Exam 2: Tax Compliance, the Irs, and Tax Authorities

The Senate Ways and Means Committee is in charge of drafting tax bills in the U.S.Senate.

According to Statements on Standards for Tax Services No.1, a tax practitioner can recommend a tax return position:

The Internal Revenue Code of 1986 is the name of the current income tax code of the United States of America.

Joel reported a high amount of charitable contributions as a deduction on his individual tax return relative to taxpayers with similar income levels.The information matching program is the IRS program most likely to identify Joel's tax return for audit.

Closed facts are especially conducive to tax planning.

For the following taxpayers, please recommend the most advantageous trial - level court(s)to litigate a tax issue with the IRS. a.Joe is litigating a tax issue with the IRS that is considered a question of fact (i.e., the answers depend on the facts of the case).There is not a lot of authority on point for this case, but Joe has a very appealing story to justify his position that is likely to be viewed sympathetically by his peers. b.The Circuit Court of Appeals for the Federal Circuit recently issued an opinion that is very favorable to the issue that Jesse plans to litigate with the IRS. c.The Circuit Court of Appeals for the Federal Circuit recently issued an opinion that is not favorable to the issue that Hank plans to litigate with the IRS. d.The 7^th Circuit (where Elizabeth resides)recently issued an opinion that is very favorable to the issue that Elizabeth plans to litigate with the IRS.

Edie would like to better understand a new code section enacted four weeks ago.Which of the following authorities will help Edie understand the newly enacted code section?

Lindy, a tax intern, is beginning her first tax research case for her employer.Her manager has given her a basic understanding of the facts and has identified the basic research question.Lindy is now ready to begin searching for relevant tax authorities.Describe the different types of research tools available to help a tax researcher locate relevant authority and identify which type may be especially useful for Lindy.

Because the U.S.District Court hears a broader set of cases, decisions by the U.S.District Court may be considered to have more authoritative weight than those by the U.S.Court of Federal Claims.

An extension to file a tax return does not extend the due date for tax payments.

Which of the following is not considered a secondary authority?

The IRS has recently completed its audit of Lorene's corporation.As a tax novice, she has very little understanding regarding the audit process and what happens next.Describe the post-audit process for Lorene and identify her options.

The regulation with the lowest authoritative weight is the:

The three basic types of IRS examinations are computer exams, office exams, and business exams.

If the IRS assesses additional tax on a tax return upon audit, a taxpayer may be subject to interest and penalties on the underpayment.

Which of the following is not a common method that the IRS uses to select returns for audit?

Which of the following is not a factor that determines whether a taxpayer is required to file a tax return?

Chris and Chuck were recently debating whether the Internal Revenue Code is "logical." Chris offers that she has briefly reviewed the Code and could hardly understand its organizational structure, if there is one.Please describe the basic organization of the Code and how understanding its organization may be especially beneficial to the tax researcher.

Houston has found conflicting authorities that address a research question for one of his clients.The majority of the authorities provide a favorable answer for his client.Nonetheless, there are several authorities that provide an unfavorable answer.Houston estimates that if the client takes the more favorable position on its tax return there is approximately a 60 percent chance that the position will be sustained upon audit or judicial proceeding.If the client takes this position on its tax return, will Houston be subject to penalty? Will the client potentially be subject to penalty?

Raul was researching an issue and found two tax court decisions issued within six months of each other, one for a taxpayer residing in California and the other for a taxpayer residing in New York, whose rulings were inconsistent.Raul knows that the federal tax law does not differ by state and the issue was exactly the same in both cases.Raul is confused because he thought that a basic judicial doctrine was that a court is supposed to rule consistently.Name and describe this judicial doctrine that requires judicial consistency and discuss why the tax court may have intentionally ruled inconsistently in this example.