Treasury Enforcement Agent Exam Criminal Law & Federal Statutes 1 — Questions and Answers
Question 1: Under 26 U.S.C. § 7201, what is the maximum prison sentence for criminal tax evasion?
- 3 years
- 5 years (Correct answer)
- 10 years
- 15 years
Correct answer: 5 years
26 U.S.C. § 7201 provides a maximum of 5 years imprisonment per count for the federal felony of tax evasion.
Question 2: The Bank Secrecy Act requires financial institutions to file a Currency Transaction Report (CTR) for cash transactions exceeding what threshold?
- $5,000
- $7,500
- $10,000 (Correct answer)
- $25,000
Correct answer: $10,000
The Bank Secrecy Act (31 U.S.C. § 5313) mandates a CTR for cash transactions exceeding $10,000 in a single business day.
Question 3: Under 31 U.S.C. § 5324, the crime of 'structuring' is best defined as which of the following?
- Combining multiple legitimate bank accounts to maximize interest
- Deliberately breaking up cash transactions to evade Currency Transaction Report requirements (Correct answer)
- Filing multiple amended tax returns to reduce liability
- Hiding assets in a series of foreign shell companies
Correct answer: Deliberately breaking up cash transactions to evade Currency Transaction Report requirements
Structuring involves intentionally breaking up cash transactions to keep them below the $10,000 CTR threshold, which is itself a federal crime regardless of whether the underlying funds are legal.
Question 4: Which mental state element is essential to prove criminal tax evasion under federal law?
- Negligence
- Willfulness (Correct answer)
- Gross negligence
- Recklessness
Correct answer: Willfulness
Criminal tax evasion requires proof of 'willfulness,' meaning the defendant intentionally violated a known legal duty to pay taxes.
Question 5: Under 18 U.S.C. § 1956, money laundering charges require that the transaction involve proceeds from what category of crimes?
- Any financial transaction over $10,000 in cash
- Specified Unlawful Activities (SUA) as defined in the statute (Correct answer)
- Any source of unreported income
- Foreign currency transactions only
Correct answer: Specified Unlawful Activities (SUA) as defined in the statute
18 U.S.C. § 1956 applies only to transactions involving proceeds of 'Specified Unlawful Activities,' a defined list of predicate offenses that includes drug trafficking, fraud, and other serious crimes.
Question 6: What is the statute of limitations for criminal tax evasion under 26 U.S.C. § 7201?
- 3 years
- 5 years
- 6 years (Correct answer)
- 10 years
Correct answer: 6 years
The statute of limitations for criminal tax evasion is 6 years from the date the offense was committed, longer than the standard 5-year period for most federal felonies.
Question 7: What is the key legal distinction between 'tax avoidance' and 'tax evasion'?
- Both are criminal offenses carrying different penalties
- Tax avoidance is illegal; tax evasion is not
- Tax avoidance uses legal means to reduce tax liability; tax evasion uses illegal means (Correct answer)
- Tax avoidance applies only to corporations; evasion applies to individuals
Correct answer: Tax avoidance uses legal means to reduce tax liability; tax evasion uses illegal means
Tax avoidance refers to legally minimizing one's tax burden through lawful deductions and planning, while tax evasion is the illegal underpayment or concealment of taxes owed.
Treasury Enforcement Agent Exam Criminal Law & Federal Statutes 1
Under 26 U.S.C. § 7201, what is the maximum prison sentence for criminal tax evasion?