JUDICIAL INTERPRETATIONS
TEST BANK, Chapter 5
Multiple Choice
Choose the best answer for each of the following questions:
1. An appeal from the Tax Court is to the:
a. U.S. Court of Appeals where the taxpayer is located.
b. District Court where the taxpayer is located.
c. U.S. Court of Federal Claims
d. Supreme Court
Answer: a
Rationale:
The U.S. Court of Appeals where the taxpayer is located is the appropriate venue for a
taxpayer to appeal a decision made by the Tax Court. Each federal judicial circuit has its
own U.S. Court of Appeals, so the taxpayer would appeal to the court within their circuit.
2. If taxpayers choose not to pay a tax deficiency, then they must petition which court?
a. the District Court
b. the U.S. Court of Federal Claims
c. the Tax Court
d. the U.S. Court of Appeal
Answer: c
Rationale:
Taxpayers who choose not to pay a tax deficiency must petition the Tax Court. The Tax
Court is a specialized court that hears disputes between taxpayers and the IRS before any
taxes are assessed or collected.
3. In which of the following courts does the taxpayer have to pay first and then sue for a
refund?
a. the Tax Court Small Cases Division
b. the District Courts and U.S. Court of Federal Claims
c. the U.S. Courts of Appeal
d. All of the above.
Answer: b
Rationale:
In the District Courts and the U.S. Court of Federal Claims, taxpayers must pay first and
then sue for a refund of taxes paid. This is because these courts do not have jurisdiction to
hear cases until after the tax has been paid and a claim for refund has been filed.
4. A decision of which of the following court(s) cannot be found in RIA's American
Federal Tax Reports (AFTR or AFTR2d)?
a. the District Courts
b. the Tax Court
c. the Supreme Court
d. the U.S. Court of Federal Claims
e. Only (b) and (c).
Answer: b
Rationale:
Decisions of the Tax Court cannot be found in RIA's American Federal Tax Reports
(AFTR or AFTR2d). The Tax Court maintains its own published reports of its decisions,
separate from those of other courts.
5. In Walter H. Johnson, 34 TCM 1056, ‘34’ stands for the:
a. year of decision
b. page number
c. volume number
d. paragraph number
Answer: c
Rationale:
In the citation '34 TCM 1056', '34' refers to the volume number of the Tax Court
Memorandum Decisions (TCM).
6. Decisions of which court(s) are published by West Publishing Company in its Federal
Supplement (F.Supp.) Series?
a. District Courts
b. U.S. Court of Federal Claims
c. U.S. Courts of Appeal
d. All of the above
Answer: a
Rationale:
Decisions of the District Courts are published by West Publishing Company in its Federal
Supplement (F.Supp.) Series.
7. In which of the following courts would a taxpayer want to argue an “emotional issue”
rather than a “technical” issue?
a. the Supreme Court
b. the District Courts
c. the U.S. Court of Federal Claims
d. the U.S. Tax Court
Answer: b
Rationale:
A taxpayer would want to argue an "emotional issue" rather than a "technical" issue in
the District Courts, as these courts are more likely to consider non-legal factors in their
decisions.
8. Which statement is CORRECT regarding the United States Tax Court?
a. The Tax Court will hear any Federal case.
b. The Tax Court is an appeals court.
c. The Tax Court must follow decisions of the District Court with jurisdiction over the
taxpayer.
d. None of the above statements are correct.
Answer: d
Rationale:
None of the statements are correct. The Tax Court is a specialized court that hears federal
tax cases, but it does not hear all federal cases. It is not an appeals court, and it is not
bound by decisions of District Courts.
9. A taxpayer who loses in the Small Cases Division of the Tax Court may appeal
directly to the:
a. Appellate division of the IRS.
b. District Court in the taxpayer’s circuit.
c. U.S. Court of Appeals in the taxpayer’s circuit.
d. Decisions in the Small Cases Division cannot be appealed.
Answer: d
Rationale:
Decisions in the Small Cases Division of the Tax Court cannot be appealed. This is
because the Small Cases Division is intended to provide a simplified process for
resolving small tax disputes without the need for formal appeals.
10. Which of the following is a secondary court reporter?
a. USTC
b. U.S.
c. F.Supp.
d. F.2d.
e. None of the above.
Answer: a
Rationale:
USTC stands for United States Tax Cases, which is a secondary court reporter that
publishes decisions from various federal courts related to tax matters.
11. Examples of instances where the burden of proof is on the government, rather than on
the taxpayer, include:
a. when the IRS uses statistics to recreate income.
b. fraud with intent to evade tax.
c. cases involving corporations with a net worth exceeding $7 million.
d. only (a) and (b).
Answer: d
Rationale:
In cases where the IRS uses statistics to recreate income or when there is fraud with
intent to evade tax, the burden of proof shifts to the government to prove its case. These
are instances where the taxpayer is not initially responsible for proving their innocence,
hence the burden rests on the government.
12. Under the Golsen rule, the Tax Court must:
a. compute the tax liability due the government.
b. reach the same decision in each region of the county.
c. follow the Court of Appeals that has direct jurisdiction over the taxpayer.
d. None of the above.
Answer: c
Rationale:
The Golsen rule requires the Tax Court to follow the precedent of the Court of Appeals
that has direct jurisdiction over the taxpayer if such a precedent exists. This ensures
consistency in tax law interpretation within a specific jurisdiction.
13. Tax Court Memorandum decisions can be located in which of the following
reporters?
a. USTC
b. AFTR2d
c. the Tax Court of the United States Reports (T.C.)
d. None of the above
Answer: d
Rationale:
Tax Court Memorandum decisions are not published in reporters. They are typically
found in unofficial sources such as online databases or the Tax Court's own website.
14. Which reporter is the official, government reporter for U.S. Supreme Court tax cases?
a. S.Ct.
b. U.S.
c. AFTR2d
d. The government does not print Supreme Court cases.
Answer: b
Rationale:
The official, government reporter for U.S. Supreme Court cases, including tax cases, is
the United States Reports (U.S.).
15. When a Tax Court decision is said to be entered under Rule 155, it means:
a. the Court computed the refund due the taxpayer.
b. the Court reaches a decision without calculating the tax.
c. the Court must follow the Court of Appeals that has direct jurisdiction over the
taxpayer.
d. the case cannot be appealed.
Answer: b
Rationale:
When a Tax Court decision is entered under Rule 155, it means that the Court has
reached a decision without calculating the tax liability. Instead, it typically directs the
parties to calculate the tax liability according to the Court's decision.
16. An appeal from any of the Circuit Courts of Appeals is to the:
a. U.S. District Court.
b. U.S. Court of Federal Claims.
c. Court of Appeals for the Federal Circuit.
d. U.S. Supreme Court.
Answer: d
Rationale:
An appeal from any of the Circuit Courts of Appeals is typically to the U.S. Supreme
Court, which is the highest court in the federal judiciary.
17. In a court case, “dictum” or “dicta” is:
a. a statement or remark that is not necessary to support the court’s decision.
b. the legal concept that bars relitigation on the same set of facts.
c. a judgment that reverses the determination of a jury.
d. none of the above.
Answer: a
Rationale:
Dictum or dicta refers to a statement or remark made by a judge in a court opinion that is
not necessary to support the court's decision. It is not binding precedent.
18. A “writ of certiorari” is:
a. the process by which the Supreme Court agrees to review a lower court decision.
b. a judgment notwithstanding the verdict.
c. the procedure for determining if the authorities can hold an individual in custody.
d. a reversal of the prior decision of a court.
Answer: a
Rationale:
A "writ of certiorari" is the process by which the Supreme Court agrees to review a lower
court decision. It is a discretionary action taken by the Supreme Court.
19. The United States Tax Cases reporter is published by:
a. RIA.
b. CCH.
c. West Publishing.
d. the Government Printing Office (GPO).
Answer: c
Rationale:
The United States Tax Cases reporter is published by West Publishing, which is a major
publisher of legal materials including court decisions.
20. The citation ABC v. U.S., 375 F.2d. 456 (1992) tells the tax researcher that this is a
decision by which court?
a. a U.S. District Court
b. the Tax Court
c. a U.S. Circuit Court of Appeals
d. Only (a) and (b)
Answer: c
Rationale:
The citation '375 F.2d. 456' indicates that this is a decision from a U.S. Circuit Court of
Appeals.
21. The citation ABC v. U.S, 967 U.S. 567 (2012) tells the tax researcher that this is a
decision by which court?
a. District Court
b. Tax Court
c. Supreme Court
d. Court of Appeals
Answer: c
Rationale:
The citation '967 U.S. 567' indicates that this is a decision from the Supreme Court of the
United States. The "U.S." preceding the volume number signifies that it is a decision
from the U.S. Reports, the official reporter for Supreme Court decisions.
22. Which of the following statements is CORRECT regarding the U.S. Court of Federal
Claims?
a. It hears monetary claims against the Federal government, including tax refund claims.
b. It is a national court based in Washington, D.C.
c. It must apply the law in of the U.S. Court of Appeals in the taxpayer’s circuit.
d. All of the above statements are correct.
e. Only (a) and (b) are correct.
Answer: e
Rationale:
Both statements (a) and (b) are correct. The U.S. Court of Federal Claims hears monetary
claims against the Federal government, including tax refund claims, and it is a national
court based in Washington, D.C. Statement (c) is incorrect because the U.S. Court of
Federal Claims is not bound by the decisions of the U.S. Courts of Appeals.
23. In which of the following courts is a jury trial available?
a. U.S. District Courts
b. Tax Court
c. U.S. Court of Federal Claims
d. All of the above.
Answer: a
Rationale:
A jury trial is available in U.S. District Courts. However, neither the Tax Court nor the
U.S. Court of Federal Claims typically involve jury trials; they are typically bench trials
where the judge makes the decision.
24. Which of the following statements is INCORRECT regarding headnotes and case
briefs?
a. Headnotes are usually inserted at the beginning of a case by the court reporter editors.
b. Headnotes help researchers quickly determine if a case is relevant.
c. Case briefs are a summary of a case identifying the facts, issue, holding, and analysis.
d. All of the above statements are correct.
Answer: d
Rationale:
Statement (d) is incorrect. While statements (a), (b), and (c) are correct, not all of the
above statements are correct because statement (d) includes an incorrect assertion.
25. Where are current U.S. Court of Federal Claims decisions published?
a. West’s U.S. Court of Federal Claims reporter (Fed. Cl.)
b. West’s Federal Reporter, Third Edition (F.3d.)
c. West’s Federal Supplement series (F. Supp.)
d. None of the above.
Answer: a
Rationale:
Current U.S. Court of Federal Claims decisions are published in West’s U.S. Court of
Federal Claims reporter (Fed. Cl.). This reporter specifically covers decisions from the
U.S. Court of Federal Claims.
True or False
Indicate which of the following statements are true or false by circling the correct answer.
1. Either the taxpayer or the IRS may initiate legal proceedings in the Federal court
system.
Answer: True
Rationale:
Both the taxpayer and the IRS have the right to initiate legal proceedings in the Federal
court system regarding tax matters. Taxpayers may file lawsuits against the IRS to
challenge tax assessments or other decisions, while the IRS may file lawsuits to collect
unpaid taxes or enforce tax laws against taxpayers.
2. Judicial decisions constitute a secondary source of the tax law.
False
Rationale:
Judicial decisions constitute a primary, governmental source of the tax law.
3. The common form of legal citation is as follows: case name, volume number, page
number, reporter abbreviation.
Answer: False
Rationale:
The common form of legal citation is as follows: case name, volume number, reporter
abbreviation, page number.
4. The two levels of appellate courts in the Federal court system are the U.S. Courts of
Appeals and the U.S. Supreme Court.
Answer: True
Rationale:
The U.S. Courts of Appeals and the U.S. Supreme Court are indeed the two levels of
appellate courts in the Federal court system. Cases typically proceed from the U.S.
District Courts to the U.S. Courts of Appeals, and then may be appealed to the U.S.
Supreme Court, although the Supreme Court has discretion over which cases it will hear.
5. In most tax cases, the Internal Revenue Code places the burden of proof on the
government.
Answer: False
Rationale:
In most tax cases, the Internal Revenue Code places the burden of proof on the taxpayer.
6. The Tax Court was formerly known as the Board of Tax Appeals.
Answer: True
Rationale:
The Tax Court was indeed formerly known as the Board of Tax Appeals (BTA). It was
established as the BTA in 1924 and was later renamed the Tax Court of the United States
in 1942. Finally, in 1969, it acquired its current name, the United States Tax Court.
7. District Court judges hearing tax cases are tax specialists.
Answer: False
Rationale:
District Court judges hearing tax cases are generally not tax specialists. Tax Court judges
are tax specialists.
8. A regular Tax Court decision generally involves a new or unusual point of law, as
determined by the Chief Judge of the Court.
Answer: True
Rationale:
Regular Tax Court decisions often deal with complex legal issues or interpret tax laws in
ways that haven't been previously addressed by the court. The determination of whether a
case involves a new or unusual point of law may indeed be made by the Chief Judge of
the Tax Court or by the judges assigned to the case. These decisions are important for
establishing precedents and providing guidance on unclear areas of tax law.
9. The Small Cases Division of the Tax Court can only hear cases involving a disputed
deficiency, including penalties, of $15,000 or less.
Answer: False
Rationale:
The Tax Court Small Cases Division can hear cases involving a disputed deficiency of
$50,000 or less.
10. The U.S. Court of Federal Claims is a trial-level court.
Answer: True
Rationale:
The U.S. Court of Federal Claims primarily serves as a trial-level court where monetary
claims against the federal government, including tax refund claims, are heard. It has
jurisdiction over cases involving federal tax disputes, contract claims, takings claims, and
other matters where the United States is a defendant. Appeals from the U.S. Court of
Federal Claims typically go to the U.S. Court of Appeals for the Federal Circuit,
indicating its trial-level status.
11. There are 11 Circuit Courts of Appeals in the Federal court system.
Answer: False
Rationale:
There are 13 Circuit Courts of Appeals in the Federal Court system, including the First
through Eleventh Circuits, the D.C. Circuit and the Federal Circuit.
12. The appellant is the party who appeals a decision to a higher court.
Answer: True
Rationale:
In legal terminology, the appellant is indeed the party who initiates an appeal by bringing
a case to a higher court, seeking to overturn or modify a decision made by a lower court.
The appellant is dissatisfied with the lower court's decision and seeks review by a higher
authority.
13. Each U.S. Court of Appeals is independent and need not follow other Circuits in
making their decisions.
Answer: True
Rationale:
Each U.S. Court of Appeals operates within its own circuit and is not bound by the
decisions of other circuits. While decisions from other circuits may be persuasive
authority, each Court of Appeals has the autonomy to interpret laws and make decisions
based on its own analysis and understanding of the law.
14. En banc refers to a court decision by the full court.
Answer: True
Rationale:
"En banc" literally translates to "in bench" and refers to a session where all the judges of
a court participate in a case, rather than the usual panel of judges. An en banc hearing is
typically called for significant or complex cases, and the decision rendered represents the
collective judgment of the entire court rather than a smaller panel of judges.
15. Tax Court Summary Opinions are published in a printed reporter by the Government
Printing Office (GPO).
Answer: False
Rationale:
Tax Court Summary Opinions are not published in a print reporter, but are available
online through commercial tax services.
16. District Courts hear cases based on the entire U.S. Code, not just the Internal Revenue
Code.
Answer: True
Rationale:
District Courts are federal trial courts with general jurisdiction, meaning they have
authority to hear a wide range of cases arising under federal law. While they do hear
cases related to tax matters, they are not limited to cases solely involving the Internal
Revenue Code. District Courts have jurisdiction over cases based on various statutes and
legal principles found in the entire U.S. Code.
17. The U.S. Tax Court may examine the entire return of a taxpayer whose case it is
hearing.
Answer: True
Rationale:
The U.S. Tax Court has broad authority to examine all aspects of a taxpayer's return
during a case hearing. Unlike other courts where the examination may be limited to
specific issues, the Tax Court has the discretion to review the entire return and consider
any relevant information in reaching its decision. This comprehensive review allows the
Tax Court to make a thorough assessment of the taxpayer's tax liabilities and any issues
raised in the case.
18. If the Supreme Court refuses to review a lower case, the Supreme Court is upholding
the lower court decision.
Answer: False
Rationale:
If the Supreme Court fails to grant certiorari, it does not necessarily mean the Court
agrees with the lower court decision. It only means that the Supreme Court declines to
hear the case at this time.
19. If the taxpayer’s Circuit Court of Appeals has not yet ruled on an issue, a researcher
should not consider a decision on the same issue by a Court of Appeals outside of the
taxpayer’s circuit.
Answer: False
Rationale:
A research should look to decisions in the other Circuits if the taxpayer’s Circuit Court of
Appeals has not decided the issue. Other Circuit Court of Appeals decisions are
influential and have precedential value in anticipating the proper position for a client.
20. District Court decisions can vary significantly among the districts.
Answer: True
Rationale:
District Courts are trial courts with general jurisdiction over federal cases within their
respective districts. While federal law applies uniformly across the country, District
Courts have discretion in interpreting and applying the law, which can lead to variations
in decisions among different districts. Factors such as judicial precedent, local legal
practices, and individual judges' interpretations may contribute to differences in outcomes
across districts. Additionally, the demographics, economic conditions, and cultural
factors within each district may also influence judicial decision-making, further
contributing to variations in District Court decisions.
Short Answer
1. Identify the publisher, citation abbreviation, and types of cases that can be found in
two of the three reporters given below.
U.S. Tax Cases
Federal Reporter
American Federal Tax Reports
Answer:
2. Why would a taxpayer want to bring a case in the U.S. Court of Federal Claims?
Answer: The U. S. Tax Court and District Court of Appeals limit their cases to a
geographic appellate circuit while the Federal Claims Court appeals their actions to the
Federal Circuit Court of Appeals. The different circuits may have different precedent on
similar tax issues. A taxpayer would want to bring a case in the U.S. Court of Federal
Claims if the Court of Appeals in the taxpayer’s circuit has decided the issue adversely to
the taxpayer, and the Federal Circuit Court of Appeals, which establishes precedent for
the U.S. Court of Federal Claims, has established a rule favorable to the taxpayer.
3. Briefly explain the nonattorney-client confidentiality privilege.
Answer: Except with respect to written communications regarding tax shelters and tax
workpapers used to prepare financial statements, the attorney-client privilege extends to
communication between a taxpayer and any nonattorneys authorized to practice before
the IRS, such as CPAs and enrolled agents. The privilege may only be asserted in a
noncriminal tax matter before IRS or a Federal court. The confidentiality privilege
usually does not apply to the preparation of tax returns or the giving of accounting or
business advice.
Essay Question
1. Describe the federal court system and its jurisdiction over tax issues. Identify the
appeals and trial-level courts. Then, describe the factors that would go into a taxpayer’s
decision to bring his or her case in a particular federal court. Finally, explain the basic
rules of precedence for tax cases in the federal court system.
Answer: The U.S. Federal court system has five courts in total: three trial courts and two
appellate-level courts. The trial courts are the U.S. Tax Court, the District Courts around
the country, and the U.S. Court of Federal Claims. The two appellate-levels are the 13
Courts of Appeal and the U.S. Supreme Court. An appeal from the Tax Court and District
Court is to the Court of Appeals where the taxpayer resides or is located. An appeal from
the U.S. Court of Federal Claims is to the Court of Appeals for the Federal Circuit.
Decisions from the U.S. Circuit Courts of Appeal can be appealed to the Supreme Court,
which may not choose to hear the case.
A taxpayer would choose the Tax Court if the taxpayer did not want to pay the deficiency
first. The Tax Court is the only trial court in which the taxpayer does not have to pay first
and sue for a refund. The taxpayer may also want to choose the Tax Court if the issue is
highly technical, since Tax Court judges are tax specialists while District Court judges
are generalists. If the taxpayer has an “emotional” issue, the taxpayer could request a jury
trial in the U.S. District Court where the taxpayer lives or is located. Jury trials can only
be brought in the U.S. District Courts.
A taxpayer would want to bring a case in the U.S. Court of Federal Claims if the Court of
Appeals in the taxpayer’s circuit has decided the issue in adversely to the taxpayer but the
Federal Circuit Court of Appeals, which establishes precedent for the U.S. Court of
Federal Claims, has established a rule favorable to the taxpayer.
The Tax Court, under the Golsen rule, must apply the rule established in the taxpayer’s
Circuit Court of Appeal. If that Circuit has not decided the issue, the Tax Court may
make its own decision. Each U.S. Court of Appeals is independent and need not follow
the precedents set by other circuits. All courts must follow a Supreme Court precedent.
Test Bank for Federal Tax Research
Roby B. Sawyers, Steven Gill, Debra Sanders, William A. Raabe, Gerald E. Whittenburg
9781111221645, 9781337282987, 9781285439396
