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1.Whichofthefollowingstatementsdescribesthetaxresearchprocess?
a.Itisstrictlylinear.
b.Itrequiresmechanicalskillscombinedwithcriticalthinking.
c.Itrequirestheabilitytousecomplexmathematicaltechniquestoidentifyandlocatetaxauthorities.
d.Alloftheabove.
ANSWER:b
POINTS:1
DIFFICULTY: Easy
2.AllofthefollowingaregoalsoftaxresearchEXCEPT?
a.tobalancetheneedforefficiencyagainsttheneedforthoroughness
b.tobalancetheclient’staxgoalswiththeclient’snontax,personalconsiderations
c.tofindadefensiblesolutiontoaclient’sproblem
d.tofindaperfectsolutiontoaclient’sproblem,nomatterhowlongittakes
ANSWER:d
POINTS:1
DIFFICULTY: Easy
3.Collateralestoppelisalegalconceptwhich:
a.allowsrelitigationonthesamefactsorsameissues
b.barsrelitigationonthesamefactsorsameissues
c.requiresthatthecourtresolvefactualissuesinataxpayer’sfavor
d.noneoftheabove
ANSWER:b
POINTS:1
DIFFICULTY: Moderate
4.Thefirststepinthetaxresearchprocessisto:
a.establishthefacts
b.identifytheissues
c.locateauthority
d.evaluateauthority
ANSWER:a
POINTS:1
DIFFICULTY: Easy
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5.Oncetheinitialfactshavebeengatheredandtheissuesdefined,thetaxresearchermust:
a.developconclusionsandrecommendations
b.evaluatetheauthority
c.contacttheIRS
d.locatetheauthority
ANSWER:d
POINTS:1
DIFFICULTY: Easy
6.Inaclosed-factproblem,themaingoaloftaxresearchisto:
a.determineseveralalternativecoursesoffutureactionforthetaxpayer
b.findsupportforanactionthetaxpayerhasalreadytaken
c.bothaandb
d.noneoftheabove
ANSWER:b
POINTS:1
DIFFICULTY: Moderate
7.Thefinalstepofthetaxresearchprocessisto:
a.developconclusionsandrecommendations
b.communicaterecommendations
c.documentconclusionsandrecommendations
d.litigatethetax-relateddispute
ANSWER:b
POINTS:1
DIFFICULTY: Easy
8.WhichofthefollowingstatementsisCORRECTregardingonlinetaxresearch?
a.Themethodofconstructingqueriesisthesameforalldatabases.
b.Mostonlinetaxservicesallowtheuseofconnectorsandwildcards.
c.Ifaquerygeneratestoolittleinformation,theresearchershouldaddmoreuniquekeywords.
d.Alloftheabovearecorrect.
ANSWER:b
POINTS:1
DIFFICULTY: Moderate
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9.Taxresearchissuescanbedividedintwomaincategories.Theseare:
a.factandlawissues
b.primaryandsecondaryissues
c.majorandminorissues
d.internalandexternalissues
e.taxandnontaxissues
ANSWER:a
POINTS:1
DIFFICULTY: Moderate
10.Whichofthefollowingarebasicconnectorsyoucanusetoconstructasearchquery?
a.google
b.not
c.or
d.*
e.onlybandc
ANSWER:e
POINTS:1
DIFFICULTY: Moderate
11.Whichofthefollowingrepresentsalawissue?
a.intentofthetransaction
b.definitionofatermusedinthecode
c.dateoftransaction
d.locationofthetransaction
e.alloftheabove
ANSWER:b
POINTS:1
DIFFICULTY: Easy
12.Theamountofatransactionrepresentsa:
a.lawissue
b.socialissue
c.factissue
d.politicalissue
ANSWER:c
POINTS:1
DIFFICULTY: Easy
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13.Whichofthefollowingisanexampleofsecondaryauthority?
a.taxtreaties
b.taxjournals
c.U.S.Constitution
d.taxlawsbyCongress
ANSWER:b
POINTS:1
DIFFICULTY: Moderate
14.AstatutorysourceofFederaltaxlawis:
a.variousrulingsoftheTreasuryDepartmentandtheIRS
b.collectedrulingsofthevariouscourtsonFederaltaxmatters
c.textbooks
d.taxtreaties
ANSWER:d
POINTS:1
DIFFICULTY: Moderate
15.Whichofthefollowingisanadministrativesourceofprimaryauthority?
a.U.S.Constitution
b.collectedrulingsofthevariouscourtsonFederaltaxmatters
c.revenuerulings
d.newsletters
ANSWER:c
POINTS:1
DIFFICULTY: Moderate
16.Areferencesourcethatenablestheresearchertofollowthejudicialhistoryofcourtcasesisknownas:
a.acasereporter
b.ajudicialdirectory
c.theCumulativeBulletin
d.acitator
ANSWER:d
POINTS:1
DIFFICULTY: Moderate
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17.CCH’sannotated,orcodebasedcommercialtaxserviceis:
a.theUnitedStatesTaxReporter
b.theTaxCoordinator2d
c.theStandardFederalIncomeTaxReporter
d.theFederalTaxLibrary
ANSWER:c
POINTS:1
DIFFICULTY: Moderate
18.TheTaxManagementPortfoliosarepublishedby:
a.CCH
b.RIA
c.BureauofNationalAffairs(BNA)
d.LexisNexis
ANSWER:c
POINTS:1
DIFFICULTY: Moderate
19.Oncetheresearchquestionhasbeenstated,theresearchermustnext:
a.gatherthefacts
b.identifythekeywords
c.selectadatabaseandexecutethesearch
d.interpretandrefinethesearch
ANSWER:b
POINTS:1
DIFFICULTY: Moderate
20.Secondarysourcesareusefulwhen:
a.conflictingprimaryauthorityexists
b.theissueisaclosed-factproblem
c.aresearcherdoesnothaveaccesstoprimarysources
d.whenaresearcherdisagreeswiththeclient
ANSWER:a
POINTS:1
DIFFICULTY: Moderate
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21.TheIRSwebsitecanbeusedtoperformwhichofthefollowingtasks:
a.obtaindownloadableforms
b.keywordsearchIRStaxpublications
c.fileyourtaxreturn
d.alloftheabove
ANSWER:d
POINTS:1
DIFFICULTY: Easy
22.WhichofthefollowingstatementsisINCORRECTregardingtheCPAexam:
a.TheNationalAssociationofStateBoardsofAccountancyadministersthetest.
b.Eachstatehasitsowntest.
c.CPAexamcandidatesmustpassallfoursectionsoftheexam.
d.TheRegulationsectionrequirestaxresearch.
ANSWER:b
POINTS:1
DIFFICULTY: Easy
23.Whichofthefollowingformsthebasisforalltaxprovisions?
a.secondaryauthority
b.theadministrativeauthorityoftheIRS
c.judicialinterpretationofthelaw
d.thestatutoryauthorityofCongress
ANSWER:d
POINTS:1
DIFFICULTY: Moderate
24.Thedistinctionbetweenprimaryandsecondaryauthorityisimportantforwhichofthefollowingreasons?
a.tomeettheaccuracythresholdof“substantialauthority.”
b.toavoidpenaltiesunderSection6662oftheCode.
c.tosearchproperlywithconnectorsandwildcards.
d.onlyaandb
ANSWER:d
POINTS:1
DIFFICULTY: Moderate
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25.Taxjournalsperformwhichofthefollowingfunctions:
a.offerresearchersexpertanalysisofuncleartaxissues
b.keepresearchersawareofcurrentdevelopments
c.suggesttaxplanningtechniques
d.alloftheabove
ANSWER:b
POINTS:1
DIFFICULTY: Easy
26.Skilledtaxresearchrequiresacombinationofreasoningandcreativity.
a.True
b.False
ANSWER:True
POINTS:1
DIFFICULTY: Easy
27.AtaxresearchercanrelyontaxjournalsassubstantialauthorityunderSection6662oftheCode.
a.True
b.False
ANSWER:False
POINTS:1
DIFFICULTY: Easy
28.Thetaxresearchprocessshouldbeapproachedinastructured,step-by-stepmanner.
a.True
b.False
ANSWER:True
POINTS:1
DIFFICULTY: Easy
29.Aftertheresearcherhaslocatedauthoritythatdealswiththeclient'sproblem,heorshemustdevelopconclusionsandrecommendations.
a.True
b.False
ANSWER:False
POINTS:1
DIFFICULTY: Moderate
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30.Ataxresearchershouldignorethepersonalpreferencesofaclientandconcentrateonlyonminimizingtheclient’s
taxliability.
a.True
b.False
ANSWER:False
POINTS:1
DIFFICULTY: Easy
31.Ifacomputersearchgeneratestoomuchinformation,theresearchmayusefewerlibrariesormoreuniquekeywords.
a.True
b.False
ANSWER:True
POINTS:1
DIFFICULTY: Easy
32.“Wildcards”suchasanasteriskcanbeusedtosearchforwordvariationsinmosttaxservices.
a.True
b.False
ANSWER:True
POINTS:1
DIFFICULTY: Easy
33.Topicaltaxservicesarearrangedbysubjectasdefinedbythepublisher'seditorialstaff.
a.True
b.False
ANSWER:True
POINTS:1
DIFFICULTY: Easy
34.Westlawisanexampleofanonline,freetax-relatedinternetsite.
a.True
b.False
ANSWER:False
RATIONALE:FEEDBACK:Westlawisacommercial,subscriptionlawlibraryonlinewithextensivetaxandotherlegalandbusinessinformationdatabases.
POINTS:1
DIFFICULTY: Easy
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35.ThepowerofCongresstoimplementandcollecttaxesissummarizedintheInternalRevenueCode,theofficialtitleofU.S.taxlaw.
a.True
b.False
ANSWER:True
POINTS:1
DIFFICULTY: Easy
36.Taxresearchersshouldnotconsidertheclient’spotentialliabilityindetermininghowmuchtimetospendonaclient’sproblem.
a.True
b.False
ANSWER:False
RATIONALE:FEEDBACK:Theresearcherhasanobligationtoaclientnottowastetheclient’smoneyonalow
cost/benefitissue.
POINTS:1
DIFFICULTY: Easy
37.TheTaxAdviserjournalispublishedbytheAICPA.
a.True
b.False
ANSWER:True
POINTS:1
DIFFICULTY: Easy
38.ThomsonReutersCheckpointisaweb-basedtaxresearchservicethatcontainsresearchmaterialonFederal,state,local,andinternationaltaxation.
a.True
b.False
ANSWER:True
POINTS:1
DIFFICULTY: Moderate
39.TheParkerTaxProLibrary(PTPL)isdesignedasalow-costtaxserviceforpractitionersprovidingtaxadvisoryandcomplianceservices.
a.True
b.False
ANSWER:True
POINTS:1
DIFFICULTY: Moderate
Full file at
40.Thesearch“stockorsecurities”wouldfinddocumentsthatcontainboththeterm“stock”andtheterm“securities.”
a.True
b.False
ANSWER:False
RATIONALE:FEEDBACK:Thissearchwouldfinddocumentsthathaveeithertheword“stock”ortheword“securities.”
POINTS:1
DIFFICULTY: Easy
41.TheIRSwebsiteisafull-service,taxresearchresource.
a.True
b.False
ANSWER:False
RATIONALE:FEEDBACK:TheIRSwebsite,whilecontainingmuchusefulinformation,isnotafull-servicetaxresearchresource.
POINTS:1
DIFFICULTY: Easy
42.Oneoftheissuesataxresearchershouldbeconcernedaboutishowdefinitivearesearchresultmustbe.
a.True
b.False
ANSWER:True
POINTS:1
DIFFICULTY: Easy
43.TheCPAexamispreparedbytheAICPA.
a.True
b.False
ANSWER:True
POINTS:1
DIFFICULTY: Easy
44.Allprimarysourcematerialhasthesameprecedentialvalue.
a.True
b.False
ANSWER:False
RATIONALE:FEEDBACK:Differenttypesofprimaryauthorityhavedifferentvalueasprecedent.Theresearchermustunderstandthehierarchyofprimarysources.
POINTS:1
DIFFICULTY: Moderate
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45.TheU.S.Constitutionisastatutorysourceoftaxlaw.
a.True
b.False
ANSWER:True
POINTS:1
DIFFICULTY: Easy
46.Listinsequentialorderthemajorstepsinvolvedinthetaxresearchprocess.
ANSWER:Thetaxresearchprocesscanbebrokendownintosixmajorsteps,eachanessentialpartoftheoverallresearchmethodology.Thestepsintaxresearchareasfollows.
oEstablishthefactsoIdentifytheissuesoLocateauthority oEvaluateauthority
oDevelopconclusionsandrecommendationsoCommunicatetherecommendations
POINTS:1
DIFFICULTY: Moderate
47.Explainthedifferenceinprimaryandsecondarysourcesoftaxinformationandgiveseveralexamplesofeach.
ANSWER:Primaryauthorityconsistsoforiginalpronouncementsthatcomefromgovernmentsources,includingstatutory,administrative,orjudicialsources.Statutoryauthoritycomesoutofthelegislativebranchofgovernment,theU.S.Congress,andincludestheInternalRevenueCode,legislativehistory,andtaxtreaties.AdministrativedocumentscomeoutoftheIRS,includingregulations,rulings,taxpayerpublications,andotherguidancedocuments.Thejudiciaryreleasescourtopinionswhichareajudicialprimarysource.
Secondarysourcesconsistofinterpretationsofprimaryauthorityandareanunofficialsourceoftaxinformation.Secondaryauthorityincludestaxservices,journals,textbooks,treatisesandnewsletters.
POINTS:1
DIFFICULTY: Challenging
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48.Listthesignificanttaxfactsthatofteninfluencetheclient'ssituation:
ANSWER:Significantfactsthatofteninfluencetheclient’ssituationincludethefollowing:
•Theclient’staxentity,forexample,individual,corporation,ortrust.
•Theclient’sfamilystatusandstability.
•Theclient’spast,present,andprojectedmarginaltaxrates.
•Theclient’splaceoflegaldomicileandcitizenship.
•Theclient’smotivationforthetransaction.
•Therelationshipsamongtheclientandotherpartieswhoareinvolvedinthetransaction.
•Whetherspecialtaxrulesapplytothetaxpayerduetothetypeofbusinessinwhichthetaxpayer
isengaged(i.e.,heorsheisafarmer,fisherman,orlong-termcontractor).
•Whetherthetransactionisproposedorcompleted.
POINTS:1
DIFFICULTY: Challenging
49.Taxresearchhasbeendescribedasan“iterativeprocess.”Explainwhatthismeanstotheresearchergivean
exampleofhowthisprocessmightworkwithahypotheticalclient.
ANSWER:Theprocessoftaxresearchisiterativeinthesensethat,onceananswerisfound,itoftencausesanewissuetoappear,whichthenrequiresthegatheringofmoreinformation.Aftertheresearcherhasmoreinformation,heorshehastogobacktotheresearchmaterialstoreevaluatetheproblem.Forexample,ifaclientcomesinaskingiftheycandeductalimony,theresearchercanlookupthegeneralfederaltaxrulesforalimony.Whenlookingatthoserules,theresearcherfindsthatthealimonymustbemadeunderadivorceorseparationinstrument.Whentheresearchergoesbacktotheclienttoquestiontheclientaboutthedetailsofthedivorceinstrument,theclientexplainsthatitwasnotadivorce,butanannulment.Nowtheresearchermustgobackandresearchtheissueofwhetheranalimonydeductionisallowedforpaymentsmadeunderadecreeofannulment.Theresearcherthenfindsthatifanannulmenthasthesameeffectforsupportpurposesasadivorceunderlocallaw,paymentsunderanannulmentdecreequalifyasdeductiblealimony.
Inconclusion,thetaxresearchprocessisnotalinearprocess.Rather,thedirectiontheresearchtakesisdependentonhowthefactsandissuesdevelopastheresearchergathersmoreinformation.
POINTS:1
DIFFICULTY: Challenging