1. Lillian bought local public activity municipal bonds and financed a new home because she was interested in getting some tax-free interest and itemizing her deductions on her federal tax return. This would be a good example of which of the following:
(1) Tax evasion
(2) Buying bonds exempt from regular income tax, but subject to AMT
(3) Tax avoidance
(4) Supporting a local municipality
(5) Building long-term equity through home ownership
A) 1, 2, and 5 only
B) 2, 3, 4, and 5 only
C) 3, 4, and 5 only
D) 3 and 5 only
2. Which of the following might a CFP® certificant recommend if they want to provide tax-deferred income to an investor:
(1) Corporate bonds in a brokerage account
(2) Dividend stocks in a traditional IRA
(3) Fixed annuity
(4) High-yield mutual funds in a 401(k) plan
(5) REIT investments in a joint brokerage
A) 1, 2 , and 3 only
B) 2, 3, and 4 only
C) 3, 4, and 5 only
D) 1, 2, 3, 4, and 5
3. Which of the following statements about taxes are TRUE?
A) Tax evasion is illegal
B) Tax avoidance is illegal
C) Tax-free income is taxed at the federal level
D) The Treasury Department is the highest source of tax authority
4. All of the following are issued by the National Office of the IRS, EXCEPT?
A) Private letter rulings
B) Technical advice memorandums
C) Revenue rulings
5. Which of the following statements are TRUE regarding the federal tax trial & appeal courts?
I. Jury trial is not available in the U.S. Tax Court
II. Appeals can be made to the U.S. Court of Appeals
III. In the U.S. District Court, taxpayer must pay their deficiency, then sue for refund
IV. U.S. Court of Federal Claims rules on monetary cases against the U.S.
A) I and II only
B) I, II, and III only
C) II, III, and IV only
D) I, II, III, and IV
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