Answer true lo 24 difficulty easy 17 a proposed

ANSWER : True
LO : 2.4
DIFFICULTY : Easy
_____ 17. A proposed regulation can be relied on when planning a transaction .
ANSWER : False
LO : 2.4
DIFFICULTY : Easy

Chapter 2: The Tax Practice Environment 3
_____ 18. Acquiescence by the Internal Revenue Service ’ s Commissioner means that the IRS will follow the decision in the
future .
ANSWER : True
LO : 2.4
DIFFICULTY : Easy
_____ 19. The Golsen rule requires the Tax Court to follow all other Federal District Court decisions in the same Circuit .
ANSWER : False
LO : 2.4
DIFFICULTY : Easy
_____ 20. A memo to file for a client should be more detailed than the client letter .
ANSWER : True
LO : 2.4
DIFFICULTY : Easy
Short - answer Questions : Provide a brief written solution to each of the following questions .
1. Explain how tax compliance differs from tax planning .
ANSWER : Tax compliance consists of gathering , evaluating and classifying the relevant information for filing a
taxpayer ’ s tax return . Compliance deals primarily with transactions that have already taken place . Tax planning is the
process of evaluating the tax consequences associated with a transaction that has yet to take place and making
recommendations that will achieve the desired objectives with the least tax cost . Tax planning primarily deals with future
transactions .
LO : 2.1 & 2.3
DIFFICULTY : Easy
2. Explain what is meant by the statute of limitations .
ANSWER : The statute of limitations is the period of time beyond which legal actions or changes to the tax return cannot be
made by either the taxpayer or the government . Under most circumstances , the IRS cannot challenge a tax return later than
three years after its due date or the date it was filed , if later .
LO : 2.1
DIFFICULTY : Easy
3. Explain the difference between tax avoidance and tax evasion .
ANSWER : Tax avoidance is the lawful use and interpretation of the tax laws in a manner that minimizes taxes . Tax evasion is
the deliberate ignoring of a tax law to reduce taxes and is illegal .
LO : 2.1 & 2.2
DIFFICULTY : Easy
4. When may a CPA use estimates in the preparation of a client ’ s tax return ?
ANSWER : A CPA may use estimates to prepare a tax return when actual data is unavailable at the time of filing or missing . A
taxpayer may have been the subject of a casualty loss that destroyed records or a computer failure may prevent the
recovery of a complete set of financial records . In such a case , the return should not imply greater accuracy than the
estimates permit .
LO : 2.2
DIFFICULTY : Easy
5. Which tax return preparers are required to obtain preparer tax identification numbers ?

4 Taxation for Decision Makers Test Bank
ANSWER : All persons who prepare tax returns for payment , or who employ one or more persons who are paid for the
preparation of all or a substantial portion of a federal tax return or claim for refund , must obtain a PTIN , a Paid Preparer
Tax Identification Number .