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gEditiongRupert
Pearson'sgFederalgTaxationg2021:gComp.,g34eg(Rupert/Anderson
)gChaptergC1: TaxgResearch
LO1:g g OverviewgofgTaxgResearch
1) Taxgplanninggisgnotgangintegralgpartgofgopen-
factgsituations.gAnswer:g FALSE
Explanation:g Itgisgintegral.
gPagegRef.:g C:1-
2gObjective:g 1
2) Whengagtaxpayergcontactsgagtaxgadvisorgrequestinggadvicegasgtogthegmostgadvantageousgwaygt
ogdisposegofgagstock,gthegtaxgadvisorgisgfacedgwith
A) agrestricted-factgsituation.
B) agclosed-factgsituation.
C) angopen-factgsituation.
D) agrecognized-
factgsituation.gAnswer:g C
Explanation:g Advicegbeforegtransactiongisgopengfactgsituation.
gPagegRef.:g C:1-2
Objective:g g 1
3) Investigationgofgagtaxgproblemgthatginvolvesgagclosed-factgsituationgmeansgthat
A) thegclient'sgtransactionsghavegalreadygoccurredgandgthegtaxgquestionsgmustgnowgbegresolved.
B) thegclient'sgtaxgreturnghasgyetgtogbegfiled.
C) futuregeventsgmaygbegplannedgandgcontrolled.
D) researchgisgprimarilygconcernedgwithgapplyinggtheglawgtogthegfactsgasgtheygexis
t.gAnswer:g A
Explanation:g Aftergthegfactgrequestgisgagclosedgfactgsituation.g
PagegRef.:g C:1-2
Objective:g g 1
4) Explaingthegdifferencegbetweengagclosed-factgandgopen-factgsituation.
Answer:g Ingagclosed-
factgsituation,gthegtransactionghasgoccurredgandgthegfactsgaregnotgsubjectgtogchange.gIngangopen-
factgsituation,gthegtransactiongisgingthegformativegorgprojectedgstage,gandgthegtaxpayergisgablegtogs
tructuregthegfactsgsogthatgthegtaxgconsequencesgofgthegtransactiongcangbegmoregfavorable.
PagegRef.:g C:1-
2gObjective:g 1
1
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gEditiongRupert
5) Ingallgsituations,gtaxgconsiderationsgaregofgprimarygimportance.gDogyougagreegorgdisagree
?gSupportgyourganswer.
Answer:g Itgisgimportantgtogconsidergnontaxgobjectivesgasgwellgasgtaxgobjectives.gForginstance,gifg
agwealthygclientgwantsgtogminimizeghergestategtaxesgwhilegpassinggtheggreatestgvaluegpossiblegtog
hergdescendants,gyougwouldgnotgsuggestgthatgshegleavegthegmajoritygofghergestategtogcharitygandg
onlygagfewghundredgthousandgdollarsgtoghergdescendants.gAlthoughgthisgwouldgreduceghergestateg
taxgliabilitygtogzero,gitgwouldgbeginconsistentgwithghergobjectivegofgallowingghergdescendantsgtogr
eceivegasgmuchgafter-taxgwealthgasgpossible.
PagegRef.:g C:1-2;gExamplegC:1-
2gObjective:g 1
LO2:g g StepsgingthegTaxgResearchgProcess
1) Identifygwhichgofgthegfollowinggstatementsgisgtrue.
A) Taxgplanninggisgangintegralgpartgofgbothgclosed-factgsituationsgandgopen-factgsituations.
B) Thegfirstgstepgingconductinggtaxgresearchgisgtogclearlygunderstandgthegissuesginvolved.
C) ThegStatementsgongStandardsgforgTaxgServicesgrecommendgthatgonlygwrittengtaxgadvicegb
egprovidedgtogthegclientgingallgsituations.
D) Allgofgthegabovegaregfalse
.gAnswer:g C
Explanation:g ThegStatementsgongStandardsgforgTaxgServicesgrecommendgthatgonlygwrittengtaxga
dvicegbegprovidedgtogthegclientgingallgsituations.
PagegRef.:g C:1-3gthroughgC:1-
5gObjective:g 2
2) Describegthegformatgofgagclientgmemo.
Answer:g Agclientgmemogshouldgincludegagstatementgofgthegfacts,gaglistgofgissues,gagdiscussiongo
fgrelevantgauthority,ganalysis,gandgrecommendationsgofgappropriategactionsgtogthegclientgbasedgo
ngthegresearchgresults.
PagegRef.:g SeegAdditionalgCommentgpagegC:1-
4gObjective:g 2
2
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gEditiongRupert
3) Outlinegandgdiscussgthegtaxgresearchgprocess
.gAnswer:
1) Thegfactsgmustgbegdetermined.gHowever,gsomegfactsgmaygnotghavegoccurredgingangopen-
factgsituation.gWheregfactsghavegnotgyetgoccurred,gitgisgusefulgtogreviewgtaxgresearchgmaterialgt
ogdeterminegwhichgfactsgwouldgproducegthegmostgfavorablegoutcome.
2) Thegissuesgmustgbegdetermined.gThegissuesgmaygnotgalwaysgbegcleargandgmaygbegdifferentgtha
ngthegclientgbelieves.gThus,gonlygagthoroughgunderstandinggofgthegfactsgpermitsgangadequategform
ulationgofgthegissues.
3) Determinegwhichgauthoritiesgaregapplicable.
4) Evaluategthegauthorities.gChoosegthegonesgtogfollowgwhengtheregaregconflictinggauthorities.
5) Communicategthegresultgtogthegclient.gThegcommunicationgwithgthegclientgshouldgnotgresultgi
ngagmisunderstanding.gWhilegdiscussionsgwithgthegclientgmaygbegsuitable,gitgisgrecommendedgbyg
thegAICPA'sgStatementsgongStandardsgforgTaxgServicesgthatgthegcommunicationgbegwrittengwhe
regissuesgaregimportant,gunusualgorgcomplicated.gManygfirmsgrequiregthatgconclusionsgbegcomm
unicatedgingwriting.
PagegRef.:g C:1-
4gObjective:g 2
LO3:g g ImportancegofgthegFactsgtogthegTaxgConsequences
1) Thegtaxgconsultantgcanggivegangopiniongongagtaxgfactgpatterngwithoutgallgthegfact
s.gAnswer:g FALSE
Explanation:g Taxgpractitionergshouldgnotgprovidegangopiniongwithoutgallgrelevantgfacts.gPa
gegRef.:g C:1-6
Objective:g g 3
2) Taxgcompliancegisgthegbiggestgcomponentgofgagtaxgpractice
.gAnswer:g FALSE
Explanation:g Taxgconsultinggisgthegbiggestgcomponentgofgtaxgpractice.gPa
gegRef.:g C:1-6
Objective:g g 3
LO4:g g ThegSourcesgofgTaxgLaw
1) ThegInternalgRevenuegCodegofg1986gcontainsgthegcurrentgversiongofgthegtaxgla
w.gAnswer:g TRUE
Explanation:g Theglastgupdategwasg1986.
gPagegRef.:g C:1-8
Objective:g g 4
2) RegulationsgissuedgpriorgtogtheglatestgtaxglegislationgdealinggwithgagspecificgCodegsectiongar
egstillgeffectivegtogthegextentgtheygdognotgconflictgwithgthegprovisionsgingthegnewglegislation.g
Answer:g TRUE
Explanation:g PergIRCgthisgremainsgaccurate.gPa
gegRef.:g C:1-9
Objective:g g 4
3
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3) FinalgregulationsghavegalmostgthegsameglegislativegweightgasgthegIRC
.gAnswer:g TRUE
Explanation:g ThegCourtsghavegfollowedgthisgconcept.gPa
gegRef.:g C:1-10
Objective:g g 4
4) AgrevenuegrulinggisgissuedgbygthegInternalgRevenuegServicegonlygingresponsegtogagverb
alginquirygbygagtaxpayer.
Answer:g g FALSE
Explanation:g ThegIRSgmaygvoluntarilygissuegagrevenuegruling
.gPagegRef.:g C:1-12
Objective:g g 4
5) TaxpayersgmustgpaygthegdisputedgtaxgpriorgtogfilinggagcasegwithgthegTaxgCour
t.gAnswer:g FALSE
Explanation:g TaxgCourtgisgthegonlygcourtgavailablegingwhichgtaxpayergdoesgnotghavegtogprepayg
thegtax.
PagegRef.:g C:1-14gandgC:1-
15gObjective:g 4
6) AppealsgfromgthegU.S.gTaxgCourtgaregtogthegCourtgofgAppealsgforgthegFederalgCircui
t.gAnswer:g FALSE
Explanation:g AppealsgfromgthegUSgTaxgCourtgaregtogthegCourtgofgAppealsgforgthegrespectivegcir
cuit.
PagegRef.:g C:1-14gandgC:1-
15gObjective:g 4
7) AppealsgfromgthegCourtgofgAppealsggogtogthegSupremegCourtgundergagwritgofgcertiorari.gT
hegSupremegCourtgdecidesgwhethergorgnotgtheygwillgheargthegcase.
Answer:g g TRUE
Explanation:g USSCgreviewsgrequestsgbeforegacceptance.
gPagegRef.:g C:1-14gandgC:1-15
Objective:g g 4
8) WhengthegTaxgCourtgfollowsgthegopiniongofgthegcircuitgcourtgofgappealsgtogwhichgthegcaseg
isgappealable,gthegcourtgisgfollowinggthe
A) Golsengrule.
B) Acquiescencegrule.
C) Forumgshoppinggrule.
D) Conformitygrule.
Answer:g g A
Explanation:g Sinceg1970gthegTaxgCourtghasgfollowedgthegGolsengconcept.
gPagegRef.:g C:1-21
Objective:g g 4
4
Copyrightg©g2021gPearsongEducation,gInc
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mynursytest.store
gEditiongRupert
Pearson'sgFederalgTaxationg2021:gComp.,g34eg(Rupert/Anderson
)gChaptergC1: TaxgResearch
LO1:g g OverviewgofgTaxgResearch
1) Taxgplanninggisgnotgangintegralgpartgofgopen-
factgsituations.gAnswer:g FALSE
Explanation:g Itgisgintegral.
gPagegRef.:g C:1-
2gObjective:g 1
2) Whengagtaxpayergcontactsgagtaxgadvisorgrequestinggadvicegasgtogthegmostgadvantageousgwaygt
ogdisposegofgagstock,gthegtaxgadvisorgisgfacedgwith
A) agrestricted-factgsituation.
B) agclosed-factgsituation.
C) angopen-factgsituation.
D) agrecognized-
factgsituation.gAnswer:g C
Explanation:g Advicegbeforegtransactiongisgopengfactgsituation.
gPagegRef.:g C:1-2
Objective:g g 1
3) Investigationgofgagtaxgproblemgthatginvolvesgagclosed-factgsituationgmeansgthat
A) thegclient'sgtransactionsghavegalreadygoccurredgandgthegtaxgquestionsgmustgnowgbegresolved.
B) thegclient'sgtaxgreturnghasgyetgtogbegfiled.
C) futuregeventsgmaygbegplannedgandgcontrolled.
D) researchgisgprimarilygconcernedgwithgapplyinggtheglawgtogthegfactsgasgtheygexis
t.gAnswer:g A
Explanation:g Aftergthegfactgrequestgisgagclosedgfactgsituation.g
PagegRef.:g C:1-2
Objective:g g 1
4) Explaingthegdifferencegbetweengagclosed-factgandgopen-factgsituation.
Answer:g Ingagclosed-
factgsituation,gthegtransactionghasgoccurredgandgthegfactsgaregnotgsubjectgtogchange.gIngangopen-
factgsituation,gthegtransactiongisgingthegformativegorgprojectedgstage,gandgthegtaxpayergisgablegtogs
tructuregthegfactsgsogthatgthegtaxgconsequencesgofgthegtransactiongcangbegmoregfavorable.
PagegRef.:g C:1-
2gObjective:g 1
1
Copyrightg©g2021gPearsongEducation,gInc
.
mynursytest.store
,DOWNLOADgTHEgTestgBankgforgPearsonsgFederalgTaxationg2021gComprehensiveg34th
gEditiongRupert
5) Ingallgsituations,gtaxgconsiderationsgaregofgprimarygimportance.gDogyougagreegorgdisagree
?gSupportgyourganswer.
Answer:g Itgisgimportantgtogconsidergnontaxgobjectivesgasgwellgasgtaxgobjectives.gForginstance,gifg
agwealthygclientgwantsgtogminimizeghergestategtaxesgwhilegpassinggtheggreatestgvaluegpossiblegtog
hergdescendants,gyougwouldgnotgsuggestgthatgshegleavegthegmajoritygofghergestategtogcharitygandg
onlygagfewghundredgthousandgdollarsgtoghergdescendants.gAlthoughgthisgwouldgreduceghergestateg
taxgliabilitygtogzero,gitgwouldgbeginconsistentgwithghergobjectivegofgallowingghergdescendantsgtogr
eceivegasgmuchgafter-taxgwealthgasgpossible.
PagegRef.:g C:1-2;gExamplegC:1-
2gObjective:g 1
LO2:g g StepsgingthegTaxgResearchgProcess
1) Identifygwhichgofgthegfollowinggstatementsgisgtrue.
A) Taxgplanninggisgangintegralgpartgofgbothgclosed-factgsituationsgandgopen-factgsituations.
B) Thegfirstgstepgingconductinggtaxgresearchgisgtogclearlygunderstandgthegissuesginvolved.
C) ThegStatementsgongStandardsgforgTaxgServicesgrecommendgthatgonlygwrittengtaxgadvicegb
egprovidedgtogthegclientgingallgsituations.
D) Allgofgthegabovegaregfalse
.gAnswer:g C
Explanation:g ThegStatementsgongStandardsgforgTaxgServicesgrecommendgthatgonlygwrittengtaxga
dvicegbegprovidedgtogthegclientgingallgsituations.
PagegRef.:g C:1-3gthroughgC:1-
5gObjective:g 2
2) Describegthegformatgofgagclientgmemo.
Answer:g Agclientgmemogshouldgincludegagstatementgofgthegfacts,gaglistgofgissues,gagdiscussiongo
fgrelevantgauthority,ganalysis,gandgrecommendationsgofgappropriategactionsgtogthegclientgbasedgo
ngthegresearchgresults.
PagegRef.:g SeegAdditionalgCommentgpagegC:1-
4gObjective:g 2
2
Copyrightg©g2021gPearsongEducation,gInc
.
mynursytest.store
,DOWNLOADgTHEgTestgBankgforgPearsonsgFederalgTaxationg2021gComprehensiveg34th
gEditiongRupert
3) Outlinegandgdiscussgthegtaxgresearchgprocess
.gAnswer:
1) Thegfactsgmustgbegdetermined.gHowever,gsomegfactsgmaygnotghavegoccurredgingangopen-
factgsituation.gWheregfactsghavegnotgyetgoccurred,gitgisgusefulgtogreviewgtaxgresearchgmaterialgt
ogdeterminegwhichgfactsgwouldgproducegthegmostgfavorablegoutcome.
2) Thegissuesgmustgbegdetermined.gThegissuesgmaygnotgalwaysgbegcleargandgmaygbegdifferentgtha
ngthegclientgbelieves.gThus,gonlygagthoroughgunderstandinggofgthegfactsgpermitsgangadequategform
ulationgofgthegissues.
3) Determinegwhichgauthoritiesgaregapplicable.
4) Evaluategthegauthorities.gChoosegthegonesgtogfollowgwhengtheregaregconflictinggauthorities.
5) Communicategthegresultgtogthegclient.gThegcommunicationgwithgthegclientgshouldgnotgresultgi
ngagmisunderstanding.gWhilegdiscussionsgwithgthegclientgmaygbegsuitable,gitgisgrecommendedgbyg
thegAICPA'sgStatementsgongStandardsgforgTaxgServicesgthatgthegcommunicationgbegwrittengwhe
regissuesgaregimportant,gunusualgorgcomplicated.gManygfirmsgrequiregthatgconclusionsgbegcomm
unicatedgingwriting.
PagegRef.:g C:1-
4gObjective:g 2
LO3:g g ImportancegofgthegFactsgtogthegTaxgConsequences
1) Thegtaxgconsultantgcanggivegangopiniongongagtaxgfactgpatterngwithoutgallgthegfact
s.gAnswer:g FALSE
Explanation:g Taxgpractitionergshouldgnotgprovidegangopiniongwithoutgallgrelevantgfacts.gPa
gegRef.:g C:1-6
Objective:g g 3
2) Taxgcompliancegisgthegbiggestgcomponentgofgagtaxgpractice
.gAnswer:g FALSE
Explanation:g Taxgconsultinggisgthegbiggestgcomponentgofgtaxgpractice.gPa
gegRef.:g C:1-6
Objective:g g 3
LO4:g g ThegSourcesgofgTaxgLaw
1) ThegInternalgRevenuegCodegofg1986gcontainsgthegcurrentgversiongofgthegtaxgla
w.gAnswer:g TRUE
Explanation:g Theglastgupdategwasg1986.
gPagegRef.:g C:1-8
Objective:g g 4
2) RegulationsgissuedgpriorgtogtheglatestgtaxglegislationgdealinggwithgagspecificgCodegsectiongar
egstillgeffectivegtogthegextentgtheygdognotgconflictgwithgthegprovisionsgingthegnewglegislation.g
Answer:g TRUE
Explanation:g PergIRCgthisgremainsgaccurate.gPa
gegRef.:g C:1-9
Objective:g g 4
3
Copyrightg©g2021gPearsongEducation,gInc
.
mynursytest.store
, DOWNLOADgTHEgTestgBankgforgPearsonsgFederalgTaxationg2021gComprehensiveg34th
gEditiongRupert
3) FinalgregulationsghavegalmostgthegsameglegislativegweightgasgthegIRC
.gAnswer:g TRUE
Explanation:g ThegCourtsghavegfollowedgthisgconcept.gPa
gegRef.:g C:1-10
Objective:g g 4
4) AgrevenuegrulinggisgissuedgbygthegInternalgRevenuegServicegonlygingresponsegtogagverb
alginquirygbygagtaxpayer.
Answer:g g FALSE
Explanation:g ThegIRSgmaygvoluntarilygissuegagrevenuegruling
.gPagegRef.:g C:1-12
Objective:g g 4
5) TaxpayersgmustgpaygthegdisputedgtaxgpriorgtogfilinggagcasegwithgthegTaxgCour
t.gAnswer:g FALSE
Explanation:g TaxgCourtgisgthegonlygcourtgavailablegingwhichgtaxpayergdoesgnotghavegtogprepayg
thegtax.
PagegRef.:g C:1-14gandgC:1-
15gObjective:g 4
6) AppealsgfromgthegU.S.gTaxgCourtgaregtogthegCourtgofgAppealsgforgthegFederalgCircui
t.gAnswer:g FALSE
Explanation:g AppealsgfromgthegUSgTaxgCourtgaregtogthegCourtgofgAppealsgforgthegrespectivegcir
cuit.
PagegRef.:g C:1-14gandgC:1-
15gObjective:g 4
7) AppealsgfromgthegCourtgofgAppealsggogtogthegSupremegCourtgundergagwritgofgcertiorari.gT
hegSupremegCourtgdecidesgwhethergorgnotgtheygwillgheargthegcase.
Answer:g g TRUE
Explanation:g USSCgreviewsgrequestsgbeforegacceptance.
gPagegRef.:g C:1-14gandgC:1-15
Objective:g g 4
8) WhengthegTaxgCourtgfollowsgthegopiniongofgthegcircuitgcourtgofgappealsgtogwhichgthegcaseg
isgappealable,gthegcourtgisgfollowinggthe
A) Golsengrule.
B) Acquiescencegrule.
C) Forumgshoppinggrule.
D) Conformitygrule.
Answer:g g A
Explanation:g Sinceg1970gthegTaxgCourtghasgfollowedgthegGolsengconcept.
gPagegRef.:g C:1-21
Objective:g g 4
4
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