Question & Answer

Why do Keynesians argue that, even in the long run, demand-side policies will be still be required if faster growth in aggregate supply is to be achieved?

Carlos has located a regulation that appears to answer his tax research question.  He is concerned because the regulation is a temporary regulation.  Evaluate the authoritative weight of this type of regulation.  Should he feel more or less confident in his answer if the regulation was a proposed regulation?

Tyrone recently read a regulation that Congress specifically requested the IRS to issue.  What type of regulation is this?  How does this regulation’s authoritative weight compare to other regulations?

In researching a tax question, you find only one authority (a trial-level court opinion) that is directly on point.  Which court would you least prefer to have heard this case and why?

Simpson Corp. is an entertainment firm that derives approximately 30% of its income from the Casino Knights Division, which manages gambling facilities. As auditor for Simpson Corp., you have recently overheard the following discussion between the controller and financial vice president. Vice President: If we sell the Casino Knights Division, it seems ridiculous to segregate the results of the sale in the income statement. Separate categories tend to be absurd and confusing to the stockholders. I believe that we should simply report the gain on the sale as other income or expense without detail. Controller: Professional pronouncements would require that we report this information separately in the income statement. If a sale of this type is considered unusual and infrequent, it must be reported as an extraordinary item. Vice President: What about the walkout we had last month when employees were upset about their commission income? Would this situation not also be an extraordinary item? Controller: I am not sure whether this item would be reported as extraordinary or not. Vice President: Oh well, it doesn’t make any difference because the net effect of all these items is immaterial, so no disclosure is necessary. Instructions (a) On the basis of the foregoing discussion, answer the following questions. Who is correct about handling the sale? What would be the correct income statement presentation for the sale of the Casino Knights Division? (b) How should the walkout by the employees be reported? (c) What do you think about the vice president’s observation on materiality? (d) What are the earnings per share implications of these topics?

Mason was shocked to learn that the current Code is the Internal Revenue Code of 1986.  He thought that U.S. tax laws change more frequently.  What is wrong with Mason’s perception?

Describe in general the process by which new tax legislation is enacted.

The y-axis of an x-y positioning table is driven by a stepping motor that is connected to a leadscrew with a 3:1 gear reduction (3 turns of the motor for each turn of the leadscrew). The stepping motor has 72 step angles. The leadscrew has 5 threads per inch and provides an axis range = 30.0 in. There are 16 bits in each binary register used by the controller to store position data for the axis. (a) What is the control resolution of the y-axis? Determine (b) the required rotational speed of the y-axis stepping motor and (c) the corresponding pulse train frequency to drive the table in a straight line from point (x = 20 in, y = 25 in) to point (x = 4.5 in, y = 7.5 in) in exactly 30 sec. Ignore acceleration.

The president recently vetoed a tax act passed by the House and Senate.  Is the tax act dead?  If not, what will it take for the act to be passed?

What are the five basic parts of an internal research memo?

What is the difference between primary and secondary authorities?  Explain the role of each authority type in conducting tax research.

Jorge is puzzled that the IRS and his CPA could legitimately reach different conclusions on a tax issue.  Why does this happen?

Explain how trading securities are accounted for and reported.

In writing a research memo, what types of facts should be included in the memo?

In constructing a keyword search, what should the keyword search include?

Lindley has become very frustrated in researching a tax issue using keyword searches.  What suggestions can you give her?

Nola, a tax novice, has a fairly simple tax question.  Besides tax services, what are some sources that she can use to answer her question?

Armando identifies a tax research question as being a question of fact.  What types of authorities should he attempt to locate in his research?

How are citators used in tax research?

Identify some of the sources for tax professional standards.  What are the potential ramifications of failing to comply with these standards

Levi is recommending a tax return position to his client.  What standard must he meet to satisfy his professional standards?  What is the source of this professional standard?

What is Circular 230?

What are the basic differences between civil and criminal tax penalties?

What are some of the most common civil penalties imposed on taxpayers?

What are the taxpayer’s standards to avoid the substantial understatement of tax penalty?