1h
Copyrighth©h2021hPearsonhEducation,hInc.h
Pearson'shFederalhTaxationh2021:hComp.,h34eh(Rupert/Anderson)h
ChapterhC1:hhTaxhResearchhh
h
LO1:hhOverviewhofhTaxhResearchh
h
1)hTaxhplanninghishnothanhintegralhparthofhopen-facthsituations.h
Answer:hhFALSEh
Explanation:hhIthishintegral.h
PagehRef.:hhC:1-2h
Objective:hh1h
h
2)hWhenhahtaxpayerhcontactshahtaxhadvisorhrequestinghadvicehashtohthehmosthadvantageoush
wayhtoh
disposehofhahstock,hthehtaxhadvisorhishfacedhwithh
A)hahrestricted-facthsituation.h
B)hahclosed-facthsituation.h
C)hanhopen-facthsituation.h
D)hahrecognized-facthsituation.h
Answer:hhCh
Explanation:hhAdvicehbeforehtransactionhishopenhfacthsituation.h
PagehRef.:hhC:1-2h
Objective:hh1h
h
3)hInvestigationhofhahtaxhproblemhthathinvolveshahclosed-facthsituationhmeanshthath
A)hthehclient'shtransactionshhavehalreadyhoccurredhandhthehtaxhquestionshmusthnowhbehresol
ved.h
B)hthehclient'shtaxhreturnhhashyethtohbehfiled.h
C)hfutureheventshmayhbehplannedhandhcontrolled.h
D)hresearchhishprimarilyhconcernedhwithhapplyinghthehlawhtohthehfactshashtheyhexist.h
Answer:hhAh
Explanation:hhAfterhthehfacthrequesthishahclosedhfacthsituation.h
PagehRef.:hhC:1-2h
Objective:hh1h
h
4)hExplainhthehdifferencehbetweenhahclosed-facthandhopen-facthsituation.h
Answer:hhInhahclosed-
facthsituation,hthehtransactionhhashoccurredhandhthehfactsharehnothsubjecthtoh
change.hInhanhopen-
facthsituation,hthehtransactionhishinhthehformativehorhprojectedhstage,handhtheh
taxpayerhishablehtohstructurehthehfactshsohthaththehtaxhconsequenceshofhthehtransactionhcanhb
ehmoreh
favorable.h
PagehRef.:hhC:1-2h
Objective:hh1h
h
,h
h
DOWNLOADhTHEhTesthBankhforhPearsonshFederalhTaxationh2021hComprehensive
hhhhhhhhhhhhhhhhhhhhhhhhhh34thhEditionhRupert
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5)hInhallhsituations,htaxhconsiderationsharehofhprimaryhimportance.hDohyouhagreehorhdisagree
?h
Supporthyourhanswer.h
Answer:hhIthishimportanthtohconsiderhnontaxhobjectiveshashwellhashtaxhobjectives.hForhinstanc
e,hifhah
wealthyhclienthwantshtohminimizehherhestatehtaxeshwhilehpassinghthehgreatesthvaluehpossible
htohherh
descendants,hyouhwouldhnothsuggesththathshehleavehthehmajorityhofhherhestatehtohcharityhandh
onlyhah
fewhhundredhthousandhdollarshtohherhdescendants.hAlthoughhthishwouldhreducehherhestateht
axh
liabilityhtohzero,hithwouldhbehinconsistenthwithhherhobjectivehofhallowinghherhdescendantshtoh
receivehashmuchhafter-taxhwealthhashpossible.h
PagehRef.:hhC:1-2;hExamplehC:1-2h
Objective:hh1h
h
LO2:hhStepshinhthehTaxhResearchhProcessh
h
1)hIdentifyhwhichhofhthehfollowinghstatementshishtrue.h
A)hTaxhplanninghishanhintegralhparthofhbothhclosed-facthsituationshandhopen-facthsituations.h
B)hThehfirsthstephinhconductinghtaxhresearchhishtohclearlyhunderstandhthehissueshinvolved.h
C)hThehStatementshonhStandardshforhTaxhServiceshrecommendhthathonlyhwrittenhtaxhadvicehb
eh
providedhtohthehclienthinhallhsituations.h
D)hAllhofhthehaboveharehfalse.h
Answer:hhCh
Explanation:hhThehStatementshonhStandardshforhTaxhServiceshrecommendhthathonlyhwrittenht
axh
advicehbehprovidedhtohthehclienthinhallhsituations.h
PagehRef.:hhC:1-3hthroughhC:1-5h
Objective:hh2h
h
2)hDescribehthehformathofhahclienthmemo.h
Answer:hhAhclienthmemohshouldhincludehahstatementhofhthehfacts,hahlisthofhissues,hahdiscussion
hofh
relevanthauthority,hanalysis,handhrecommendationshofhappropriatehactionshtohthehclienthbase
dhonh
thehresearchhresults.h
PagehRef.:hhSeehAdditionalhCommenthpagehC:1-4h
,Objective:hh2h
h
h
h
DOWNLOADhTHEhTesthBankhforhPearsonshFederalhTaxationh2021hComprehensive
hhhhhhhhhhhhhhhhhhhhhhhhhh34thhEditionhRupert
mynursytest.store
3h
Copyrighth©h2021hPearsonhEducation,hInc.h
3)hOutlinehandhdiscusshthehtaxhresearchhprocess.h
Answer:hhh
1)hThehfactshmusthbehdetermined.hHowever,hsomehfactshmayhnothhavehoccurredhinhanhopen-
facth
situation.hWherehfactshhavehnothyethoccurred,hithishusefulhtohreviewhtaxhresearchhmaterialhtoh
determinehwhichhfactshwouldhproducehthehmosthfavorablehoutcome.h
2)hThehissueshmusthbehdetermined.hThehissueshmayhnothalwayshbehclearhandhmayhbehdifferen
ththanh
thehclienthbelieves.hThus,honlyhahthoroughhunderstandinghofhthehfactshpermitshanhadequateh
formulationhofhthehissues.h
3)hDeterminehwhichhauthoritiesharehapplicable.h
4)hEvaluatehthehauthorities.hChoosehthehoneshtohfollowhwhenhthereharehconflictinghauthoritie
s.h
5)hCommunicatehthehresulthtohthehclient.hThehcommunicationhwithhthehclienthshouldhnothresu
lthinh
ahmisunderstanding.hWhilehdiscussionshwithhthehclienthmayhbehsuitable,hithishrecommendedh
byhtheh
AICPA'shStatementshonhStandardshforhTaxhServiceshthaththehcommunicationhbehwrittenhwher
eh
issuesharehimportant,hunusualhorhcomplicated.hManyhfirmshrequirehthathconclusionshbeh
communicatedhinhwriting.h
PagehRef.:hhC:1-4h
Objective:hh2h
h
LO3:hhImportancehofhthehFactshtohthehTaxhConsequencesh
h
1)hThehtaxhconsultanthcanhgivehanhopinionhonhahtaxhfacthpatternhwithouthallhthehfacts.h
Answer:hhFALSEh
Explanation:hhTaxhpractitionerhshouldhnothprovidehanhopinionhwithouthallhrelevanthfacts.h
PagehRef.:hhC:1-6h
Objective:hh3h
h
2)hTaxhcompliancehishthehbiggesthcomponenthofhahtaxhpractice.h
Answer:hhFALSEh
Explanation:hhTaxhconsultinghishthehbiggesthcomponenthofhtaxhpractice.h
PagehRef.:hhC:1-6h
Objective:hh3h
h
, LO4:hhThehSourceshofhTaxhLawh
h
1)hThehInternalhRevenuehCodehofh1986hcontainshthehcurrenthversionhofhthehtaxhlaw.h
Answer:hhTRUEh
Explanation:hhThehlasthupdatehwash1986.h
PagehRef.:hhC:1-8h
Objective:hh4h
h
2)hRegulationshissuedhpriorhtohthehlatesthtaxhlegislationhdealinghwithhahspecifichCodehsectionh
areh
stillheffectivehtohthehextenththeyhdohnothconflicthwithhthehprovisionshinhthehnewhlegislation.h
Answer:hhTRUEh
Explanation:hhPerhIRChthishremainshaccurate.h
PagehRef.:hhC:1-9h
Objective:hh4h
h
DOWNLOADhTHEhTesthBankhforhPearsonshFederalhTaxationh2021hComprehensive
hhhhhhhhhhhhhhhhhhhhhhhhhh34thhEditionhRupert
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Copyrighth©h2021hPearsonhEducation,hInc.h
3)hFinalhregulationshhavehalmosththehsamehlegislativehweighthashthehIRC.h
Answer:hhTRUEh
Explanation:hhThehCourtshhavehfollowedhthishconcept.h
PagehRef.:hhC:1-10h
Objective:hh4h
h
4)hAhrevenuehrulinghishissuedhbyhthehInternalhRevenuehServicehonlyhinhresponsehtohahverbalh
inquiryhbyhahtaxpayer.h
Answer:hhFALSEh
Explanation:hhThehIRShmayhvoluntarilyhissuehahrevenuehruling.h
PagehRef.:hhC:1-12h
Objective:hh4h
h
5)hTaxpayershmusthpayhthehdisputedhtaxhpriorhtohfilinghahcasehwithhthehTaxhCourt.h
Answer:hhFALSEh
Explanation:hhTaxhCourthishthehonlyhcourthavailablehinhwhichhtaxpayerhdoeshnothhavehtohprep
ayh
thehtax.h
PagehRef.:hhC:1-14handhC:1-15h
Objective:hh4h
h
6)hAppealshfromhthehU.S.hTaxhCourtharehtohthehCourthofhAppealshforhthehFederalhCircuit.h
Answer:hhFALSEh
Explanation:hhAppealshfromhthehUShTaxhCourtharehtohthehCourthofhAppealshforhthehrespectiveh
circuit.h
PagehRef.:hhC:1-14handhC:1-15h
Copyrighth©h2021hPearsonhEducation,hInc.h
Pearson'shFederalhTaxationh2021:hComp.,h34eh(Rupert/Anderson)h
ChapterhC1:hhTaxhResearchhh
h
LO1:hhOverviewhofhTaxhResearchh
h
1)hTaxhplanninghishnothanhintegralhparthofhopen-facthsituations.h
Answer:hhFALSEh
Explanation:hhIthishintegral.h
PagehRef.:hhC:1-2h
Objective:hh1h
h
2)hWhenhahtaxpayerhcontactshahtaxhadvisorhrequestinghadvicehashtohthehmosthadvantageoush
wayhtoh
disposehofhahstock,hthehtaxhadvisorhishfacedhwithh
A)hahrestricted-facthsituation.h
B)hahclosed-facthsituation.h
C)hanhopen-facthsituation.h
D)hahrecognized-facthsituation.h
Answer:hhCh
Explanation:hhAdvicehbeforehtransactionhishopenhfacthsituation.h
PagehRef.:hhC:1-2h
Objective:hh1h
h
3)hInvestigationhofhahtaxhproblemhthathinvolveshahclosed-facthsituationhmeanshthath
A)hthehclient'shtransactionshhavehalreadyhoccurredhandhthehtaxhquestionshmusthnowhbehresol
ved.h
B)hthehclient'shtaxhreturnhhashyethtohbehfiled.h
C)hfutureheventshmayhbehplannedhandhcontrolled.h
D)hresearchhishprimarilyhconcernedhwithhapplyinghthehlawhtohthehfactshashtheyhexist.h
Answer:hhAh
Explanation:hhAfterhthehfacthrequesthishahclosedhfacthsituation.h
PagehRef.:hhC:1-2h
Objective:hh1h
h
4)hExplainhthehdifferencehbetweenhahclosed-facthandhopen-facthsituation.h
Answer:hhInhahclosed-
facthsituation,hthehtransactionhhashoccurredhandhthehfactsharehnothsubjecthtoh
change.hInhanhopen-
facthsituation,hthehtransactionhishinhthehformativehorhprojectedhstage,handhtheh
taxpayerhishablehtohstructurehthehfactshsohthaththehtaxhconsequenceshofhthehtransactionhcanhb
ehmoreh
favorable.h
PagehRef.:hhC:1-2h
Objective:hh1h
h
,h
h
DOWNLOADhTHEhTesthBankhforhPearsonshFederalhTaxationh2021hComprehensive
hhhhhhhhhhhhhhhhhhhhhhhhhh34thhEditionhRupert
mynursytest.store
2h
Copyrighth©h2021hPearsonhEducation,hInc.h
5)hInhallhsituations,htaxhconsiderationsharehofhprimaryhimportance.hDohyouhagreehorhdisagree
?h
Supporthyourhanswer.h
Answer:hhIthishimportanthtohconsiderhnontaxhobjectiveshashwellhashtaxhobjectives.hForhinstanc
e,hifhah
wealthyhclienthwantshtohminimizehherhestatehtaxeshwhilehpassinghthehgreatesthvaluehpossible
htohherh
descendants,hyouhwouldhnothsuggesththathshehleavehthehmajorityhofhherhestatehtohcharityhandh
onlyhah
fewhhundredhthousandhdollarshtohherhdescendants.hAlthoughhthishwouldhreducehherhestateht
axh
liabilityhtohzero,hithwouldhbehinconsistenthwithhherhobjectivehofhallowinghherhdescendantshtoh
receivehashmuchhafter-taxhwealthhashpossible.h
PagehRef.:hhC:1-2;hExamplehC:1-2h
Objective:hh1h
h
LO2:hhStepshinhthehTaxhResearchhProcessh
h
1)hIdentifyhwhichhofhthehfollowinghstatementshishtrue.h
A)hTaxhplanninghishanhintegralhparthofhbothhclosed-facthsituationshandhopen-facthsituations.h
B)hThehfirsthstephinhconductinghtaxhresearchhishtohclearlyhunderstandhthehissueshinvolved.h
C)hThehStatementshonhStandardshforhTaxhServiceshrecommendhthathonlyhwrittenhtaxhadvicehb
eh
providedhtohthehclienthinhallhsituations.h
D)hAllhofhthehaboveharehfalse.h
Answer:hhCh
Explanation:hhThehStatementshonhStandardshforhTaxhServiceshrecommendhthathonlyhwrittenht
axh
advicehbehprovidedhtohthehclienthinhallhsituations.h
PagehRef.:hhC:1-3hthroughhC:1-5h
Objective:hh2h
h
2)hDescribehthehformathofhahclienthmemo.h
Answer:hhAhclienthmemohshouldhincludehahstatementhofhthehfacts,hahlisthofhissues,hahdiscussion
hofh
relevanthauthority,hanalysis,handhrecommendationshofhappropriatehactionshtohthehclienthbase
dhonh
thehresearchhresults.h
PagehRef.:hhSeehAdditionalhCommenthpagehC:1-4h
,Objective:hh2h
h
h
h
DOWNLOADhTHEhTesthBankhforhPearsonshFederalhTaxationh2021hComprehensive
hhhhhhhhhhhhhhhhhhhhhhhhhh34thhEditionhRupert
mynursytest.store
3h
Copyrighth©h2021hPearsonhEducation,hInc.h
3)hOutlinehandhdiscusshthehtaxhresearchhprocess.h
Answer:hhh
1)hThehfactshmusthbehdetermined.hHowever,hsomehfactshmayhnothhavehoccurredhinhanhopen-
facth
situation.hWherehfactshhavehnothyethoccurred,hithishusefulhtohreviewhtaxhresearchhmaterialhtoh
determinehwhichhfactshwouldhproducehthehmosthfavorablehoutcome.h
2)hThehissueshmusthbehdetermined.hThehissueshmayhnothalwayshbehclearhandhmayhbehdifferen
ththanh
thehclienthbelieves.hThus,honlyhahthoroughhunderstandinghofhthehfactshpermitshanhadequateh
formulationhofhthehissues.h
3)hDeterminehwhichhauthoritiesharehapplicable.h
4)hEvaluatehthehauthorities.hChoosehthehoneshtohfollowhwhenhthereharehconflictinghauthoritie
s.h
5)hCommunicatehthehresulthtohthehclient.hThehcommunicationhwithhthehclienthshouldhnothresu
lthinh
ahmisunderstanding.hWhilehdiscussionshwithhthehclienthmayhbehsuitable,hithishrecommendedh
byhtheh
AICPA'shStatementshonhStandardshforhTaxhServiceshthaththehcommunicationhbehwrittenhwher
eh
issuesharehimportant,hunusualhorhcomplicated.hManyhfirmshrequirehthathconclusionshbeh
communicatedhinhwriting.h
PagehRef.:hhC:1-4h
Objective:hh2h
h
LO3:hhImportancehofhthehFactshtohthehTaxhConsequencesh
h
1)hThehtaxhconsultanthcanhgivehanhopinionhonhahtaxhfacthpatternhwithouthallhthehfacts.h
Answer:hhFALSEh
Explanation:hhTaxhpractitionerhshouldhnothprovidehanhopinionhwithouthallhrelevanthfacts.h
PagehRef.:hhC:1-6h
Objective:hh3h
h
2)hTaxhcompliancehishthehbiggesthcomponenthofhahtaxhpractice.h
Answer:hhFALSEh
Explanation:hhTaxhconsultinghishthehbiggesthcomponenthofhtaxhpractice.h
PagehRef.:hhC:1-6h
Objective:hh3h
h
, LO4:hhThehSourceshofhTaxhLawh
h
1)hThehInternalhRevenuehCodehofh1986hcontainshthehcurrenthversionhofhthehtaxhlaw.h
Answer:hhTRUEh
Explanation:hhThehlasthupdatehwash1986.h
PagehRef.:hhC:1-8h
Objective:hh4h
h
2)hRegulationshissuedhpriorhtohthehlatesthtaxhlegislationhdealinghwithhahspecifichCodehsectionh
areh
stillheffectivehtohthehextenththeyhdohnothconflicthwithhthehprovisionshinhthehnewhlegislation.h
Answer:hhTRUEh
Explanation:hhPerhIRChthishremainshaccurate.h
PagehRef.:hhC:1-9h
Objective:hh4h
h
DOWNLOADhTHEhTesthBankhforhPearsonshFederalhTaxationh2021hComprehensive
hhhhhhhhhhhhhhhhhhhhhhhhhh34thhEditionhRupert
mynursytest.store
4h
Copyrighth©h2021hPearsonhEducation,hInc.h
3)hFinalhregulationshhavehalmosththehsamehlegislativehweighthashthehIRC.h
Answer:hhTRUEh
Explanation:hhThehCourtshhavehfollowedhthishconcept.h
PagehRef.:hhC:1-10h
Objective:hh4h
h
4)hAhrevenuehrulinghishissuedhbyhthehInternalhRevenuehServicehonlyhinhresponsehtohahverbalh
inquiryhbyhahtaxpayer.h
Answer:hhFALSEh
Explanation:hhThehIRShmayhvoluntarilyhissuehahrevenuehruling.h
PagehRef.:hhC:1-12h
Objective:hh4h
h
5)hTaxpayershmusthpayhthehdisputedhtaxhpriorhtohfilinghahcasehwithhthehTaxhCourt.h
Answer:hhFALSEh
Explanation:hhTaxhCourthishthehonlyhcourthavailablehinhwhichhtaxpayerhdoeshnothhavehtohprep
ayh
thehtax.h
PagehRef.:hhC:1-14handhC:1-15h
Objective:hh4h
h
6)hAppealshfromhthehU.S.hTaxhCourtharehtohthehCourthofhAppealshforhthehFederalhCircuit.h
Answer:hhFALSEh
Explanation:hhAppealshfromhthehUShTaxhCourtharehtohthehCourthofhAppealshforhthehrespectiveh
circuit.h
PagehRef.:hhC:1-14handhC:1-15h
