Test Bank for South Western Federal Taxation 2014

Comprehensive 37th Edition Hoffman Maloney Raabe

Young 1285180925 9781285180922
Full link download
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 COMPREHENSIVE VOLUME--CHAPTER 2--WORKING
WITH THE TAX LAW
tudent

1. Rules of tax law do not include Revenue Rulings and Revenue Procedures.

True False

2. A tax professional need not worry about the relative weight of authority within the various tax law
sources.

True False

3. In recent years, Congress has been relatively successful in simplifying the Internal Revenue Code.

True False

4. A taxpayer should always minimize his or her tax liability.

True False

5. The first codification of the tax law occurred in 1954.

True False

6. The Code section citation is incorrect: § 212(1).

True False

7. Subchapter D refers to the "Corporate Distributions and Adjustments" section of the Internal Revenue
Code.

True False
8. Regulations are generally issued immediately after a statute is enacted.

True False

9. Temporary Regulations are only published in the Internal Revenue Bulletin.

True False

1
10. Revenue Rulings issued by the National Office of the IRS carry the same legal force and effect as
Regulations.

True False

11. A Revenue Ruling is a judicial source of Federal tax law.

True False

12. The following citation can be a correct citation: Rev. Rul. 95-271, I.R.B. No. 54, 18.

True False

13. Revenue Procedures deal with the internal management practices and procedures of the IRS.

True False

14. Post-1984 letter rulings may be substantial authority for purposes of the accuracy-related penalty in
§ 6662.

True False

15. A letter ruling applies only to the taxpayer who asks for and obtains a letter ruling.

True False

16. The IRS is not required to make a letter ruling public.

True False

17. Determination letters usually involve finalized transactions.

True False

18. Technical Advice Memoranda deal with completed transactions.

True False

19. Technical Advice Memoranda may not be cited as precedents by taxpayers.

True False

20. A taxpayer must pay any tax deficiency assessed by the IRS and sue for a refund to bring suit in the U.S.
Court of Federal Claims. Only in the Tax Court can jurisdiction be obtained without first paying the
assessed tax deficiency.

True False

2
21. In a U.S. District Court, a jury can decide both questions of fact and questions of law.

True False

22. Three judges will normally hear each U.S. Tax Court case.

True False

23. A taxpayer can obtain a jury trial in the U.S. Tax Court.

True False

24. 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

25. Arizona is in the jurisdiction of the Eighth Circuit Court of Appeals.

True False

26. Texas is in the jurisdiction of the Second Circuit Court of Appeals.

True False

27. The Golsen rule has been overturned by the U.S. Supreme Court.

True False

28. The granting of a Writ of Certiorari indicates that at least four members of the Supreme Court believe
that an issue is of sufficient importance to be heard by the full court.

True False

29. The "petitioner" refers to the party against whom a suit is brought.

True False

30. The term "petitioner" is a synonym for "defendant."

True False
31. The U.S. Tax Court meets most often in Washington, D.C.

True False

32. There are 11 geographic U.S. Circuit Court of Appeals.

True False

3
33. The following citation is correct: Larry G. Mitchell, 131 T.C. 215 (2008).

True False

34. The IRS issues an acquiescence or nonacquiescence only for regular Tax Court decisions.

True False

35. There is a direct conflict between a Code section adopted in 2008 and a treaty with France (signed in
2012). The Code section controls.

True False

36. The Index to Federal Tax Articles (published by Warren, Gorham, and Lamont) is available in print and
electronic formats.

True False

37. A U.S. District Court is the lowest trial court.

True False

38. The research process should begin with a tax service.

True False

39. Electronic databases are most frequently searched by the keyword approach.

True False

40. The test for whether a child qualifies for dependency status is first conducted under the qualified child
requirement.

True False

41. A Bluebook opinion is substantial authority for purposes of the accuracy related penalty.

True False

42. The primary purpose of effective tax planning is to reduce or defer the tax in the current tax year.

True False

43. Deferring income to a subsequent year is considered to be tax avoidance.

True False

44. Tax planning usually involves a completed transaction.

True False

4
45. The Regulation section of the CPA exam is 60% Taxation and 40% Law & Professional
Responsibilities.

True False

46. The Internal Revenue Code was first codified in what year?

A. 1913.
B. 1923.
C. 1939.
D. 1954.
E. 1986.
47. Tax bills are handled by which committee in the U.S. House of Representatives?

A. Taxation Committee.
B. Ways and Means Committee.
C. Finance Committee.
D. Budget Committee.
E. None of the above.
48. Federal tax legislation generally originates in what body?

A. Internal Revenue Service.

B. Senate Finance Committee.
C. House Ways and Means Committee.
D. Senate Floor.
E. None of the above.
49. Subtitle A of the Internal Revenue Code covers which of the following taxes?

A. Income taxes.
B. Estate and gift taxes.
C. Excise taxes.
D. Employment taxes.
E. All of the above.
50. In § 212(1), the number (1) stands for the:

A. Section number.
B. Subsection number.
C. Paragraph designation.
D. Subparagraph designation.
E. None of the above.

5
51. Which of these is not a correct citation to the Internal Revenue Code?

A. Section 211.
B. Section 1222(1).
C. Section 2(a)(1)(A).
D. Section 280B.
E. All of above are correct cites.
52. Which of the following is not an administrative source of tax law?

A. Field Service Advice.

B. Revenue Procedure.
C. Technical Advice Memoranda.
D. General Counsel Memorandum.
E. All of the above are administrative sources.
53. Which of the following sources has the highest tax validity?

A. Revenue Ruling.
B. Revenue Procedure.
C. Regulations.
D. Internal Revenue Code section.
E. None of the above.
54. Which of the following types of Regulations has the highest tax validity?

A. Temporary.
B. Legislative.
C. Interpretive.
D. Procedural.
E. None of the above.
55. Which statement is not true with respect to a Regulation that interprets the tax law?

A. Issued by the U.S. Congress.

B. Issued by the U.S. Treasury Department.
C. Designed to provide an interpretation of the tax law.
D. Carries more legal force than a Revenue Ruling.
E. All of the above statements are true.
56. In addressing the importance of a Regulation, an IRS agent must:

A. Give equal weight to the Code and the Regulations.

B. Give more weight to the Code rather than to a Regulation.
C. Give more weight to the Regulation rather than to the Code.
D. Give less weight to the Code rather than to a Regulation.
E. None of the above.

6
57. Which item may not be cited as a precedent?

A. Regulations.
B. Temporary Regulations.
C. Technical Advice Memoranda.
D. U.S. District Court decision.
E. None of the above.
58. What statement is not true with respect to Temporary Regulations?

A. May not be cited as precedent.

B. Issued as Proposed Regulations.
C. Automatically expire within three years after the date of issuance.
D. Found in the Federal Register.
E. All of the above statements are true.
59. What administrative release deals with a proposed transaction rather than a completed transaction?

A. Letter Ruling.
B. Technical Advice Memorandum.
C. Determination Letter.
D. Field Service Advice.
E. None of the above.
60. Which of the following indicates that a decision has precedential value for future cases?

A. Stare decisis.
B. Golsen doctrine.
C. En banc.
D. Reenactment doctrine.
E. None of the above.
61. A taxpayer who loses in a U.S. District Court may appeal directly to the:

A. U.S. Supreme Court.

B. U.S. Tax Court.
C. U.S. Court of Federal Claims.
D. U.S. Circuit Court of Appeals.
E. All of the above.
62. If a taxpayer decides not to pay a tax deficiency, he or she must go to which court?

A. Appropriate U.S. Circuit Court of Appeals.

B. U.S. District Court.
C. U.S. Tax Court.
D. U.S. Court of Federal Claims.
E. None of the above.

7
63. A jury trial is available in the following trial court:

A. U.S. Tax Court.

B. U.S. Court of Federal Claims.
C. U.S. District Court.
D. U.S. Circuit Court of Appeals.
E. None of the above.
64. A taxpayer may not appeal a case from which court:

A. U.S. District Court.

B. U.S. Circuit Court of Appeals.
C. U.S. Court of Federal Claims.
D. Small Case Division of the U.S. Tax Court.
E. None of the above.
65. The IRS will not acquiesce to the following tax decisions:

A. U.S. District Court.

B. U.S. Tax Court.
C. U.S. Court of Federal Claims.
D. Small Case Division of the U.S. Tax Court.
E. All of the above.
66. Which publisher offers the Standard Federal Tax Reporter?

A. Research Institute of America.

B. Commerce Clearing House.
C. Prentice-Hall.
D. LexisNexis.
E. None of the above.
67. Which is presently not a major tax service?

A. Standard Federal Tax Reporter.

B. Federal Taxes.
C. United States Tax Reporter.
D. Tax Management Portfolios.
E. All of the above are major tax services.
68. Which publisher offers the United States Tax Reporter?

A. Research Institute of America.

B. Commerce Clearing House.
C. LexisNexis.
D. Tax Analysts.
E. None of the above.

8
69. When searching on an online tax service, which approach is more frequently used?

A. Code section approach.

B. Keyword approach.
C. Table of contents approach.
D. Index.
E. All are about the same.
70. A researcher can find tax information on home page sites of:

A. Governmental bodies.
B. Tax academics.
C. Publishers.
D. CPA firms.
E. All of the above.
71. Tax research involves which of the following procedures:

A. Identifying and refining the problem.

B. Locating the appropriate tax law sources.
C. Assessing the validity of the tax law sources.
D. Follow-up.
E. All of the above.
72. Which tax-related website probably gives the best policy-orientation results?

A. taxalmanac.org.
B. irs.gov.
C. taxsites.com.
D. taxanalyst.com.
E. ustaxcourt.gov.
73. Which court decision would probably carry more weight?

A. Regular U.S. Tax Court decision.

B. Reviewed U.S. Tax Court decision.
C. U.S. District Court decision.
D. Memorandum Tax Court decision.
E. U.S. Court of Federal Claims.
74. Which Regulations have the force and effect of law?

A. Procedural Regulations.
B. Finalized Regulations.
C. Legislative Regulations.
D. Interpretive Regulations.
E. All of the above.

9
75. Which items tell taxpayers the IRS's reaction to certain court decisions?

A. Notices.
B. Revenue Procedures.
C. Revenue Rulings.
D. Actions on Decisions.
E. Legislative Regulations.
76. Which court decision carries more weight?

A. Federal District Court.

B. Second Circuit Court of Appeals.
C. Memorandum U.S. Tax Court decision.
D. Small Cases Division of U.S. Tax Court.
E. U.S. Court of Federal Claims.
77. Which company does not publish citators for tax purposes?

A. John Wiley & Sons.

B. Commerce Clearing House.
C. Research Institute of America.
D. Westlaw.
E. Shepard's.
78. Which is not a primary source of tax law?

A. Notice 89-99, 1989-2 C.B. 422.

B. Estate of Harry Holmes v. Comm., 326 U.S. 480 (1946).
C. Rev. Rul. 79-353, 1979-2 C.B. 325.
D. Prop. Reg. § 1.752-4T(f).
E. All of the above are primary sources.
79. Which statement is incorrect with respect to taxation on the CPA exam?

A. The CPA exam now has only four parts.

B. There are no longer case studies on the exam.
C. A candidate may not go back after exiting a testlet.
D. Simulations include a four-function pop-up calculator.
E. None of the above are incorrect.

10
80. How can Congressional committee reports be used by a tax researcher?

81. What are Treasury Department Regulations?

82. Compare Revenue Rulings with Revenue Procedures.

11
83. What is a Technical Advice Memorandum?

84. Discuss the advantages and disadvantages of the Small Cases Division of the U.S. Tax Court.

85. Distinguish between the jurisdiction of the U.S. Tax Court and a U.S. District Court.

12
86. How do treaties fit within tax sources?

13
 COMPREHENSIVE VOLUME--CHAPTER 2--WORKING
WITH THE TAX LAW Key
1. Rules of tax law do not include Revenue Rulings and Revenue Procedures.

FALSE

2. A tax professional need not worry about the relative weight of authority within the various tax law
sources.

FALSE

3. In recent years, Congress has been relatively successful in simplifying the Internal Revenue Code.

FALSE

4. A taxpayer should always minimize his or her tax liability.

FALSE

5. The first codification of the tax law occurred in 1954.

FALSE

6. The Code section citation is incorrect: § 212(1).

FALSE

7. Subchapter D refers to the "Corporate Distributions and Adjustments" section of the Internal
Revenue Code.

FALSE
8. Regulations are generally issued immediately after a statute is enacted.

FALSE

9. Temporary Regulations are only published in the Internal Revenue Bulletin.

FALSE
10. Revenue Rulings issued by the National Office of the IRS carry the same legal force and effect as
Regulations.

FALSE

1
11. A Revenue Ruling is a judicial source of Federal tax law.

FALSE

12. The following citation can be a correct citation: Rev. Rul. 95-271, I.R.B. No. 54, 18.

FALSE

13. Revenue Procedures deal with the internal management practices and procedures of the IRS.

TRUE
14. Post-1984 letter rulings may be substantial authority for purposes of the accuracy-related penalty in
§ 6662.

TRUE

15. A letter ruling applies only to the taxpayer who asks for and obtains a letter ruling.

TRUE

16. The IRS is not required to make a letter ruling public.

FALSE

17. Determination letters usually involve finalized transactions.

TRUE

18. Technical Advice Memoranda deal with completed transactions.

TRUE

19. Technical Advice Memoranda may not be cited as precedents by taxpayers.

TRUE

20. A taxpayer must pay any tax deficiency assessed by the IRS and sue for a refund to bring suit in the
U.S. Court of Federal Claims. Only in the Tax Court can jurisdiction be obtained without first paying
the assessed tax deficiency.

TRUE

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

FALSE

22. Three judges will normally hear each U.S. Tax Court case.

FALSE

2
23. A taxpayer can obtain a jury trial in the U.S. Tax Court.

FALSE
24. 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

25. Arizona is in the jurisdiction of the Eighth Circuit Court of Appeals.

FALSE

26. Texas is in the jurisdiction of the Second Circuit Court of Appeals.

FALSE

27. The Golsen rule has been overturned by the U.S. Supreme Court.

FALSE

28. The granting of a Writ of Certiorari indicates that at least four members of the Supreme Court believe
that an issue is of sufficient importance to be heard by the full court.

TRUE

29. The "petitioner" refers to the party against whom a suit is brought.

FALSE

30. The term "petitioner" is a synonym for "defendant."

FALSE

31. The U.S. Tax Court meets most often in Washington, D.C.

FALSE
32. There are 11 geographic U.S. Circuit Court of Appeals.

TRUE

33. The following citation is correct: Larry G. Mitchell, 131 T.C. 215 (2008).

TRUE

34. The IRS issues an acquiescence or nonacquiescence only for regular Tax Court decisions.

FALSE

3
35. There is a direct conflict between a Code section adopted in 2008 and a treaty with France (signed in
2012). The Code section controls.

FALSE

36. The Index to Federal Tax Articles (published by Warren, Gorham, and Lamont) is available in print
and electronic formats.

FALSE

37. A U.S. District Court is the lowest trial court.

TRUE

38. The research process should begin with a tax service.

FALSE

39. Electronic databases are most frequently searched by the keyword approach.

TRUE

40. The test for whether a child qualifies for dependency status is first conducted under the qualified
child requirement.

TRUE

41. A Bluebook opinion is substantial authority for purposes of the accuracy related penalty.

TRUE

42. The primary purpose of effective tax planning is to reduce or defer the tax in the current tax year.

FALSE

43. Deferring income to a subsequent year is considered to be tax avoidance.

TRUE

44. Tax planning usually involves a completed transaction.

FALSE
45. The Regulation section of the CPA exam is 60% Taxation and 40% Law & Professional
Responsibilities.

TRUE

4
46. The Internal Revenue Code was first codified in what year?

A. 1913.
B. 1923.
C. 1939.
D. 1954.
E. 1986.
47. Tax bills are handled by which committee in the U.S. House of Representatives?

A. Taxation Committee.
B. Ways and Means Committee.
C. Finance Committee.
D. Budget Committee.
E. None of the above.
48. Federal tax legislation generally originates in what body?

A. Internal Revenue Service.

B. Senate Finance Committee.
C. House Ways and Means Committee.
D. Senate Floor.
E. None of the above.
49. Subtitle A of the Internal Revenue Code covers which of the following taxes?

A. Income taxes.
B. Estate and gift taxes.
C. Excise taxes.
D. Employment taxes.
E. All of the above.
50. In § 212(1), the number (1) stands for the:

A. Section number.
B. Subsection number.
C. Paragraph designation.
D. Subparagraph designation.
E. None of the above.
51. Which of these is not a correct citation to the Internal Revenue Code?

A. Section 211.
B. Section 1222(1).
C. Section 2(a)(1)(A).
D. Section 280B.
E. All of above are correct cites.

5
52. Which of the following is not an administrative source of tax law?

A. Field Service Advice.

B. Revenue Procedure.
C. Technical Advice Memoranda.
D. General Counsel Memorandum.
E. All of the above are administrative sources.
53. Which of the following sources has the highest tax validity?

A. Revenue Ruling.
B. Revenue Procedure.
C. Regulations.
D. Internal Revenue Code section.
E. None of the above.
54. Which of the following types of Regulations has the highest tax validity?

A. Temporary.
B. Legislative.
C. Interpretive.
D. Procedural.
E. None of the above.
55. Which statement is not true with respect to a Regulation that interprets the tax law?

A. Issued by the U.S. Congress.

B. Issued by the U.S. Treasury Department.
C. Designed to provide an interpretation of the tax law.
D. Carries more legal force than a Revenue Ruling.
E. All of the above statements are true.
56. In addressing the importance of a Regulation, an IRS agent must:

A. Give equal weight to the Code and the Regulations.

B. Give more weight to the Code rather than to a Regulation.
C. Give more weight to the Regulation rather than to the Code.
D. Give less weight to the Code rather than to a Regulation.
E. None of the above.
57. Which item may not be cited as a precedent?

A. Regulations.
B. Temporary Regulations.
C. Technical Advice Memoranda.
D. U.S. District Court decision.
E. None of the above.

6
58. What statement is not true with respect to Temporary Regulations?

A. May not be cited as precedent.

B. Issued as Proposed Regulations.
C. Automatically expire within three years after the date of issuance.
D. Found in the Federal Register.
E. All of the above statements are true.
59. What administrative release deals with a proposed transaction rather than a completed transaction?

A. Letter Ruling.
B. Technical Advice Memorandum.
C. Determination Letter.
D. Field Service Advice.
E. None of the above.
60. Which of the following indicates that a decision has precedential value for future cases?

A. Stare decisis.
B. Golsen doctrine.
C. En banc.
D. Reenactment doctrine.
E. None of the above.
61. A taxpayer who loses in a U.S. District Court may appeal directly to the:

A. U.S. Supreme Court.

B. U.S. Tax Court.
C. U.S. Court of Federal Claims.
D. U.S. Circuit Court of Appeals.
E. All of the above.
62. If a taxpayer decides not to pay a tax deficiency, he or she must go to which court?

A. Appropriate U.S. Circuit Court of Appeals.

B. U.S. District Court.
C. U.S. Tax Court.
D. U.S. Court of Federal Claims.
E. None of the above.
63. A jury trial is available in the following trial court:

A. U.S. Tax Court.

B. U.S. Court of Federal Claims.
C. U.S. District Court.
D. U.S. Circuit Court of Appeals.
E. None of the above.

7
64. A taxpayer may not appeal a case from which court:

A. U.S. District Court.

B. U.S. Circuit Court of Appeals.
C. U.S. Court of Federal Claims.
D. Small Case Division of the U.S. Tax Court.
E. None of the above.
65. The IRS will not acquiesce to the following tax decisions:

A. U.S. District Court.

B. U.S. Tax Court.
C. U.S. Court of Federal Claims.
D. Small Case Division of the U.S. Tax Court.
E. All of the above.
66. Which publisher offers the Standard Federal Tax Reporter?

A. Research Institute of America.

B. Commerce Clearing House.
C. Prentice-Hall.
D. LexisNexis.
E. None of the above.
67. Which is presently not a major tax service?

A. Standard Federal Tax Reporter.

B. Federal Taxes.
C. United States Tax Reporter.
D. Tax Management Portfolios.
E. All of the above are major tax services.
68. Which publisher offers the United States Tax Reporter?

A. Research Institute of America.

B. Commerce Clearing House.
C. LexisNexis.
D. Tax Analysts.
E. None of the above.
69. When searching on an online tax service, which approach is more frequently used?

A. Code section approach.

B. Keyword approach.
C. Table of contents approach.
D. Index.
E. All are about the same.

8
70. A researcher can find tax information on home page sites of:

A. Governmental bodies.
B. Tax academics.
C. Publishers.
D. CPA firms.
E. All of the above.
71. Tax research involves which of the following procedures:

A. Identifying and refining the problem.

B. Locating the appropriate tax law sources.
C. Assessing the validity of the tax law sources.
D. Follow-up.
E. All of the above.
72. Which tax-related website probably gives the best policy-orientation results?

A. taxalmanac.org.
B. irs.gov.
C. taxsites.com.
D. taxanalyst.com.
E. ustaxcourt.gov.
73. Which court decision would probably carry more weight?

A. Regular U.S. Tax Court decision.

B. Reviewed U.S. Tax Court decision.
C. U.S. District Court decision.
D. Memorandum Tax Court decision.
E. U.S. Court of Federal Claims.
74. Which Regulations have the force and effect of law?

A. Procedural Regulations.
B. Finalized Regulations.
C. Legislative Regulations.
D. Interpretive Regulations.
E. All of the above.
75. Which items tell taxpayers the IRS's reaction to certain court decisions?

A. Notices.
B. Revenue Procedures.
C. Revenue Rulings.
D. Actions on Decisions.
E. Legislative Regulations.

9
76. Which court decision carries more weight?

A. Federal District Court.

B. Second Circuit Court of Appeals.
C. Memorandum U.S. Tax Court decision.
D. Small Cases Division of U.S. Tax Court.
E. U.S. Court of Federal Claims.
77. Which company does not publish citators for tax purposes?

A. John Wiley & Sons.

B. Commerce Clearing House.
C. Research Institute of America.
D. Westlaw.
E. Shepard's.
78. Which is not a primary source of tax law?

A. Notice 89-99, 1989-2 C.B. 422.

B. Estate of Harry Holmes v. Comm., 326 U.S. 480 (1946).
C. Rev. Rul. 79-353, 1979-2 C.B. 325.
D. Prop. Reg. § 1.752-4T(f).
E. All of the above are primary sources.
79. Which statement is incorrect with respect to taxation on the CPA exam?

A. The CPA exam now has only four parts.

B. There are no longer case studies on the exam.
C. A candidate may not go back after exiting a testlet.
D. Simulations include a four-function pop-up calculator.
E. None of the above are incorrect.
80. How can Congressional committee reports be used by a tax researcher?

Congressional committee reports often explain the provisions of proposed legislation and are a
valuable source of ascertaining the intent of Congress. The intent of Congress is the key to
interpreting new legislation by taxpayers, especially before Regulations are published.

10
81. What are Treasury Department Regulations?

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.

82. Compare Revenue Rulings with Revenue Procedures.

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.

83. What is a Technical Advice Memorandum?

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.

11
84. Discuss the advantages and disadvantages of the Small Cases Division of the U.S. Tax Court.

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.

85. Distinguish between the jurisdiction of the U.S. Tax Court and a U.S. District Court.

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.

86. How do treaties fit within tax sources?

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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