Chap 01 2026 - Nellen
Indicate whether the statement is true or false.
1. Appeals from the U.S. Court of Federal Claims go to the U.S. Supreme Court.
a. True
b. False
ANSWER: False
2. The Golsen rule no longer applies to the U.S. Tax Court.
a. True
b. False
ANSWER: False
3. 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 (which could possibly sunset at the end of 2025).
a. True
b. False
ANSWER: True
4. Indexation of various income tax components was eliminated by the Tax Cuts and Jobs Act of 2017.
a. True
b. False
ANSWER: False
5. Determination letters usually involve proposed transactions.
a. True
b. False
ANSWER: False
6. Revenue-neutral tax laws reduce deficits.
a. True
b. False
ANSWER: False
7. When there is a direct conflict between an Internal Revenue Code section and a treaty provision, the most recent
item takes precedence.
a. True
b. False
ANSWER: True
Page 1
,Name: Class: Date:
Chap 01 2026 - Nellen
8. In a U.S. District Court, a jury can decide both questions of fact and questions of law.
a. True
b. False
ANSWER: False
9. Internal Revenue Code Section 318, which deals with the definition of related parties with respect to stock
redemptions, includes brothers and sisters in the related-party definition.
a. True
b. False
ANSWER: False
10. The favorable treatment of research and development expenses (via amortization deductions and tax credits) is
one means of controlling the economy.
a. True
b. False
ANSWER: False
11. The taxation part of the CPA exam (REG) includes both multiple-choice questions and task-based simulations.
a. True
b. False
ANSWER: True
12. Revenue Rulings carry the same legal force and effect as Regulations.
a. True
b. False
ANSWER: False
13. 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.
a. True
b. False
ANSWER: True
14. When there is a direct conflict between a tax treaty and the Internal Revenue Code, the Internal Revenue Code
takes precedence.
a. True
b. False
ANSWER: False
Page 2
,Name: Class: Date:
Chap 01 2026 - Nellen
15. The like-kind tax free exchange treatment is an example of the wherewithal to pay concept.
a. True
b. False
ANSWER: True
16. Letter rulings are issued by the National Office of the IRS.
a. True
b. False
ANSWER: True
17. The encouragement of private-sector pension plans can be justified under the encouragement of certain
industries.
a. True
b. False
ANSWER: False
18. Although a corporation is subject to a Federal income tax, a partnership is not.
a. True
b. False
ANSWER: True
19. Taxpayers may read Committee Reports to determine the intent of Congress.
a. True
b. False
ANSWER: True
20. The U.S. national debt is around $20 trillion.
a. True
b. False
ANSWER: False
21. 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.
a. True
b. False
ANSWER: True
22. Treasury Decisions are issued by the Treasury Department to promulgate new Regulations.
a. True
b. False
ANSWER: True
Page 3
, Name: Class: Date:
Chap 01 2026 - Nellen
23. Proposed Regulations are published in the Federal Register.
a. True
b. False
ANSWER: True
24. Alabama and South Carolina are community property states.
a. True
b. False
ANSWER: False
25. A tax bill cannot originate in the Senate Finance Committee.
a. True
b. False
ANSWER: False
26. A U.S. District Court must abide by the precedents set by the U.S. Court of Appeals of its jurisdiction.
a. True
b. False
ANSWER: True
27. 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.
a. True
b. False
ANSWER: True
28. “Legislative" regulations carry more weight than “interpretative” regulations.
a. True
b. False
ANSWER: True
29. The annual gift tax exclusion in 2025 is $18,000.
a. True
b. False
ANSWER: False
30. Proposed Regulations have the force and effect of law.
a. True
b. False
ANSWER: False
Page 4
Indicate whether the statement is true or false.
1. Appeals from the U.S. Court of Federal Claims go to the U.S. Supreme Court.
a. True
b. False
ANSWER: False
2. The Golsen rule no longer applies to the U.S. Tax Court.
a. True
b. False
ANSWER: False
3. 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 (which could possibly sunset at the end of 2025).
a. True
b. False
ANSWER: True
4. Indexation of various income tax components was eliminated by the Tax Cuts and Jobs Act of 2017.
a. True
b. False
ANSWER: False
5. Determination letters usually involve proposed transactions.
a. True
b. False
ANSWER: False
6. Revenue-neutral tax laws reduce deficits.
a. True
b. False
ANSWER: False
7. When there is a direct conflict between an Internal Revenue Code section and a treaty provision, the most recent
item takes precedence.
a. True
b. False
ANSWER: True
Page 1
,Name: Class: Date:
Chap 01 2026 - Nellen
8. In a U.S. District Court, a jury can decide both questions of fact and questions of law.
a. True
b. False
ANSWER: False
9. Internal Revenue Code Section 318, which deals with the definition of related parties with respect to stock
redemptions, includes brothers and sisters in the related-party definition.
a. True
b. False
ANSWER: False
10. The favorable treatment of research and development expenses (via amortization deductions and tax credits) is
one means of controlling the economy.
a. True
b. False
ANSWER: False
11. The taxation part of the CPA exam (REG) includes both multiple-choice questions and task-based simulations.
a. True
b. False
ANSWER: True
12. Revenue Rulings carry the same legal force and effect as Regulations.
a. True
b. False
ANSWER: False
13. 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.
a. True
b. False
ANSWER: True
14. When there is a direct conflict between a tax treaty and the Internal Revenue Code, the Internal Revenue Code
takes precedence.
a. True
b. False
ANSWER: False
Page 2
,Name: Class: Date:
Chap 01 2026 - Nellen
15. The like-kind tax free exchange treatment is an example of the wherewithal to pay concept.
a. True
b. False
ANSWER: True
16. Letter rulings are issued by the National Office of the IRS.
a. True
b. False
ANSWER: True
17. The encouragement of private-sector pension plans can be justified under the encouragement of certain
industries.
a. True
b. False
ANSWER: False
18. Although a corporation is subject to a Federal income tax, a partnership is not.
a. True
b. False
ANSWER: True
19. Taxpayers may read Committee Reports to determine the intent of Congress.
a. True
b. False
ANSWER: True
20. The U.S. national debt is around $20 trillion.
a. True
b. False
ANSWER: False
21. 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.
a. True
b. False
ANSWER: True
22. Treasury Decisions are issued by the Treasury Department to promulgate new Regulations.
a. True
b. False
ANSWER: True
Page 3
, Name: Class: Date:
Chap 01 2026 - Nellen
23. Proposed Regulations are published in the Federal Register.
a. True
b. False
ANSWER: True
24. Alabama and South Carolina are community property states.
a. True
b. False
ANSWER: False
25. A tax bill cannot originate in the Senate Finance Committee.
a. True
b. False
ANSWER: False
26. A U.S. District Court must abide by the precedents set by the U.S. Court of Appeals of its jurisdiction.
a. True
b. False
ANSWER: True
27. 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.
a. True
b. False
ANSWER: True
28. “Legislative" regulations carry more weight than “interpretative” regulations.
a. True
b. False
ANSWER: True
29. The annual gift tax exclusion in 2025 is $18,000.
a. True
b. False
ANSWER: False
30. Proposed Regulations have the force and effect of law.
a. True
b. False
ANSWER: False
Page 4
