Chapter 01: Understanding and Working with the Federal Tax Law

Chapter 01: Understanding and Working with the Federal Tax Law

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Indicate whether the statement is true or false.

• Many states have balanced budgets because laws or constitutional amendments preclude deficit spending.
• True
• False

• The U.S. Federal government has a provision in the Constitution that precludes deficit spending.
• True
• False

• Revenue-neutral tax laws reduce deficits.
• True
• False

• Longer class lives for depreciable property and the required use of the straight-line method of depreciation would likely

dampen the tax incentive for purchasing capital assets.

• True
• False

• The Internal Revenue Code is a compilation of Federal tax legislation that appears in Title 26 of the United States

Code.

• True
• False

• The favorable treatment of research and development expenses is one means of controlling the economy.
• True
• False

• The encouragement of private-sector pension plans can be justified under the encouragement of certain industries.
• True
• False

• One Internal Revenue Code section enables shareholders in a small business corporation to obtain an ordinary

deduction for any loss recognized on a stock investment.

• True
• False

• One of the justifications for the enactment of the tax law governing corporate reorganizations was the economic benefit

it would provide businesses (including making them more efficient).

• True
• False

• Although a corporation is subject to a Federal income tax, a partnership is not.
• True
• False

(South-Western Federal Taxation 2024 Corporations, Partnerships, Estates and Trusts, 47e Raabe, Nellen, Young, Cripe, Lassar, Persellin, Cuccia ) (Test Bank all Chapters) 1 / 4

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Chapter 01: Understanding and Working with the Federal Tax Law

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• The Federal income tax law allows a taxpayer to claim a deduction for state and local income taxes but limits all state

taxes to a maximum of $10,000.

• True
• False

• Alabama and South Carolina are community property states.
• True
• False

• A tax bill cannot originate in the Senate Finance Committee.
• True
• False

• Taxpayers may read Committee Reports to determine the intent of Congress.
• True
• False

• These Internal Revenue Code citations are incorrect: § 212(1) and § 1221(1).
• True
• False

• Internal Revenue Code § 6 involves gross income and § 7 outlines itemized deductions.
• True
• False

• Subchapter P refers to the subchapter in the Internal Revenue Code that deals with partners and partnerships.
• True
• False

• Regulations are arranged in a different sequence than the Internal Revenue Code.
• True
• False

• Proposed Regulations have the force and effect of law.
• True
• False

• Temporary Regulations have the same authoritative value as Final Regulations for four years.
• True
• False

• Proposed Regulations are published in the Federal Register.
• True
• False

• Regulations are issued by the Treasury Department. 2 / 4

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Chapter 01: Understanding and Working with the Federal Tax Law

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• True
• False

• Revenue Rulings carry the same legal force and effect as Regulations.
• True
• False

• A Revenue Ruling is a legislative source of Federal tax law.
• True
• False

• Revenue Procedures deal with the internal management practices and procedures of the IRS.
• True
• False

• Treasury Decisions are issued by the Treasury Department to promulgate new Regulations.
• True
• False

• Determination letters usually involve proposed transactions.
• True
• False

• Letter rulings are issued by the National Office of the IRS.
• True
• False

• A taxpayer must pay any tax deficiency assessed by the IRS and sue for a refund to bring suit in the U.S. District

Court.

• True
• False

• In a U.S. District Court, a jury can decide both questions of fact and questions of law.
• True
• False

• A U.S. District Court must abide by the precedents set by the U.S. Court of Appeals of its jurisdiction.
• True
• False

• Appeals from the U.S. Court of Federal Claims go to the U.S. Supreme Court.
• True
• False

• A jury trial is available when a case is heard by a U.S. Court of Appeals.
• True 3 / 4

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Chapter 01: Understanding and Working with the Federal Tax Law

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• False

• Only one judge hears a trial in a U.S. District Court.
• True
• False

• The Golsen rule no longer applies to the U.S. Tax Court.
• True
• False

• When there is a direct conflict between an Internal Revenue Code section and a treaty provision, the most recent item

takes precedence.

• True
• False

• “Legislative" regulations carry more weight than “interpretative” regulations.
• True
• False

• The U.S. national debt is around $15 trillion.
• True
• False

• A change in the individual tax rate has an almost immediate impact on the economy.
• True
• False

• The like-kind tax free exchange treatment is an example of the wherewithal to pay concept.
• True
• False

• Indexation of various income tax components was eliminated by the Tax Cuts and Jobs Act of 2017.
• True
• False

• When there is a direct conflict between a tax treaty and the Internal Revenue Code, the Internal Revenue Code takes

precedence.

• True
• False

• The Standard Federal Tax Reporter is published by Research Institute of America.
• True
• False

• The annual gift tax exclusion in 2023 is $15,000.
• True
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