal source and evaluate the strength of its holdings.
A)True
B)False
Q3) Checkpoint (formerly RIA Checkpoint) is a commercial tax and accounting research service offered by CCH.
A)True
B)False
Q4) The starting point in approaching any tax research problem is to:
A)browse the Table of Contents
B)formulate relevant tax questions and identify the issues associated with them
C)evaluate the tax problem and suggest solutions to the taxpayers
D)none of these are correct
Q5) The footnote links in Checkpoint editorial services are not important to tax researchers.
A)True
B)False
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Chapter 7: Tax Services CCH Intelliconnect
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Sample Questions
Q1) A broad knowledge of tax law, a reasonable level of experience, and persistence are necessary for:
A)passing the Bar Exam
B)looking at Google
C)researching the tax law
D)contracting tax law researchers
Q2) Most tax services, including IntelliConnect, offer four primary ways to search for information: keyword search, contents search, index search, and:
A)a one-to-four star system that indicates the extent to which citing cases discuss the case of interest
B)headnotes that address only the tax issues in a case
C)case evaluation symbols such as warning flags to indicate how the later court has treated a cited case
D)citation search
Q3) A typical IntelliConnect subscription will contain a maximum of two editorial sources of interest: U.S. Master Tax Guide and Standard Federal Tax Reporter.
A)True
B)False
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9
Chapter 8: Tax Services Specialty and Others
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Q1) All major tax services include a publication as part of their service aimed at keeping the subscriber abreast of important tax law developments. These publications are called Newsletters.
A)True
B)False
Q2) The collection of papers, seminars, lectures, panel discussions, and demonstrations presented at yearly conferences of tax professionals is called the:
A)annual proceedings
B)annual webinars
C)annual awards
D)annual law news
Q3) For which type of search does BNA offer four different ways to do a search in the tax databases?
A)Keyword Search
B)Quick Search
C)Go To Search
D)Guided Search
Q4) How can finding a BNA Portfolio on point with a practitioner's tax issue be like hiring someone to do the research?
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Chapter 9: Multijurisdictional and Other Research
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Sample Questions
Q1) A native country's taxation of its citizens' foreign-source income involves inbound transactions.
A)True
B)False
Q2) When deciding where to locate new plants or headquarters, businesses must consider the level of:
A)revenues
B)expenses
C)diversions
D)state and local taxation
Q3) With a territorial model of taxation, a foreign tax credit is needed to ensure that the income is not taxed twice.
A)True
B)False
Q4) The U.S. blended tax model encourages U.S. domestic corporations to retain earnings in foreign countries and postpone repatriation as long as possible.
A)True
B)False
Q5) Why are taxpayers emphasizing multijurisdictional tax planning?
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Chapter 10: Financial Accounting Research
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Sample Questions
Q1) "A sound understanding of financial accounting is essential for tax professionals." Discuss.
Q2) Which of the following statements is INCORRECT regarding the International Financial Reporting Standards (IFRS)?
A)The standards are promulgated by the International Accounting Standards Board.
B)IFRS takes into account the financial reporting needs of emerging economies and small and medium-sized entities.
C)The United States has adopted IFRS, and U.S. companies are now subject to the international standards.
D)All of the these statements are correct.
Q3) Most research using the Codification is expected to be performed using the:
A)Browse function
B)Search function
C)Go To function
D)Find function
Q4) The main difference between U.S. GAAP and IFRS is that IFRS is much lengthier, with over 25,000 pages.
A)True
B)False
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Chapter 11: Communicating Research Results
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Sample Questions
Q1) Which of the following statements is CORRECT with respect to conflicting tax laws?
A)Revenue Rulings and Revenue Procedures seldom are held to be invalid by a court.
B)Regulations are frequently held to be invalid by a court.
C)The decisions of courts that are higher in the judicial hierarchy should receive additional precedential weight.
D)All of the these are correct.
Q2) Which of the following is CORRECT with respect to a file memo?
A)It should include only the strengths of the client's position.
B)It should include a list of the tax issues that are in dispute and a matching conclusion for each identified issue.
C)It should be prepared only in closed-fact situations.
D)All of these are correct.
Q3) IRS agents are not bound by District Court decisions. A)True B)False
Q4) More research engagements entail closed-fact settings than open-fact situations. A)True B)False
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Page 13
Chapter 12: Tax Planning
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Sample Questions
Q1) Jane owns land adjacent to her home that appreciated in value by $5,000 this year. She acquired the land five years ago for $25,000. Based on these facts alone, the amount that would be included in her taxable income for the current year is:
A)$30,000
B)$25,000
C)$5,000
D)$0
Q2) Where ATC = after-tax cost, BTC = before-tax cost, and MTR = marginal tax rate, the after-tax cost of tax planning can be expressed as:
A)ATC = BTC × (1 - MTR)
B)a factor of the time value of money
C)MTR × taxable income = ATC
D)ATC = BTC ÷ (1 - MTR)
Q3) Identify the five goals of tax planning behavior and give an example of each.
Q4) Under a progressive tax rate system, the applicable tax rate:
A)is applied against the taxpayer's net holdings of tangible assets
B)decreases as the tax base grows larger
C)increases as the tax base grows larger
D)is independent of the tax base
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Chapter 13: Working With the IRS
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Sample Questions
Q1) In selecting returns for examination, the primary goal of the IRS is to review only those returns that:
A)belong to taxpayers who were found guilty previously
B)will result in a satisfactory increase in the tax liability
C)have been filed for the first time
D)contain mathematical/clerical errors
Q2) The IRS Oversight Board:
A)has the authority to affect tax policy
B)has the authority to affect the processing of individual tax cases
C)can intervene in IRS personnel or procurement matters
D)can review and approve the IRS annual budget request
Q3) The IRS has increased the number of tax return processing centers with the increase in electronic filing of returns.
A)True
B)False
Q4) A "DIF" score is a type of:
A)fraud definition used by the IRS
B)composite score that rates returns for potentially higher tax liability
C)negligent penalty score
D)score used for information purposes in collateral agreements
Page 15
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Chapter 14: Tax Practice and Administration: Sanctions, Agreements,
and Disclosures
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Sample Questions
Q1) The Code provides for payment of interest on underpayments and overpayments of tax at an adjustable rate compounded annually.
A)True
B)False
Q2) A "large corporation" as defined in the Code is one which had a taxable income of:
A)$10 million or more in any of the ten immediately preceding taxable years
B)$2 million or more in any of the two immediately preceding taxable years
C)$5 million or more in any of the five immediately preceding taxable years
D)$1 million or more in any of the three immediately preceding taxable years
Q3) Failure to file as a result of a taxpayer not having the sufficient funds to pay the tax liability is an example of reasonable cause.
A)True
B)False
Q4) Cite two instances that would lead to imposition of criminal penalties on tax return preparers.
Q5) How do the courts define reasonable cause? List the examples of reasonable cause.
Q6) What is the procedure for claiming a refund or credit for overpayment of tax?
Page 16
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