Federal Tax Research, 10th Edition solutions manual and test bank by Roby B. Sawyers
1. 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 the above.
ANSWER: b
POINTS: 1
DIFFICULTY: Easy
2. All of the following are goals of tax research EXCEPT?
a. to balance the need for efficiency against the need for thoroughness
b. to balance the client’s tax goals with the client’s nontax, personal considerations
c. to find a defensible solution to a client’s problem
d. to find a perfect solution to a client’s problem, no matter how long it takes
ANSWER: d
POINTS: 1
DIFFICULTY: Easy
3. 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 the above
ANSWER: b
POINTS: 1
DIFFICULTY: Moderate
4. The first step in the tax research process is to:
a. establish the facts
b. identify the issues
c. locate authority
d. evaluate authority
ANSWER: a
POINTS: 1
DIFFICULTY: Easy
5. Once the initial facts have been gathered and the issues defined, the tax researcher must:
a. develop conclusions and recommendations
b. evaluate the authority
c. contact the IRS
d. locate the authority
ANSWER: d
POINTS: 1
DIFFICULTY: Easy
6. In a closed-fact problem, the main goal of tax research is to:
a. determine several alternative courses of future action for the taxpayer
b. find support for an action the taxpayer has already taken
c. both a and b
d. none of the above
ANSWER: b
POINTS: 1
DIFFICULTY: Moderate
7. The final step of the tax research process is to:
a. develop conclusions and recommendations
b. communicate recommendations
c. document conclusions and recommendations
d. litigate the tax-related dispute
ANSWER: b
POINTS: 1
DIFFICULTY: Easy
8. Which of the following statements is CORRECT regarding online tax research?
a. The method of constructing queries is the same for all databases.
b. Most online tax services allow the use of connectors and wild cards.
c. If a query generates too little information, the researcher should add more unique keywords.
d. All of the above are correct.
ANSWER: b
POINTS: 1
DIFFICULTY: Moderate
9. Tax research issues can be divided in two main categories. These are:
a. fact and law issues
b. primary and secondary issues
c. major and minor issues
d. internal and external issues
e. tax and nontax issues
ANSWER: a
POINTS: 1
DIFFICULTY: Moderate
10. Which of the following are basic connectors you can use to construct a search query?
a. google
b. not
c. or
d. *
e. only b and c
ANSWER: e
POINTS: 1
DIFFICULTY: Moderate
11. Which of the following represents a law issue?
a. intent of the transaction
b. definition of a term used in the code
c. date of transaction
d. location of the transaction
e. all of the above
ANSWER: b
POINTS: 1
DIFFICULTY: Easy
12. The amount of a transaction represents a:
a. law issue
b. social issue
c. fact issue
d. political issue
ANSWER: c
POINTS: 1
DIFFICULTY: Easy
13. Which of the following is an example of secondary authority?
a. tax treaties
b. tax journals
c. U.S. Constitution
d. tax laws by Congress
ANSWER: b
POINTS: 1
DIFFICULTY: Moderate
14. A statutory source of Federal tax law is:
a. various rulings of the Treasury Department and the IRS
b. collected rulings of the various courts on Federal tax matters
c. textbooks
d. tax treaties
ANSWER: d
POINTS: 1
DIFFICULTY: Moderate
15. Which of the following is an administrative source of primary authority?
a. U.S. Constitution
b. collected rulings of the various courts on Federal tax matters
c. revenue rulings
d. newsletters
ANSWER: c
POINTS: 1
DIFFICULTY: Moderate
16. A reference source that enables the researcher to follow the judicial history of court cases is known as:
a. a case reporter
b. a judicial directory
c. the Cumulative Bulletin
d. a citator
ANSWER: d
POINTS: 1
DIFFICULTY: Moderate
17. CCH’s annotated, or codebased commercial tax service is:
a. the United States Tax Reporter
b. the Tax Coordinator 2d
c. the Standard Federal Income Tax Reporter
d. the Federal Tax Library
ANSWER: c
POINTS: 1
DIFFICULTY: Moderate
18. The Tax Management Portfolios are published by:
a. CCH
b. RIA
c. Bureau of National Affairs (BNA)
d. LexisNexis
ANSWER: c
POINTS: 1
DIFFICULTY: Moderate
19. Once the research question has been stated, the researcher must next:
a. gather the facts
b. identify the keywords
c. select a database and execute the search
d. interpret and refine the search
ANSWER: b
POINTS: 1
DIFFICULTY: Moderate
20. Secondary sources are useful when:
a. conflicting primary authority exists
b. the issue is a closed-fact problem
c. a researcher does not have access to primary sources
d. when a researcher disagrees with the client
ANSWER: a
POINTS: 1
DIFFICULTY: Moderate
21. The IRS website can be used to perform which of the following tasks:
a. obtain downloadable forms
b. keyword search IRS tax publications
c. file your tax return
d. all of the above
ANSWER: d
POINTS: 1
DIFFICULTY: Easy
22. Which of the following statements is INCORRECT regarding the CPA exam:
a. The National Association of State Boards of Accountancy administers the test.
b. Each state has its own test.
c. CPA exam candidates must pass all four sections of the exam.
d. The Regulation section requires tax research.
ANSWER: b
POINTS: 1
DIFFICULTY: Easy
23. Which of the following forms the basis for all tax provisions?
a. secondary authority
b. the administrative authority of the IRS
c. judicial interpretation of the law
d. the statutory authority of Congress
ANSWER: d
POINTS: 1
DIFFICULTY: Moderate
24. The distinction between primary and secondary authority is important for which of the following reasons?
a. to meet the accuracy threshold of “substantial authority.”
b. to avoid penalties under Section 6662 of the Code.
c. to search properly with connectors and wildcards.
d. only a and b
ANSWER: d
POINTS: 1
DIFFICULTY: Moderate
25. Tax journals perform which of the following functions:
a. offer researchers expert analysis of unclear tax issues
b. keep researchers aware of current developments
c. suggest tax planning techniques
d. all of the above
ANSWER: b
POINTS: 1
DIFFICULTY: Easy
26. Skilled tax research requires a combination of reasoning and creativity.
a. True
b. False
ANSWER: True
POINTS: 1
DIFFICULTY: Easy
27. A tax researcher can rely on tax journals as substantial authority under Section 6662 of the Code.
a. True
b. False
ANSWER: False
POINTS: 1
DIFFICULTY: Easy
28. The tax research process should be approached in a structured, step-by-step manner.
a. True
b. False
ANSWER: True
POINTS: 1
DIFFICULTY: Easy
29. After the researcher has located authority that deals with the client's problem, he or she must develop conclusions and recommendations.
a. True
b. False
ANSWER: False
POINTS: 1
DIFFICULTY: Moderate
30. A tax researcher should ignore the personal preferences of a client and concentrate only on minimizing the client’s
tax liability.
a. True
b. False
ANSWER: False
POINTS: 1
DIFFICULTY: Easy
31. If a computer search generates too much information, the research may use fewer libraries or more unique keywords.
a. True
b. False
ANSWER: True
POINTS: 1
DIFFICULTY: Easy
32. “Wildcards” such as an asterisk can be used to search for word variations in most tax services.
a. True
b. False
ANSWER: True
POINTS: 1
DIFFICULTY: Easy
33. Topical tax services are arranged by subject as defined by the publisher's editorial staff.
a. True
b. False
ANSWER: True
POINTS: 1
DIFFICULTY: Easy
34. Westlaw is an example of an online, free tax-related internet site.
a. True
b. False
ANSWER: False
RATIONALE: FEEDBACK: Westlaw is a commercial, subscription law library online with extensive tax and other legal and business information databases.
POINTS: 1
DIFFICULTY: Easy
35. The power of Congress to implement and collect taxes is summarized in the Internal Revenue Code, the official title of U.S. tax law.
a. True
b. False
ANSWER: True
POINTS: 1
DIFFICULTY: Easy
36. Tax researchers should not consider the client’s potential liability in determining how much time to spend on a client’s problem.
a. True
b. False
ANSWER: False
RATIONALE: FEEDBACK: The researcher has an obligation to a client not to waste the client’s money on a low
cost/benefit issue.
POINTS: 1
DIFFICULTY: Easy
37. The Tax Adviser journal is published by the AICPA.
a. True
b. False
ANSWER: True
POINTS: 1
DIFFICULTY: Easy
38. Thomson Reuters Checkpoint is a web-based tax research service that contains research material on Federal, state, local, and international taxation.
a. True
b. False
ANSWER: True
POINTS: 1
DIFFICULTY: Moderate
39. The Parker Tax Pro Library (PTPL) is designed as a low-cost tax service for practitioners providing tax advisory and compliance services.
a. True
b. False
ANSWER: True
POINTS: 1
DIFFICULTY: Moderate
40. The search “stock or securities” would find documents that contain both the term “stock” and the term “securities.”
a. True
b. False
ANSWER: False
RATIONALE: FEEDBACK: This search would find documents that have either the word “stock” or the word “securities.”
POINTS: 1
DIFFICULTY: Easy
41. The IRS website is a full-service, tax research resource.
a. True
b. False
ANSWER: False
RATIONALE: FEEDBACK: The IRS website, while containing much useful information, is not a full-service tax research resource.
POINTS: 1
DIFFICULTY: Easy
42. One of the issues a tax researcher should be concerned about is how definitive a research result must be.
a. True
b. False
ANSWER: True
POINTS: 1
DIFFICULTY: Easy
43. The CPA exam is prepared by the AICPA.
a. True
b. False
ANSWER: True
POINTS: 1
DIFFICULTY: Easy
44. All primary source material has the same precedential value.
a. True
b. False
ANSWER: False
RATIONALE: FEEDBACK: Different types of primary authority have different value as precedent. The researcher must understand the hierarchy of primary sources.
POINTS: 1
DIFFICULTY: Moderate
45. The U.S. Constitution is a statutory source of tax law.
a. True
b. False
ANSWER: True
POINTS: 1
DIFFICULTY: Easy
46. List in sequential order the major steps involved in the tax research process.
ANSWER: The tax research process can be broken down into six major steps, each an essential part of the overall research methodology. The steps in tax research are as follows.
o Establish the facts o Identify the issues o Locate authority o Evaluate authority
o Develop conclusions and recommendations o Communicate the recommendations
POINTS: 1
DIFFICULTY: Moderate
47. Explain the difference in primary and secondary sources of tax information and give several examples of each.
ANSWER: Primary authority consists of original pronouncements that come from government sources, including statutory, administrative, or judicial sources. Statutory authority comes out of the legislative branch of government, the U.S. Congress, and includes the Internal Revenue Code, legislative history, and tax treaties. Administrative documents come out of the IRS, including regulations, rulings, taxpayer publications, and other guidance documents. The judiciary releases court opinions which are a judicial primary source.
Secondary sources consist of interpretations of primary authority and are an unofficial source of tax information. Secondary authority includes tax services, journals, textbooks, treatises and newsletters.
POINTS: 1
DIFFICULTY: Challenging
48. List the significant tax facts that often influence the client's situation:
ANSWER: Significant facts that often influence the client’s situation include the following:
• The client’s tax entity, for example, individual, corporation, or trust.
• The client’s family status and stability.
• The client’s past, present, and projected marginal tax rates.
• The client’s place of legal domicile and citizenship.
• The client’s motivation for the transaction.
• The relationships among the client and other parties who are involved in the transaction.
• Whether special tax rules apply to the taxpayer due to the type of business in which the taxpayer
is engaged (i.e., he or she is a farmer, fisherman, or long-term contractor).
• Whether the transaction is proposed or completed.
POINTS: 1
DIFFICULTY: Challenging
49. Tax research has been described as an “iterative process.” Explain what this means to the researcher 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 they 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 the client 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.
POINTS: 1
DIFFICULTY: Challenging
CHAPTER 2
TAX RESEARCH METHODOLOGY
DISCUSSION QUESTIONS
2-1. The primary purpose of tax research is to aid in finding solutions to tax problems.
Page 52
2-2. The basic steps in conducting tax research include the following:
Establish the Facts. This step involves the gathering of facts, including tax and nontax considerations.
Identify the Issues. The tax researcher must identify both issues of fact and issues of law. In so doing, the researcher must rely on a combination of education, training, and experience.
Locate the Appropriate Authority. The researcher must locate authority relevant to the client's situation. Authority may include both primary and secondary authority.
Evaluate the Authority. This step in the tax research process requires the researcher to analyze the authority, including the current status of the authority and the precedential value of the authority.
Develop Conclusions and Recommendations. The researcher must arrive at his or her conclusions based on the first four steps of the tax research process.
Communicate the Recommendations. The final step in the research process is to communicate to the client the facts, assumptions, issues, sources of authority, and conclusions and recommendations.
Page 53 - 61
2-3. First, the researcher must understand the mechanical techniques that are used to identify and locate the tax authorities that relate to solving a problem. Second, the researcher must be creative and explore all of the relevant relationships among the facts and the problems at hand.
Page 52
2-4. Significant tax facts that a tax practitioner might want to obtain could include any of the following:
The client’s tax entity(ies).
The client's family status and stability.
The client's past, present, and projected marginal tax rates.
The client's legal domicile and citizenship.
The client's motivation for the transaction.
Relationships among the client and other parties involved in the transaction.
Whether special tax rules apply.
Whether the transaction is proposed or completed.
Pages 53 and 54
2-5. The researcher should be aware of the following pitfalls:
1. The researcher may attempt to research a problem before fully understanding the facts and circumstances relevant to the client's situation.
2. Often the researcher may have a tendency to ignore new questions that arise as the research task progresses.
3. The client may fail to provide all of the information that is vital to an accurate solution.
4. The tax researcher may approach a tax problem without considering other constraints on the solution to the problem, such as economic factors or personal preferences of the client.
Page 54
2-6. a. T (lower tax liability).
b. NT (economic constraints).
c. NT (personal preference).
d. NT (personal preference).
e. NT (personal preference).
2-7. a. NT (personal preference). Might also be classified as T, since the taxpayer's motivation for a potential transaction is known.
b. NT (personal preference)
c. NT (family preference)
d. T (lower tax liability)
e. T (lower tax liability)
Page 54
2-8. Research issues can be divided into two major categories, namely, fact issues and law issues. Fact issues are concerned with problems such as the dates of the transactions, the amounts involved in an exchange, reasonableness, intent, and purpose. Law issues arise when the facts are well established, but it is not clear which portion of the tax law applies.
Page 55
2-9. The legal concept of collateral estoppel bars relitigation on the same facts or the same issues. Therefore, the tax practitioner must be certain that his or her case is researched fully and no issues have been overlooked. If an issue is not addressed in the original case, it may be lost forever.
Page 55
2-10. Tax research may be spread over a lengthy period of time. The researcher must be aware of changes that occur during this period which might affect the outcome of the research. Applicable law or facts might be subject to changes which will cause the researcher to arrive at different conclusions and recommendations, even concerning completed research activities.
Page 55
2-11. All tax authority does not carry the same precedential value. The tax researcher must consider the source of the authority, including whether the source of authority is a primary or secondary source, and the force of the authority. Primary authority comes from statutory, administrative, and judicial sources. In fact, statutory authority is the basis for all tax provisions.
Secondary authority consists of unofficial sources of tax information, such as tax journal articles, textbooks, and newsletters. The researcher should be cautious in relying upon secondary authority which does not have precedential value, but which may be of assistance in clarifying or explaining the primary authority. In addition, the researcher must take into account new issues that have developed since the date of the authority.
Page 57 - 58
2-12. Statutory sources include the Constitution, tax treaties, and tax laws that have been passed by Congress. Administrative authority includes the various rulings of the Treasury Department and the IRS. Judicial authority consists of the collected rulings of the various courts on Federal tax matters.
Page 57-58
2-13. a. P
b. P
c. S
d. P
e. P
Pages 57-59
2-14. a. P
b. P
c. P
d. S
e. S
Pages 57-59
2-15. a. S
b. S
c. P
d. P
e. S
Pages 57-59
2-16. The annotated tax services are organized in Internal Revenue Code section order. The two major annotated services are published by Commerce Clearing House (CCH) and Research Institute of America (RIA).
The topical services are arranged by topic, as defined by the publisher's editorial staff. The Research Institute of America (RIA), Commerce Clearing House (CCH), and the Bureau of National Affairs (BNA) all publish major topical tax services.
Page 58
2-17. Court reporters are sets of bound volumes in which court decisions are published. Three organizations that produce court reporters are the Government Printing Office, West Publishing Company, and Commerce Clearing House (CCH).
Page 58
2-18. a. CCH
b. West
c. Thomson Reuters
d. GPO (Government Printing Office)
Page 59
2-19. A citator is a reference source that enables the researcher to follow the judicial history of court cases.
Page 59
2-20. The primary bound publication containing IRS pronouncements is a set of weekly bound volumes titled the Internal Revenue Bulletin.
Page 59
2-21. A tax service is a coordinated set of reference materials that organizes the tax authority into a useable format, making the Internal Revenue Code more accessible.
Page 58
2-22. a. TAXES - General tax practitioners
b. Journal of Taxation - Sophisticated tax practitioners
c. Practical Tax Strategies – General tax practitioners
d. The Tax Adviser - Members of the AICPA and other tax practitioners
e. The ATA Journal of Legal Tax Research – Tax academics and practitioners.
Page 59
2-23. All tax authority does not carry the same precedential value. In the process of evaluating the tax authority for the issue under consideration, it is possible that new issues, not previously considered, may become known. In this case, the researcher may be required to gather additional facts, find more pertinent authority, and evaluate the new issues.
Page 59 - 60
2-24. If a clear solution to a tax research problem has not been obtained, the practitioner must use professional judgment as to the proper conveyance of the research results to the client. In addition, the client might be informed of the alternative possible outcomes of the disputed transaction and give the best acceptable recommendation.
Page 60
2-25. Include the following items in both the memorandum to the client file and the client letter:
1. A restatement of the pertinent facts from the researcher's perspective.
2. A summary of any assumptions that the researcher made in the course of his or her research.
3. A summary of the issues addressed in the research process.
4. The applicable authority used to arrive at the researcher's conclusions and recommendations.
5. The researcher's conclusions and recommendations.
Generally, the memorandum to the client file will contain significantly more details than the letter to the client.
Page 60 - 61
2-26. Yes. In many research situations, a fact generates an issue that in turn may lead to an answer or the need for more facts. Similarly, once an answer is found to an issue, it may also cause a new issue to appear or the need to gather more information. The same situation occurs in evaluating authority. Frequently, there will be ambiguity between items of authority that will require the researcher to use his or her critical thinking skills. This may result in new issues becoming known. The researcher would then be required to gather additional facts, find additional pertinent authority, and evaluate the new issues.
Page 56
2-27. Substantial Authority under Reg. §1.6662-4(d)(3)(iii) includes:
a. The Internal Revenue Code and other statutory provisions,
b. Proposed, Temporary, and Final Regulations,
c. Revenue Rulings and Procedures,
d. Tax Treaties and regulations there under,
e. Court Cases,
f. Congressional Committee Reports,
g. The Blue Book,
h. Private Letter Rulings issued after 10/31/76,
i. Technical Advice Memoranda issued after 10/31/76,
j. General Counsel Memoranda issued after 3/31/81, and
k. IRS Information and Press Releases.
It is important to be familiar with the above sources because any position documented based on these authorities will prevent accuracy-related penalties associated with the item or return under review.
Page 58
2-28. Online tax research systems provide a fast, cheap method for tax practitioners to access tax information that he or she could not afford to buy before the use of computers. Today’s online systems allow the distribution of tax research information and entire tax services to multiple tax staff in both small and large CPA firms. They are accessible through the Internet and several public telecommunications networks. The materials that are available with these services are contained in databases that are stored at centralized computer locations. These databases may be accessed from remote locations with the use of a variety of compatible video devices and keyboards. Usually, they can be accessed via compatible handheld devices and computers that the user already owns.
Advantages of such a system over a standard printed service are the ability on the part of the user to index any significant item by using it as a search item in a query, and the ability for the user to tailor his or her query to fit the requirements of a specific tax problem, which can result in the research process being conducted with greater speed and thoroughness; that online services are updated much faster than printed tax services; that they are particularly useful in researching case law, since every word contained in a case is included in the database, which in turn enables the user to save time by directly accessing only those cases that contain the key terms of his or her search, that certain documents may be obtained only from the central computer library, and that it can be used to obtain regularly published documents to which the researcher does not have access.
Pages 62 - 65
2-29. Any of the following could be examples of web addresses of three free online Internet sites where someone could find information on various aspects of taxation:
Page 63
2-30. Computerized tax research involves the utilization of a computerized tax service upon which to conduct tax research. The diligent tax professional must be cognizant of the latest legislative changes and judicial decisions whenever he or she is giving advice to a client. In addition, he or she must be able to draw upon the vast body of established knowledge and to apply certain statutes and administrative and judicial rulings. Since a computerized tax service contains all of the primary sources of the tax law within its database, it is necessary for the tax professional to be able to use the service to conduct research.
When using a computerized tax service, the researcher effectively creates his or her own indices; therefore, he or she is not bound to the limitations imposed by manually accessing tax materials through a printed service or text. In addition, computerized services contain some documents that cannot be located elsewhere.
Page 62
2-31. a. Thomson Reuters Checkpoint--A Web-based tax research service that contains research
material on federal, state, local, and international taxation. Checkpoint contains analytical material such as the Tax Coordinator 2d and the United States Tax Reporter.
b. CCH IntelliConnect--A Web-based tax research service that contains CCH’s tax services (Tax Research Consultant and Federal Income Tax Reporter) and other federal, state, local, and international legal and tax information.
c. LexisNexis Tax Center--Besides containing all federal and state tax research material,
LexisNexis provides access to expert analytical materials from CCH, Tax Analysts, and BNA. In addition, LexisNexis has extensive libraries of newspapers, magazines, journals, and
patent records and medical, economic, and accounting databases.
d. Westlaw Westlaw and WestlawNext--contain all federal, state, local, and international legal sources, including court cases, administrative releases, and statutory information. All government documents (e.g., IRS publications, court cases) are also available on this system.
Page 63
2-32. The disadvantages of using a computerized tax service include the high cost of conducting a search and the broad nature of the database.
The database includes all of the pertinent documents needed to conduct a thorough tax research. However, a computerized tax service does not normally include any type of indices; therefore, the researcher must determine the key words to utilize in his or her search request. If the request is not properly structured, the researcher will not locate the pertinent documents.
Page 62
2-33. Four benefits of using an online service to conduct your tax search are:.
1. In an online service, it is possible to index any significant term by using it as a search term in the query. Because the researcher creates his or her own indices, he or she is not bound to the limitations imposed by manually accessing tax materials through a printed service or text.
2. In a computerized tax research system, the user can tailor his or her query to fit the requirements of a specific tax problem. Because the user defines the precise parameters of his or her query, computerized research is exceptionally flexible.
3. Most electronic services allow great speed and flexibility to move among pertinent tax documents through hypertext linking, a colorful code assigned to related documents.
4. Computerized services are updated much faster than are printed tax services.
Page 64
2-34. Developing an effective search request requires that the researcher:
1. State the Issue in the Form of a Question
2. Identify the Keywords
3. Construct a Computer Research Query
4. Select Database and Execute Search
5. Interpret and Refine the Search
Pages 65-
2-35. To reduce the number of retrieved documents to a reasonable number, the researcher should modify his or her request, usually by editing the last request transmitted to one that is narrower in scope and utilize more unique key words..
Page 67
2-36. The Checkpoint search connectors discussed in the text are:
§ and – finds documents with both chosen keywords in them
§ or – finds documents with either chosen keywords in them
§ /n - finds documents where the first chosen term is within ‘n’ words of the second chosen term
§ not – finds documents with the term that precedes the connector, but not the term following the connector
Page 66
2-37. (1) Primary
(2) Primary
(3) Primary
(4) Secondary
Page 67
2-38. Use quotes “trade or business” around the term
Page 69
2-39. Yes, one may use the file format options for a specific file format such as PDF. Just select PDF from the dropdown menu.
Page 69
2-40. No, the terms are not case sensitive. All letters are handled as lowercase.
Page 69
2-41. “Engagement Time Cost” could impact an engagement by making the research to costly for the client.
Page 68
2-42. The “Potential Tax Liability” in a situation by making the research cost exceeds the tax savings.
Page 70
2-43. The “Accuracy Threshold” could impact how much time is spent on the project. As a general rule, the more accuracy needed by the client, the more research that needs to be done to reach a higher level of client comfort.
Page 70
2-44. “Professional Ethics” could impact a tax engagement by requiring the researcher to achieve an appropriate comfort level for the research conclusion.
Page 70
2-45. The four parts of the Uniform CPA Exam are::
1. Auditing and Attestation (AUD)
2. Business Environment and Concepts (BEC)
3. Financial Accounting and Reporting (FAR)
4. Regulation (REG)
The tax issues covered in the REG section of the Uniform CPA Exam include processes, procedures, accounting, and planning as well as federal taxation of property transactions, individuals, and entities. Ethics and professional and legal responsibilities are key components of the section, requiring that candidates be familiar with Treasury Department Circular 230, the AICPA Statements on Standards for Tax Services, and relevant IRS Code sections and regulations.
Page 71
2-46. The “supporting skills” that the CPA exam tests are the abilities to communicate, perform research, and analyze information, as well as other higher-order skills such as judgment and understanding.
Answers will vary for the second question.
EXERCISES
2-47. All can be found online (however, a researcher may have to pay a subscription fee for access to them). For the second part of the question, the answer will vary by individual school campus library.
2-48. All responses and answers will vary with the availability of tax research services available for student use on your campus. Information regarding how students can gain access to the system for research projects in your classes should be obtained by the instructor. If the tax research service is not available on your campus, the student will state so.
2-49. a. www.ftb.ca.gov/
2-50. Because of the “hands on” Internet nature of this exercise, the answer will vary over time.
2-51. Because of the “hands on” Internet nature of this exercise, the answer will vary over time.
2-52. Because of the “hands on” Internet nature of this exercise, the answer will vary over time.
2-53. Because of the “hands on” Internet nature of this exercise, the answer will vary over time.
2-54. Because of the “hands on” Internet nature of this exercise, the answer will vary over time.
2-55. Because of the “hands on” Internet nature of this exercise, the answer will vary over time.
2-56. Because of the “hands on” Internet nature of this exercise, the answer will vary over time.
2-57. Because of the “hands on” Internet nature of this exercise, the answer will vary over time.
2-58 Because of the “hands on” Internet nature of this exercise, the answer will vary over time
2-59. Issues that may be relevant in determining the tax consequences of these transactions include the following:
1. Does the condemnation of the land constitute an involuntary conversion of §1231 property?
2. If gain is realized, how is it computed?
3. If gain is recognized, is it ordinary income or capital gain?
4. Can any of the gain be deferred?
5. How is the award for damages treated?
2-60. Issues that may be relevant in determining the tax consequences of these transactions include the following:
1. Did the accident result from a “willful act” by Joey (i.e., his not setting the brake)?
2. Does the accident qualify for the casualty loss deduction for Joey?
3. How are the damages to the car and other property measured?
4. Are any payments for Nick’s injuries deductible by Joey?
5. Is the damage to Nick’s house deductible by Joey?
2-61. Issues that may be relevant in determining the tax consequences of these transactions include the following:
1. Who has the liability for the tax on the $75,000, John, Marsha, or both?
2. Could John and Marsha’s other income have any impact on the taxability of the $75,000?
3. Did John receive any benefit from the income and how might that affect any income tax liability?
4. Do John and Marsha live in a community property or common law state and what impact would that have on any tax liability?
5. If John reimburses the bank for the $75,000, is it deductible to him?
2-62. Issues that may be relevant in determining the tax consequences of these transactions include the following:
1. Is the receipt of the restricted stock compensation to Dave?
2. Is there any gain realized on the receipt of the stock? If so, how is the gain computed?
3. If gain is recognized on the receipt of the stock, is it ordinary income or capital gain?
4. Can any of the gain be deferred? If so, how?
5. What is Dave’s basis in the restricted stock?
6. If Dave sells the stock after seven years, how will any gain or loss be taxed?
2-63. Issues that may be relevant in determining the tax consequences of these transactions include the following.
1. What are the tax consequences of rents received in advance?
2. Is Ericka a cash or accrual basis taxpayer?
3. If she is a cash basis taxpayer, how is the rent treated?
4. If she is an accrual basis taxpayer, how is the rent treated?
5. How are any expenses (e.g., depreciation and real estate taxes) associated with the rental income treated?
2-64. The query should include several of the following key words:
redemption
call
proceeds
tax-exempt
bonds
municipal
Examples of queries include the following:
tax-exempt & redemption & call* (CheckPoint)
tax-exempt and redemption and call! (Lexis)
2-65. The query should include several of the following key words:
treaty
Germany
fellowship income
fellowship grant
internship
Examples of queries include the following:
“treaty Germany” /10 & fellowship or internship (CheckPoint)
treaty w/10 Germany and fellowship or internship (Lexis)
2-66. The query should include several of the following key words:
capitalize
fringe benefits
overhead
build
building
slack time
idle time
employee
employee costs
addition
factory
Examples of queries include the following:
capitalize & overhead & fringe /3 benefits (CheckPoint)
capitalize and overhead and fringe w/3 benefits (Lexis)
No comments:
Post a Comment