You have found a court decision that is directly on point (favorably) with an issue that your client currently has under audit with the IRS. However, the IRS has issued a nonacquiescence to that decision. What effect may that nonacquiescence have on your decision to continue fighting the issue with the IRS?
a)
It means that you are likely to lose in court if you pursue the issue.
b)
It means that the IRS is likely to actively contest your issue and settlement is unlikely.
c)
None - it is not relevant because it concerns a different taxpayer.
d)
It means that you are more likely to succeed with your audit - the IRS is more likely to compromise.
Who is the appellant in a case?
a)
It is the party who won the case in the lower court
b)
It is always the IRS
c)
It is the party who lost the case in the lower court
d)
It is always the taxpayer
Which of the following is true of the United States Tax Court?
a)
It is headquartered in New York
b)
It is an Appeals court
c)
It has jurisdiction over the District Courts
d)
All of the above are false
Which of the following is not “secondary” authority?
a)
A treatise
b)
A journal article directly on point
c)
A private letter ruling
d)
The Federal Taxes Weekly newsletter
What significant distinctions between Tax Court and District Court is a taxpayer likely to consider in deciding where to bring his/her case?
a)
The judges in Tax Court are tax specialists; the judges in District Court are not.
b)
Jury trials are available only in Tax Court.
c)
The taxpayer has to pay the tax first before going to Tax Court.
d)
All of the above are valid considerations.
What is the effect of the Golsen rule?
a)
The Tax Court must follow the precedent of the Circuit Court of Appeals that has jurisdiction over the taxpayer in question.
b)
The Tax Court may ignore the precedent of the taxpayer's Circuit Court of Appeals if there is a different result in another Circuit.
c)
The Tax Court does not have to follow the precedent of any other court.
d)
All of the above.
The citation EFG v. U.S., 357 F. Supp. 343 (_____ 1992) tells the tax researcher that this is a decision by which court system?
a)
The U.S. Tax Court
b)
The U.S. Supreme Court
c)
A U.S. District Court
d)
Can't tell from the citation.
The citation 97 AFTR 2d 2006-1626 tells the researcher this is a decision by which court system?
a)
District Court
b)
Tax Court
c)
U.S. Court of Appeals
d)
Can't tell from the citation given
If taxpayers choose not to pay a tax deficiency, then they must petition which court?
a)
District Court
b)
Tax Court
c)
They must always pay before going to court
d)
U.S. Court of Federal Claims
If a case has been "overruled" it means that
a)
A higher court has sent the case back to the lower court for an additional ruling
b)
The same court, in a later decision, has interpreted the law differently than it did in an earlier case
c)
The U.S. Supreme Court has refused to hear the case
d)
All of the above
By what process does one petition the U.S. Supreme Court to hear one's tax case?
a)
En banc
b)
Collateral estoppel
c)
Due process
d)
Writ of certiorari
An appeal from the Tax Court is to:
a)
The applicable Circuit Court of Appeals
b)
The applicable District Court
c)
The U.S. Supreme Court
d)
Any of the above
A decision of which of the following courts can not be found in CCH’s U.S. Tax Cases (USTC)?
a)
Court of Appeals
b)
Supreme Court
c)
Tax Court
d)
District Courts
The IRS's official interpretation of the Internal Revenue Code is found in
a)
Treasury Regulations
b)
the "Blue Book."
c)
annotations.
d)
Notices and Announcements.
Which of the following is not an administrative source of primary authority?
a)
Revenue Ruling
b)
Revenue Procedure
c)
Treasury Regulation
d)
Public Law
In the citation Treas. Reg. 1.704-3, the researcher knows that this Regulation deals with
a)
an income tax issue.
b)
a procedural tax issue.
c)
an estate tax issue.
d)
can't tell from the citation.
The government organization that generally initiates tax legislation is:
a)
The Joint Conference Committee on Taxation
b)
The IRS
c)
The House Ways and Means Committee
d)
The U.S. Senate
In order to amend the Internal Revenue Code:
a)
The U.S. Congress must pass a new Public Law ("P.L.")
b)
The IRS issues a Public Law announcing the amendment ("P.L.")
c)
The IRS issues a new Treasury Decision ("T.D.")
d)
The U.S. Congress issues a new Treasury Decision (("T.D.")
Once the House Ways and Means Committee completes work on a tax bill, it is sent next to the
a)
Joint Conference Committee
b)
Senate Finance Committee
c)
Full Senate for a vote
d)
Full House of Representatives for a vote
The official name of the current Internal Revenue Code is:
a)
The Internal Revenue Code of 2020, as amended
b)
The Internal Revenue Code of 1954, as amended
c)
2020 Public Law
d)
The Internal Revenue Code of 1986, as amended
RIA's Federal Tax Coordinator
a)
Is a brief handbook of tax topics
b)
Is a Code arranged publication
c)
Is a topically-arranged publication
d)
Contains only Supreme Court, Circuit Court, and District Court decisions
Temporary Regulations issued currently expire
a)
After six years
b)
Never
c)
Only if Final Regulations are eventually issued
d)
After three years
What is the name of the Congressional Committee that resolves differences between the House and Senate version of a bill?
a)
The Joint Conference Committee on Taxation
b)
The Congressional Committee on Taxation
c)
The Senate Finance Committee
d)
The House Ways and Means Committee
What is a Treasury Decision?
a)
The decision of any court on a tax issue.
b)
An announcement by the Treasury Department of new interest rates
c)
The format by which Revenue Rulings are issued
d)
The format by which Regulations are issued.
In the citation "P.L. 99-514," what does the "99" represent?
a)
The year 1999
b)
The volume where the Public Law is found
c)
The Internal Revenue Code section number
d)
The 99th Congressional Session
What is the type of IRS document that deals with IRS practice and procedural rules involving taxpayers?
a)
Revenue Ruling
b)
Regulation
c)
Revenue Procedure
d)
IRS Publication
Which of the following is true concerning a Proposed Regulation?
a)
It is only in effect for three years
b)
It only involves proposed legislation
c)
The taxpayer does not have to follow a Proposed Regulation
d)
All of the above are true
What is the name of the document issued in response to a taxpayer's request for the IRS' position on a proposed transaction?
a)
Notice of Deficiency
b)
IRS Publication
c)
Revenue Agent's Report
d)
Private letter ruling
Which of the following is true concerning Congressional Committee reports?
a)
They are considered secondary authority
b)
They are a research tool of last resort in interpreting the Internal Revenue Code
c)
They are issued by the IRS when new legislation is passed
d)
All of the above are false
A Congressional committee report
a)
is considered primary authority.
b)
is never issued in connection with tax legislation.
c)
is secondary authority.
d)
is biased and therefore should not be considered in interpreting the Internal Revenue Code.
The result in the Cesarinicase was:
a)
Money located in a piano was taxable under IRC 61 in the year the piano was purchased.
b)
Money found in a piano was taxable only when it was spent.
c)
Money found in a piano was not taxable because it was a bona fide purchase of the piano and all its contents.
d)
None of the above
The result in the Old Colony Trustcase was:
a)
Any payments made by a corporation on behalf of its officers or employees are never taxable to the officers or employees.
b)
Income tax payments made by the corporation on behalf of its president were taxable to the president because it discharged his obligation.
c)
Income tax payments made by the corporation on behalf of its president were not taxable to the president because he never requested it.
d)
Income tax payments made by a corporation on behalf of the president was considered a non-taxable gift from the corporation to the president.
The result in the Glenshaw Glasscase was:
a)
Damage payments resulted in income to the taxpayer even though they were a windfall and not attributed to labor or capital.
b)
Antitrust windfall damage payments resulted in income to the taxpayer because they were a reimbursement for lost profits.
c)
Punitive damages are never taxed as income because they are designed to punish the other party.
d)
Congress does not have the authority to tax windfalls because they are not considered income
The result in theIndependent Life Ins Co case was:
a)
A taxpayer who owns and occupies its own building may be subject to tax on the fair market value of free rent under the TCJA 2017 legislation.
b)
A taxpayer who owns and occupies its own building is not taxed on the fair market value of the free rent, but is then not allowed to depreciate the building for tax purposes.
c)
A taxpayer who owns and occupies its own building and pays no rent is not subject to income tax on the fair market value of free rent and may be able to depreciate the building.
d)
Free rent can never be taxed because it is not received in the form of cash.
The result in Rev. Rul. 79-24 was:
a)
The value of a barter is never taxed because it is not received in cash.
b)
The value of a barter is only taxed if the two parties exchange items of like-kind.
c)
The value of a barter may be partially taxable only if cash changes hands.
d)
THIS IS THE ANSWER - If a taxpayer performs services and receives property other than cash, the taxpayer is taxed on the fair market value of the property received.
In Dean v. Commissioner, the Appeals Court affirmed the Tax Court’s opinion that the fair market value of the use of the residence owned by the corporation is income to the shareholder. Yet, in Herbert G. Hatt v. Commissioner, the value of the lodging was excluded from the employee’s income. What is the best reason for these different outcomes?
a)
A funeral business is more important than a personal residence.
b)
The requirements of code section 119, which specifically excludes the value of housing furnished to an employee under certain conditions, was satisfied in Hatt but not in Dean.
c)
The Treasury Regulations changed between 1951 (the year of the Dean case), and 1969 (the year of the Hatt case).
d)
Dean owned a greater portion of the corporation in that case than did Hatt.
From the Dubersteincase, what was the main outcome with respect to a gift?
a)
Nontaxable gifts may be possible in a business context, but are difficult and rare.
b)
Business gifts are tax-free to the recipient, but fully deductible to the corporation.
c)
A nontaxable gift in the business context is common because the parties are usually unrelated.
d)
For a business gift to be considered a tax-free gift, it must be made in cash, not property such as a Cadillac.
From the Stanton case, we learn that:
a)
Gifts are nontaxable to the recipient only if they are paid by a non-profit entity since the deduction is not important to the payor.
b)
A payment made by an employer to a deserving person who had been paid a good salary will be considered a gift.
c)
A gift paid to a CFO by his employer, a religious non-profit entity, was not taxable, although the case was decided at a time of profound religion in our country's history and might not be decided the same today.
d)
All of the above.
The Lyeth v. Hoey case is significant because:
a)
State law determines who can be an heir, but federal law determines the income tax result.
b)
If a settlement is mentioned, you must cite this case and ask what is the settlement in lieu of.
c)
This is especially important because it is a U.S. Supreme Court case
d)
All of the above are correct.
The result in theWoldercase was:
a)
An attorney who was left a bequest in a will in lieu of payment for services did not have taxable income per IRC § 102
b)
An attorney who received stock as a bequest had taxable income only because the bequest was not made in cash.
c)
The state law definition of a bequest will dictate the federal tax result.
d)
The intent of the bequest to an attorney was to compensate the attorney for services rendered and hence was taxable under IRC § 61.
The case Lucas V. Earl:
a)
Is famous for the rule that a husband's wages could not be taxed to his wife despite the contract that they entered into had entitling her to ½ of the wages.
b)
Is known for the rule that the fruit (income) cannot be attributed to a tree which is different from that on which it grew.
c)
Would have a different result today in community property states.
d)
All of the above.
In the Giannini case, regarding the question of whether Mr. Giannini’s 5% profit distribution in lieu of a salary was taxable to him, the Court held that:
a)
Mr. Giannini never received the money and disclaimed any right to receive it so it was nontaxable to him.
b)
Mr. Giannini did not receive the money but had the right to direct it, so it was taxable to him.
c)
Mr. Giannini had to take the amount into income but it was offset by a charitable contribution deduction.
d)
The income was taxable to Mr. Giannini because it was beneficially received by him.
Helvering v. Horst was a US Supreme Court case that held that:
a)
The donor had income from a gifted one year bond coupon when the donor retains the bond itself
b)
The donee had income from the gifted bond coupon in the year of receipt
c)
The donor did not have income from the gifted bond coupon when he retains the bond itself
d)
The donee had income from the gifted bond coupon when he cashed it at the bank
In the Susie Salvatore case (regarding the gas station and Texaco), the question was whether the Taxpayer is taxable on all or half of gain realized on the sale of the gas station property. What did the Tax Court find in Salvatore v. Commissioner?
a)
Susie made an anticipatory assignment to her children of one half the income from the sale. Thus, Susie is taxable on all the income from the sale. Susie made the sale, not the children.
b)
Susie made an anticipatory assignment to her children of one half the income from the sale.Thus, Susie is taxable on half the income from the sale.Both Susie and the children made the sale.
c)
Installment sales are fully taxable, not merely taxable to the extent of a retained interest.
d)
Installment sales are partially taxable, only to the extent of a retained interest.
The importance of the Culbertson case was the court’s finding that:
a)
the key issue to be determined is whether there was a bona fide intent for the sons to be partners.
b)
a partnership can only exist only if (1) capital or (2) essential services are contributed, which the sons did not contribute.
c)
a valid partnership can never exist between family members
d)
none of the above.
The result in theOverton case where two taxpayers created special stock in a corporation and gave it to their wives, was that
a)
The wives were taxable on the dividends because they actually received the stock certificates which were registered in their names.
b)
The wives were not taxable on the dividends because the stock was non- voting.
c)
The wives were not taxable on the dividends because the husbands controlled the voting stock and could have refused to pay dividends.
d)
The wives were not taxable on the stock because it was a mere assignment of income and not real stock due to a stock agreement which said if the wives ever wanted to sell the stock they had to sell it to the corporation for $1 per share.
In the Borge case, the taxpayer owned a corporation which ran a farm (at a loss) and contracted to have the corporation receive the substantial income he earned as an entertainer. The court determined that:
a)
This was a valid arrangement which taxed the corporation on the entertainment income because the corporation was validly formed and all the contracts were legal and proper.
b)
This was a valid arrangement which taxed the corporation on the entertainment income because NBC, which paid the money, was aware of the corporation and paid the money to the corporation.
c)
The IRS could use IRC 482, which allows the IRS to allocate income between entities to clearly reflect income, and attributed all income to Borge personally because he was in the business of entertaining.
d)
The IRS could not use IRC 482, which allows the IRS to allocate income between entities to clearly reflect income, because Borge was a person and not an entity so all income was properly attributed to the corporation.
The result in the Charley case was:
All taxpayers are immediately when they earn frequent traveler miles while on company business.
People who earn frequent flier miles while on company business can treat them as a non-taxable gift from their employer.
People who own frequent flier miles are taxed when they sell them or get credit in their personal travel account at a travel agency.
Travelers are never taxed on the value of frequent flier miles because they are not equivalent to cash.
The result in the Dean case was:
Sole shareholders are never taxed on benefits received from their corporation since the shareholder and the corporation are effectively one taxpayer.
A shareholder who occupies, rent free, a building owned by the shareholder's corporation is not subject to tax on the fair market value of the free rent only where the shareholder owns 100% of the stock of the corporation.
A sole shareholder who occupies, rent free, a building owned by the shareholder's corporation is subject to tax on the fair market value of the free rent.
Corporations are not allowed to rent property to shareholders of that corporation.
Match the case to the black letter law.
H GIVES W B STOCK $1 LIQ VALUE, NO VOTE, $150/YR DIVIDEND. HELD ASSIGNMENT OF INCOME, NOT REAL STOCK
FRUIT IS TAXABLE TO THE TREE EVEN WHERE H & W TRY TO AGREE THAT H'S SALARY IS TAXABLE 1/2 TO W
COMPROMISE OF CLAIM BY HEIR IN WILL CONTEST IS NOT INCOME TO HEIR. A SETTLEMENT IN LIEU OF A TRIAL
A GIFT MUST PROCEED FROM A DETACHED & DISINTERESTED GENEROSITY & IS DIFFICULT IN A BUS CONTEXT
PUNITIVE DAMAGES ARE INCOME TO T AS UNDENIABLE ACCESSIONS TO WEALTH, CLEARLY REALIZED
SETTLEMENT OF A CONTESTED GAMBLING LIABILITY IS NOT INCOME FROM CANCELLATION OF INDEBTEDNESS
FMV OF STRAWBERRY BRIDGE GIVEN IS PRESUMED = TO FMV OF FRANCHISE RECEIVED IN EXCHANGE
EE HAS ADDITIONAL INCOME WHEN ER PAYS INCOME TAX FOR EE ON SALARY OF 978, 725 IN 1918
FMV OF BUILDING OCCUPIED BY OWNER IS NOT INCOME TO OWNER
ENTERTAINER'S EARNINGS PAID TO HIS POULTRY CORP WERE REALLOCATED TO HIM UNDER S482
A SECURITY DEPOSIT IS NOT INCOME TO THE UTILITY, BUT IS LIKE A LOAN.
FMV OF FUNERAL HOME IS NOT INCOME TO EE REQUIRED TO LIVE ON PREMISES FOR CONVENIENCE OF ER
GROSS INCOME INCLUDES MONEY FOUND IN A PIANO WHEN REDUCED TO UNDISPUTED POSSESSION
REFUSAL OF MONEY BY T BANK PRESIDENT BEFORE IT WAS EARNED IS NOT INCOME TO T
DONOR HAS INCOME FROM GIFTED BOND COUPONS WHEN HE RETAINS THE BOND ITSELF
GAS STATION SALE TAXABLE TO T WHO ASSIGNED TO HER KIDS AFTER THE SALE CONTRACT WAS SIGNED
T NOT TAXABLE ON INCOME FROM TRUST HE ASSIGNED TO HIS KIDS. T DOES NOT OWN ANY CORPUS.
FUTURE W IN PRENUPTIAL AGREEMENT GETS BASIS IN PROPERTY RECEIVED = TO FMV OF SUPPORT RIGHTS SHE GAVE UP
TRUST IN WHICH T RETAINED THE POWER TO ALTER IT IN ANY WAY IS TAXABLE TO T
2008 RR-DISCHARGE OF STUDENT LOAN UNDER LRAP (PUBLIC SERVICE WORK) IS NOT INC. - INCLUDES REFI LOAN
EXISTENCE OF PARTNERSHIP DEPENDS ON FACTS & CIRCUMSTANCES INCLUDING FAIR RETURN TO CAPITAL & SERVICES
BONDS REPURCHASED AT A PRICE LESS THAN ISSUE PRICE = INCOME TO CORP PURCHASER-FORGIVENESS OF DEBT
TRAVEL CREDITS TO T WERE INCOME. HE KEPT THE 300 DIFFERENCE BETWEEN 1ST CLASS 500 & COACH 200
5 YEAR TRUST TAXED TO T EVEN IF IRREVOCABLE BECAUSE T RETAINED A BUNDLE OF RIGHTS = TO CONTROL
ATTORNEY WHO RECEIVES CASH BEQUEST UNDER WILL IN LIEU OF PAYMENT FOR SERVICES HAS INCOME
FMV OF USE OF RESIDENCE OWNED BY CORPORATION IS INCOME TO SHAREHOLDER
