1. To effectively convey the results of a tax research project, the practitioner must:
a. consult IRS officials.
b. apply professional judgment and communication skills.
c. have an informal discussion with the client.
d. all of the above.
2. The audience for tax research communication is primarily:
a. IRS officials.
b. the practitioner’s supervisor.
c. the client.
d. Both (b) and (c).
3. Tax-related communications can come in many forms, for example:
a. a posting on a general, business, or tax-oriented blog.
b. a speech to a general audience.
c. an article for publication in a professional journal
d. an appearance on a broadcast with more or less serious tone.
e. all of the above.
4. The heart of tax research communication is:
a. the File Memo
b. primary source material.
c. secondary source material.
d. network links.
5. Which of the following is CORRECT with respect to a file memo?
a. It should include only the strengths of the client’s position.
b. It should include a list of the tax issues that are in dispute and a matching conclusion for each identified issue.
c. It should be prepared only in closed-fact situations.
d. All of the above.
6. Initial determinations of the facts of a tax issue are likely to be incomplete because:
a. taxpayers tend to see the dispute only from their side.
b. taxpayers not being trained in the tax law may be unable to determine which facts are important to convey.
c. fact-gathering often depends on the reliability of the memory of taxpayers.
d. all of the above.
7. Which of the following statements is CORRECT with respect to conflicting tax laws?
a. Revenue Rulings and Revenue Procedures seldom are held to be invalid by a court.
b. Regulations are frequently held to be invalid by a court.
c. The decisions of courts that are higher in the judicial hierarchy should receive additional precedential weight.
d. All of the above are correct.
8. Other factors being equal, decisions of which of the following Circuit Courts should be given additional weight when
evaluating sources?
a. the Second and Ninth Circuits.
b. the Sixth and Ninth Circuits.
c. the Federal and First Circuits.
d. All the above courts have equal weight.
9. Which of the following statements is INCORRECT with regard to the weight of authority of tax documents?
a. District and Circuit Court opinions have direct bearing on the taxpayer only if they were issued in the
taxpayer’s jurisdiction.
b. The opinions of the Court of Federal Claims and Tax Court are not binding on a taxpayer if they were issued
with respect to a taxpayer who lives in a different jurisdiction.
c. Revenue Rulings and Revenue Procedures are frequently modified or held to be invalid by courts.
d. Older court decisions should be given a declining degree of importance unless they are Supreme Court cases.
10. By far the most common form of substantive communication between the tax professional and his or her client is a:
a. File Memo.
b. text message.
c. tax-oriented blog.
d. telephone call or e-mail.
11. The best way for a practitioner to confirm his or her understanding of the discussion in a telephone conversation with
a client is to:
a. tape all client telephone calls.
b. take accurate notes during the conversation.
c. send a hard copy of a follow-up letter to the client.
d. Important discussions with clients should only take place face-to-face.
12. Which statement is CORRECT regarding the proper form for a client letter?
a. Client letters should be brief.
b. Client letters should be lengthy and detailed in order to avoid malpractice problems.
c. Client letters should not exceed four pages.
d. All of the above statements are correct.
13. The two major elements of a client file are:
a. invoices and full-text court opinions.
b. internal firm memos and invoices.
c. a client letter and a file memo.
d. a written summary of telephone conversations and emails.
14. In client files, a practitioner should include all of the following types of underlying legal authority except?
a. Underlined or highlighted portions of important legal documents.
b. Case, regulation, and ruling briefs that are pertinent to the file memo.
c. A listing of legal citations and computer files that would show a researcher’s analysis.
d. All of the above information should be included in a client file.
15. Effective written business communication often makes use of which of the following guidelines?
a. The main point should be in the first paragraph.
b. Use clichés and trendy jargons to add interest to your communications.
c. Follow the 10–80–10 rules for structure of the communication.
d. Only (a) and (c).
16. Under the 10–80-10 rules for the structure of technical tax communications:
a. the introduction should identify three to six key points.
b. the introduction should be 10 percent, the body should be 80 percent, and the conclusion should be 10 percent.
c. Fifty percent of the body of the communication should be examples.
d. all of the above.
17. Which of the following statements is CORRECT regarding the use of visual aids in oral presentations?
a. Visual aids should be used to illustrate ideas that are difficult to convey strictly with words.
b. On average, allow at least six minutes of spoken presentation for each slide.
c. Slides should be colorful with substantial amounts of text.
d. Only (a) and (c).
18. An effective speaker should:
a. not be afraid of silence.
b. get physically close to the audience.
c. vary the pitch of his or her voice.
d. all of the above.
19. In order to provide the greatest amount of information to the greatest number of listeners, the speaker should direct
remarks to the:
a. front of the room.
b. back of the room.
c. highlights and general results of the research.
d. the host or hostess.
20. Which of the following statements is INCORRECT regarding letters to unsophisticated clients?
a. Citations to controlling authority should not be included.
b. The letter should give the answer in the first paragraph.
c. A practitioner should always attach a file memo to give the client more detailed information.
d. All of the above are correct.
21. IRS agents are bound only by which types of authority?
a. The Code.
b. The Code, administrative pronouncements and Supreme Court decisions.
c. Second and Ninth Circuit Court Decisions.
d. The Code and Regulations.
22. The tax researcher spends most of his or her time writing the memorandum to the client’s file.
a. True
b. False
23. The tone and nature of the file memo should recognize that its reader (the client) probably is not well versed in the
Federal tax law.
a. True
b. False
24. A file memorandum should not include citations to secondary sources of tax law, such as commercial tax services.
a. True
b. False
25. Generally, the file memo should be accompanied in the file by briefs of one or more pertinent cases or administrative
pronouncements.
a. True
b. False
26. Generally, it is better to cite more recent court decisions than older decisions to support one’s position.
a. True
b. False
27. Tax treatises and journal articles should not be used in the formation of the practitioner’s research schedule.
a. True
b. False
28. Even if all of the judicial precedent supports a taxpayer’s position, the court still may hold against the taxpayer.
a. True
b. False
29. IRS agents are bound by District Court decisions.
a. True
b. False
30. Consulting firms and tax departments all use the same format for client files.
a. True
b. False
31. In oral communications, a speaker should always aim the presentation at the audience members who have the least
amount of knowledge.
a. True
b. False
32. Well-written case opinions typically provide a summary of the evolution of the pertinent tax law and a discussion of
the parties’ competing interpretations.
a. True
b. False
33. In slides and other visual aids, fancy fonts and many colors should be used to create a more sophisticated
presentation.
a. True
b. False
34. Public speaking is an important part of the tax practitioner’s professional life and can be an accurate predictor of
success.
a. True
b. False
35. More research engagements entail closed-fact settings than open-fact situations.
a. True
b. False
36. Paper reduction should be the main goal in deciding whether or not to include duplications of controlling law in a
client file.
a. True
b. False
37. State the purposes for which a file memorandum is designed.
38. Identify the major elements of a client letter, and briefly discuss the difference between a letter to a sophisticated
client and to an unsophisticated client.
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39. Identify five types of tax-related communications.
40. You are preparing for an audit with an IRS agent for an important client. Your research has uncovered several
favorable rulings and court decisions. What are the key points that should guide you in evaluating sources of the law?
41. Amy and Frank got married and they have approached you seeking your views about the gift tax and income tax
consequences on the following facts.
As per the prenuptial agreement, Amy gave to Frank $100,000 of appreciated stock on the morning of their wedding.
Amy’s basis in the stock was $35,000. Under the terms of the agreement, Frank surrendered all other marital rights
and claims to Amy’s assets in exchange for these securities. Both Frank and Amy are residents of Arizona.
The file memo you prepared contains the following legal conclusions, based on controlling authority:
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• IRC Section 2501 imposes a tax on the transfer of property by gift, not when it is received by the donee, but upon
the transfer. The donor is taxed, not the donee.
• The Supreme Court has held that prenuptial transfers in relinquishment of marital rights are not adequate and full
consideration for the transfer of property. So, the transfer is treated as a gift.
• Since the prenuptial agreement is enforceable only after the marriage, the transfer has not taken place until after
the marriage occurred. Thus, the transfer is eligible for the gift tax marital deduction.
• Although the transaction resulted in a gift, no gift tax is imposed due to the application of the annual exclusion and
the unlimited gift tax marital deduction.
• Neither party recognizes gross income upon release of the marital rights. Gross income does not include the value
of property acquired by gift.
• The donee takes the donor’s income tax basis in the transferred property.
Based on the information provided above, draft a client letter to an unsophisticated client explaining the gift tax
consequences and the income tax consequences of the stock transfer.
