Principles of Taxation Exam Practice Tests
Course Introduction
Principles of Taxation introduces students to the foundational concepts and frameworks governing taxation systems. The course examines the objectives and functions of taxation, the distinctions between direct and indirect taxes, and the ethical, legal, and economic principles underlying tax policy. Students will explore the structure and administration of tax systems, basic tax computation, tax incidence, and the impact of taxation on individuals, businesses, and society. Emphasis is placed on understanding how tax laws are formulated, interpreted, and applied, providing a basis for further study in accounting, law, and finance.
Recommended Textbook
Federal Tax Research 11th Edition by
Roby B. Sawyers
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14 Chapters
691 Verified Questions
691 Flashcards
Source URL: https://quizplus.com/study-set/1283
Page 2
Chapter 1: Introduction to Tax Practice and Ethics
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54 Verified Questions
54 Flashcards
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Sample Questions
Q1) 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
Q2) A CPA can rely without verification on information given to the CPA by a taxpayer unless the information appears to be incorrect.
A)True
B)False
Answer: True
Q3) Under 2-2b rules, which of the following actions would constitute deceptive advertising?
A)advertising too frequently
B)implying that the CPA had the ability to influence an IRS official
C)promising a favorable result without justification
D)implying that the CPA had the ability to influence an IRS official andpromising a favorable result without justification
Answer: D
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3
Chapter 2: Tax Research Methodology
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49 Verified Questions
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Sample Questions
Q1) Tax research has been described as an "iterative process." Explain what this means to the researcher and give an example of how this process might work with a hypothetical client.
Answer: The process of tax research is iterative in the sense that, once an answer is found, it often causes a new issue to appear, which then requires the gathering of more information. After the researcher has more information, he or she has to go back to the research materials to reevaluate the problem. For example, if a client comes in asking if he or she can deduct alimony, the researcher can look up the general federal tax rules for alimony. When looking at those rules, the researcher finds that the alimony must be made under a divorce or separation instrument. When the researcher goes back to the client to question him or her about the details of the divorce instrument, the client explains that it was not a divorce, but an annulment. Now the researcher must go back and research the issue of whether an alimony deduction is allowed for payments made under a decree of annulment. The researcher then finds that if an annulment has the same effect for support purposes as a divorce under local law, payments under an annulment decree qualify as deductible alimony.In conclusion, the tax research process is not a linear process. Rather, the direction the research takes is dependent on how the facts and issues develop as the researcher gathers more information.
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Page 4
Chapter 3: Constitutional and Legislative Sources
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Sample Questions
Q1) Which of the following statements is INCORRECT regarding tax treaties?
A)They are authorized by the U.S. Constitution.
B)They are usually initiated by the State Department, not the Treasury.
C)The United States can have multiple types of tax treaties with one country.
D)All of these are correct.
Answer: B
Q2) Which of the following statements is CORRECT regarding Committee Reports?
A)They are published in the Internal Revenue Bulletin.
B)They can be found in most subscription online tax services.
C)They explain the elements of proposed tax law changes and reasons for the changes.
D)All of these are correct.
E)None of these are correct.
Answer: D
Q3) The North American Free Trade Agreement (NAFTA) is a non-tax international treaty that addresses some tax-related issues.
A)True
B)False
Answer: True
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5
Chapter 4: Administrative Regulations and Rulings
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Sample Questions
Q1) The IRS's general authority to issue binding rules and regulations comes from which source?
A)the U.S. Constitution
B)an Executive Order of the President
C)a section of the Internal Revenue Code itself
D)none of these are correct
Q2) The IRS's official publication for its pronouncements is the Internal Revenue Manual.
A)True
B)False
Q3) Most official IRS pronouncements are written by:
A)The IRS Office of Chief Counsel
B)The IRS Commissioner
C)The Treasury Secretary
D)IRS Field Office Staff Members
Q4) An IRS Technical Advice Memorandum applies strictly to the taxpayer for whose audit it was requested and cannot be relied upon by other taxpayers.
A)True
B)False
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Chapter 5: Judicial Interpretations
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Sample Questions
Q1) Which of the following statements is INCORRECT regarding headnotes and case briefs?
A)Headnotes are usually inserted at the beginnig of a case by the court reporter editors.
B)Headnotes help researchers quickly determine if a case is relevant.
C)Case briefs are a summary of a case identifying the facts, issue, holding and analysis.
D)All of the above statements are correct.
Q2) A regular Tax Court decision generally involves a new or unusual point of law, as determined by the Chief Judge of the Court.
A)True
B)False
Q3) The U.S. Tax Court may examine the entire return of a taxpayer whose case it is hearing.
A)True
B)False
Q4) There are 11 Circuit Courts of Appeals in the federal court system.
A)True
B)False
Q5) Why would a taxpayer want to bring a case in the U.S. Court of Federal Claims?
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Chapter 6: Tax Services Ria Checkpoint
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Sample Questions
Q1) Why would a researcher use a Table of Contents or Index search instead of a keyword search?
Q2) Which statement is CORRECT regarding commercial tax services?
A)They provide free access to all primary source tax materials.
B)They eliminate the need for reading primary tax law source materials.
C)They act as an index for and explanation of primary tax law.
D)All of these are correct.
Q3) Primary source materials are important to the researcher because they are:
A)easily found
B)the source of "substantial authority"
C)listed in all publications
D)difficult to understand
Q4) Checkpoint's annotated service, which formerly was known as PH Federal Taxes, is known by the following acronym:
A)the U.S. Master Tax Guide
B)AFTR
C)USTR
D)none of these are correct
Q5) Explain the difference between an annotated tax service and a topical tax service. Give an example of each.
Page 8
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Chapter 7: Tax Services CCH Intelliconnect
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46 Verified Questions
46 Flashcards
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Sample Questions
Q1) The CCH Federal Tax Weekly is an example of what type of tax periodical?
A)a weekly newsletter
B)a professional and practitioner journal
C)a scholarly review
D)an annual proceeding
Q2) The CCH annotated service is the:
A)Federal Tax Coordinator
B)Federal Tax Expert
C)Standard Federal Tax Reporter
D)United States Tax Reporter
Q3) Which of the following statements is CORRECT regarding the CCH Citator?
A)The CCH Citator lists paragraph references where a case is examined in its Standard Federal Income Tax Reporter.
B)Only selected cases which the editors have determined most affect a case's precedential value are included in the citator listing.
C)The CCH Citator uses a general, not a local citation for citing cases.
D)All of these are correct.
Q4) What roles does a citator play in tax research?
Q5) Distinguish between the following terms: "cited case" and "citing case."
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Chapter 8: Tax Services Specialty and Others
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Sample Questions
Q1) Why might some researchers find the citators in Westlaw or Shepard's superior to those found in Checkpoint or IntelliConnect?
Q2) Like BNA, Westlaw is accessible via the Internet and through wireless mobile devices.
A)True
B)False
Q3) The BNA Portfolios can be accessed directly by clicking on the headings under:
A)Cases and Decisions
B)Practice Tools
C)Expert Analysis
D)Indexes and Finding Aids
Q4) BNA Bloomberg is best known in the tax community as the publisher of the:
A)BNA Collections
B)BNA Tax Management Portfolio
C)BNA Bloomberg Tax & Accounting Center
D)BNA Citators
Q5) Virtually all law schools train their students using the Westlaw system.
A)True
B)False
Q6) What are KeySearch and the West Key Number System?
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Chapter 9: Multijurisdictional and Other Research
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60 Verified Questions
60 Flashcards
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Sample Questions
Q1) The Checkpoint tax product which provides a comprehensive set of analytical treaties and texts is named:
A)RIA International Taxes Weekly
B)Tax Management Portfolios
C)RIA International Tax Library (ITL)
D)Worldwide Tax Treaties
Q2) In today's expanding tax planning and compliance, tax practitioners need to service their clients by adding to federal tax planning:
A)tax analysis
B)investment planning
C)state and local tax planning
D)estate planning
Q3) 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
Q4) Why are taxpayers emphasizing multijurisdictional tax planning?
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Chapter 10: Financial Accounting Research
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Sample Questions
Q1) What is meant by "tax position"? Explain the requirements of ASC 740 for the reporting of tax positions.
Q2) A position taken in a previously filed return or expected to be taken in a future return is known as:
A)an audit position
B)a tax position
C)an uncertain tax position
D)none of these are correct
Q3) Which of the following International Accounting Standards deals with international guidance for accounting for income taxes?
A)IAS 29
B)ASC 740
C)SFAS 109
D)IAS 12
Q4) Explain the basic principles of accounting for deferred taxes.
Q5) Accounting Statements of Position (SOPs) were brought into the FASB Accounting Standards Codification (ASC).
A)True
B)False
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Chapter 11: Communicating Research Results
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Sample Questions
Q1) Well-written case opinions typically provide a summary of the evolution of the pertinent tax law and a discussion of the parties' competing interpretations.
A)True
B)False
Q2) Identify five types of tax-related communications.
Q3) The tax researcher spends most of his or her time writing the memorandum to the client's file.
A)True
B)False
Q4) Initial determinations of the facts of a tax issue are likely to be incomplete because:
A)taxpayers tend to see the dispute only from their side
B)taxpayers not being trained in the tax law may be unable to determine which facts are important to convey
C)fact-gathering often depends on the reliability of the memory of taxpayers
D)all of these are correct
Q5) IRS agents are not bound by District Court decisions.
A)True
B)False
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Chapter 12: Tax Planning
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Sample Questions
Q1) What is a statutory tax trap? Give an example.
Q2) The tax rate which is computed by simply dividing the total tax liability by the corresponding tax base is known as the:
A)capital gains tax rate
B)average tax rate
C)effective tax rate
D)marginal tax rate
Q3) The effective average tax rate can be found by dividing the total tax liability by the economic income.
A)True B)False
Q4) Whenever a series of transactions results in significant tax savings, the IRS may attempt to apply the concept of substance over form by collapsing several transactions into one.
A)True B)False
Q5) Harrison is subject to a 40 percent overall marginal tax rate. Is he better off if he receives a tax-free fringe benefit of $4,000 than if he receives an equivalent raise in his salary? Why or why not?
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Chapter 13: Working With the IRS
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Sample Questions
Q1) In cases where an IRS examiner questions only one or two items on a selected return, an examination is typically conducted by mail, called a correspondence examination.
A)True
B)False
Q2) The Appeals Office has the exclusive and final authority to settle cases that originate in any district irrespective of its jurisdiction.
A)True
B)False
Q3) 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
Q4) The National Research Program (NRP) provides statistics that are used in the development and update of the DIF formulas.
A)True
B)False
Q5) What are the "pros" and "cons" of filing a protest to an IRS Audit?
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Chapter 14: Tax Practice and Administration: Sanctions, Agreements,
and Disclosures
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Sample Questions
Q1) When the accuracy-related penalty applies, interest on the penalty accrues from the:
A)date on which the assessment is made
B)date on which the penalty was imposed or December 31, whichever is earlier
C)date on which the penalty was imposed
D)due date of the return
Q2) If a taxpayer fails to file her return due to willful neglect, the minimum penalty is:
A)25 percent or 5 months cumulative penalty
B)lesser of $205 or the full amount of taxes that are required to be shown on the return
C)15 percent monthly penalty
D)lesser of $135 or the full amount of taxes that are required to be shown on the return
Q3) A failure-to-pay penalty is imposed when the taxpayer fails to pay either a tax shown on his or her return or an assessed deficiency within 10 days of an IRS notice or demand.
A)True
B)False
Q4) What is the procedure for claiming a refund or credit for overpayment of tax?
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