South-Western Federal Taxation 2015: Individual Income Taxes, 38th Edition solutions manual and appe solutions and test bank
Course Support(appe solutions) PowerPoint Lecture Tools Solutions Manual
HAPTER 2: WORKING WITH THE TAX LAW
1. Rules of tax law do not include Revenue Rulings and Revenue
Procedures.
a. True
b. False
ANSWER: False
RATIONALE: Rules of tax law do include Treasury Department
pronouncements.
2.
A tax professional need not worry about the relative weight
of authority within the various tax law sources.
a. True
b. False
ANSWER: False
RATIONALE: Quite the contrary.
3.
In
recent years, Congress has been relatively successful in simplifying the Internal Revenue Code.
a. True
b. False
ANSWER: False
RATIONALE: Each year the Code becomes more and more complex.
4.
A taxpayer should always minimize his or her tax liability.
a. True
b. False
ANSWER: False
RATIONALE: A taxpayer should maximize the after-tax return in
conjunction with the overall economic effect.
5.
The first codification of the tax law occurred in 1954.
a. True
b. False
ANSWER: False
RATIONALE: The first codification of the tax law occurred in
1939.
6.
The Code section citation is incorrect: § 212(1).
a. True
b. False
ANSWER: False
RATIONALE: Some Code sections
omit the subsection and use paragraph designation as the first subpart as does
§ 212.
7.
Subchapter D refers to the
“Corporate Distributions and Adjustments” section of the Internal Revenue Code.
a. True
b. False
ANSWER: False
RATIONALE: The correct subchapter for “Corporate
Distributions and Adjustments” is Subchapter C.
8. Regulations are
generally issued immediately after a statute is enacted.
a. True
b. False
ANSWER: False
RATIONALE: The reverse is true.
Regulations require time to be issued and may never be issued on a particular
statutory change in a Code section.
9.
Temporary
Regulations are only published in the Internal
Revenue Bulletin.
a. True
b. False
ANSWER: False
RATIONALE: They are published in the Federal Register and the Internal
Revenue Bulletin.
10. Revenue Rulings
issued by the National Office of the IRS carry the same legal force and effect
as Regulations.
a. True
b. False
ANSWER: False
RATIONALE: They do not contain the same legal force as
Regulations. That is, the legal force is less.
11. A Revenue Ruling is a
judicial source of Federal tax law.
a. True
b. False
ANSWER: False
RATIONALE: A Revenue Ruling is an administrative source.
12. The following
citation can be a correct citation: Rev. Rul. 95-271,1995-64 I.R.B. 18.
a. True
b. False
ANSWER: False
RATIONALE: The citation given refers to the Bulletin issued in the 64th
week of 1995. Because a year contains only 52 weeks, the citation cannot be correct.
1. What are Treasury Department Regulations?
ANSWER: Regulations are
issued by the U.S. Treasury Department under authority granted by Congress.
Interpretive by nature, they provide taxpayers with considerable
guidance on the meaning and application of
the Code. Regulations may be issued in proposed,
temporary, or final form.
Regulations carry considerable
authority as the official interpretation of tax statutes. They are an important
factor to consider in complying with
the tax law. Courts generally ignore Proposed Regulations.
2. Compare Revenue Rulings with Revenue Procedures.
ANSWER: Revenue Rulings
are official pronouncements of the National Office of the IRS. They typically
provide one or more examples of how
the IRS would apply a law to specific fact situations. Like Regulations, Revenue Rulings are designed to provide
interpretation of the tax law. However, they do not carry the same legal force and effect as Regulations
and usually deal with more restricted problems. Regulations are approved by the Secretary of the
Treasury, whereas Revenue Rulings generally are not.
Revenue Procedures are issued in the same manner as Revenue Rulings,
but deal with the internal management
practices and procedures of the IRS. Familiarity with these procedures can
increase taxpayer compliance and help the
IRS administer the tax laws more efficiently. A taxpayer’s failure to follow a Revenue
Procedure can result in unnecessary delay or, in a discretionary situation, can
cause the IRS to decline to act on
behalf of the taxpayer.
3. What is a Technical Advice Memorandum?
ANSWER: The National Office of the IRS releases Technical Advice Memoranda
(TAMs) weekly. TAMs resemble letter
rulings in that they give the IRS’s determination of an issue. However, they differ
in several
respects. Letter rulings deal with proposed transactions and are issued to
taxpayers at their request. In
contrast, TAMs deal with completed transactions. Furthermore, TAMs arise from
questions raised by IRS personnel
during audits and are issued by the National Office of the IRS to its field personnel. TAMs are often requested for
questions relating to exempt organizations and employee plans. TAMs are not officially published and may
not be cited or used as precedent.
4. Discuss the advantages and disadvantages of the Small Cases Division
of the U.S. Tax Court.
ANSWER: There is no
appeal from the Small Cases Division. The jurisdiction of the Small Cases
Division is limited to cases involving
amounts of $50,000 or less. The proceedings of the Small Cases Division are
informal (e.g., no necessity for the
taxpayer to be represented by a lawyer or other tax adviser). Special trial judges rather than Tax Court judges preside
over these proceedings. The decisions of the Small Cases Division are not precedents for any other court decision and are
not reviewable by any higher court.
Proceedings can be more timely and less expensive in the Small Cases
Division. Some of these cases can now
be found on the U.S. Tax Court Internet Website.
5. Distinguish between the jurisdiction of the U.S. Tax Court and a
U.S. District Court.
ANSWER: The U.S. Tax
Court hears only tax cases and is the most popular tax forum. The U.S. District
Court hears a wide variety of nontax
cases, including drug crimes and other Federal violations, as well as tax cases. Some Tax Court justices have been
appointed from IRS or Treasury Department positions. For these reasons, some people suggest that the U.S. Tax Court has
more expertise in tax matters.
6. How do treaties fit within tax sources?
ANSWER: The U.S signs
certain tax treaties (sometimes called tax conventions) with foreign countries
to render mutual assistance in tax
enforcement and to avoid double taxation. Tax legislation enacted in 1988 provided that neither a tax law nor a tax treaty
takes general precedence. Thus, when there is a direct conflict with the Code and a treaty, the most recent item will
take precedence. A taxpayer must disclose on
the tax return any position where a treaty overrides a tax law. There is a
$1,000 penalty per failure to disclose
for individuals and a $10,000 per failure penalty for corporations.
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