Question 1

The statute of limitations is unlimited for a tax return that is never filed.

Accepted Answer

A) True 
 B)False

Question 2

The IRS audited the tax returns of Dan Jackson, a gifted painter. It contended that, between 2003 and 2005, Jackson received $500,000 for his paintings, but reported only $75,000. Jackson attributed the shortfall to his receipt of cash at art fairs and street fairs. He allegedly concealed the cash payments in separate bank accounts unbeknownst to his CPA. What tax compliance issues regarding the alleged underreporting are pertinent to the CPA?

Accepted Answer

Dan Jackson, his agent, and CPA (tax ret

Question 3

Identify which of the following statements is true.

Accepted Answer

A)  The statute of limitations, which stipulates the time frame within which either the government or the taxpayer may request a redetermination of tax due, usually expires six years after the date on which the return is filed. 
B)  The statute of limitations limits the time during which a taxpayer may claim a refund of an overpayment of tax. 
C)  If a taxpayer omits from gross income an amount in excess of 25% of the gross income shown on his return, the statute of limitations is five years. 
D)  All of the above are true. 
A)  The statute of limitations, which stipulates the time frame within which either the government or the taxpayer may request a redetermination of tax due, usually expires six years after the date on which the return is filed. 
B)  The statute of limitations limits the time during which a taxpayer may claim a refund of an overpayment of tax. 
C)  If a taxpayer omits from gross income an amount in excess of 25% of the gross income shown on his return, the statute of limitations is five years. 
D)  All of the above are true.

Question 4

A letter ruling is a written determination that interprets and applies the tax laws to the taxpayer's specific set of facts.

Accepted Answer

A) True 
 B)False

Question 5

Identify which of the following statements is true.

Accepted Answer

A)  A partnership is not required to file a return if the partnership has no income for the year. 
B)  The "automatic" extension period for filing an individual return is five months. 
C)  Individuals and calendar year-end corporations may obtain six-month extensions for paying taxes and filing their returns for the taxable year by filing the appropriate extension requests. 
D)  All of the above are false. 
A)  A partnership is not required to file a return if the partnership has no income for the year. 
B)  The "automatic" extension period for filing an individual return is five months. 
C)  Individuals and calendar year-end corporations may obtain six-month extensions for paying taxes and filing their returns for the taxable year by filing the appropriate extension requests. 
D)  All of the above are false.

Question 6

The IRS will issue a ruling

Accepted Answer

A)  on prospective transactions only. 
B)  only if regulations have been issued on the subject. 
C)  on a completed transaction for which a return has been filed. 
D)  to clarify the tax treatment of a transaction. 
A)  on prospective transactions only. 
B)  only if regulations have been issued on the subject. 
C)  on a completed transaction for which a return has been filed. 
D)  to clarify the tax treatment of a transaction.

Question 7

One of your corporate clients comes to you asking for advice regarding a proposed merger with XYZ Company. You (a) issue an opinion concerning the FMV of XYZ, (b) prepare pro forma financials for the merged entity to be, (c) draft shareholder resolutions for your client approving the proposed merger, (d) file a shareholder proxy statement with the U.S. Securities and Exchange Commission, and (e) advise your client's board of directors concerning the advantages of a Type A versus a Type B reorganization. Which of these activities, if any, constitutes the unauthorized practice of law?

Accepted Answer

Activities (c) and (d) constitute the un

Question 8

Which of the following communications between an accountant and client are not privileged?
a) An accountant orally communicates to his client that he should set up a foreign subsidiary to shift taxable income to a lower tax jurisdiction.
b) An accountant privately submits to the client a plan for shifting taxable income to a lower tax jurisdiction.
c) During a meeting in which a client is asking for advice relating to criminal fraud, the client tells his accountant that he lied to the IRS.

Accepted Answer

Communications (b) and (c) are not privi

Question 9

Gerald requests an extension for filing his last year's individual income tax return. His tax liability is $10,000, of which $8,000 was withheld, leaving a balance due of $2,000 when he files on August 1 of the current year. His penalty for failure to pay the tax on time is

Accepted Answer

A)  $0. 
B)  $40. 
C)  $300. 
D)  $400. 
A)  $0. 
B)  $40. 
C)  $300. 
D)  $400.

Question 10

Identify which of the following statements is false.

Accepted Answer

A)  The IRS issues annually a revenue procedure that prescribes how a letter ruling should be requested and the information to be contained in the ruling request. 
B)  The request for a ruling may contain a suggested conclusion (or answer) that the taxpayer proposes that the IRS adopt in the described situation. 
C)  As a practical consideration, taxpayers always find it preferable to obtain an advance ruling on questionable tax situations. 
D)  Third parties may not cite private letter rulings as authority for the tax consequences of their transactions. 
A)  The IRS issues annually a revenue procedure that prescribes how a letter ruling should be requested and the information to be contained in the ruling request. 
B)  The request for a ruling may contain a suggested conclusion (or answer) that the taxpayer proposes that the IRS adopt in the described situation. 
C)  As a practical consideration, taxpayers always find it preferable to obtain an advance ruling on questionable tax situations. 
D)  Third parties may not cite private letter rulings as authority for the tax consequences of their transactions.

Question 11

Identify which of the following statements is false.

Accepted Answer

A)  So-called private letter rulings are made public after confidential information is eliminated. 
B)  A letter ruling is a written statement issued to a taxpayer by the IRS that interprets and applies the tax laws to that taxpayer's specific set of facts. 
C)  Only the taxpayer can appeal the decision of a court of original jurisdiction to the next higher court. 
D)  If the Supreme Court decides to hear a case, it grants certiorari. 
A)  So-called private letter rulings are made public after confidential information is eliminated. 
B)  A letter ruling is a written statement issued to a taxpayer by the IRS that interprets and applies the tax laws to that taxpayer's specific set of facts. 
C)  Only the taxpayer can appeal the decision of a court of original jurisdiction to the next higher court. 
D)  If the Supreme Court decides to hear a case, it grants certiorari.

Question 12

Identify which of the following statements is true.

Accepted Answer

A)  If a taxpayer fails to file a return, the statute of limitations is extended to 10 years. 
B)  If a couple files a joint return but only one spouse had income, only the spouse with income is responsible for paying any tax due. 
C)  Joint and several liability means that each spouse is potentially liable for the full amount of tax due. 
D)  All of the above are false. 
A)  If a taxpayer fails to file a return, the statute of limitations is extended to 10 years. 
B)  If a couple files a joint return but only one spouse had income, only the spouse with income is responsible for paying any tax due. 
C)  Joint and several liability means that each spouse is potentially liable for the full amount of tax due. 
D)  All of the above are false.

Question 13

On July 25 of the following year, Joy files her current calendar-year tax return without having requested an extension. On October 8, she pays the amount due. The tax shown on her return is $25,000. Her current-year withholding tax is $20,000. Joy pays no estimated taxes and does not claim any tax credits on her current year return. Calculate the penalties that the IRS is likely to assess. Ignore the penalty for underpayment of estimated taxes. Assume she did not commit fraud.

Accepted Answer

Failure-to-pay penalty -
0.005 × ($25,00

Question 14

Identify which of the following statements is false.

Accepted Answer

A)  Appeals officers usually have the operating authority to settle disputes with taxpayers based on the "hazards of litigation." 
B)  When an appeals officer is dealing with an "appeals coordinated issue," he has the authority to settle with the taxpayer based on the "hazards of litigation." 
C)  A Technical Advice Memorandum may be requested by an IRS auditor if the transaction in question involves an especially complex tax issue. 
D)  If the taxpayer and the appeals officer fail to reach agreement, the IRS issues a 90-day letter. 
A)  Appeals officers usually have the operating authority to settle disputes with taxpayers based on the "hazards of litigation." 
B)  When an appeals officer is dealing with an "appeals coordinated issue," he has the authority to settle with the taxpayer based on the "hazards of litigation." 
C)  A Technical Advice Memorandum may be requested by an IRS auditor if the transaction in question involves an especially complex tax issue. 
D)  If the taxpayer and the appeals officer fail to reach agreement, the IRS issues a 90-day letter.

Question 15

Treasury Department Circular 230 regulates the practice of attorneys, CPAs, enrolled agents, and enrolled actuaries before the IRS.

Accepted Answer

A) True 
 B)False

Question 16

An automatic extension of time from the regular filing date for an individual tax return may be received, without giving the IRS a reason, for

Accepted Answer

A)  2 months. 
B)  3 months. 
C)  4 months. 
D)  6 months. 
A)  2 months. 
B)  3 months. 
C)  4 months. 
D)  6 months.

Question 17

Terry files his return on March 31. The return shows taxes of $6,000, and Terry pays this entire amount when he files his return. By what time must he file a claim of refund?

Accepted Answer

A)  the later of two years from the return filing or three years from the date the tax is paid 
B)  the later of three years from the return due date or two years from the date the tax is paid 
C)  two years from the payment of tax date, if the IRS mails a notice of deficiency in the third year following the due date of the return 
D)  four years from the payment of tax date, if the IRS mails a notice of deficiency 
A)  the later of two years from the return filing or three years from the date the tax is paid 
B)  the later of three years from the return due date or two years from the date the tax is paid 
C)  two years from the payment of tax date, if the IRS mails a notice of deficiency in the third year following the due date of the return 
D)  four years from the payment of tax date, if the IRS mails a notice of deficiency

Question 18

The maximum failure to file penalty is a total of 25% of the underpayment.

Accepted Answer

A) True 
 B)False

Question 19

Identify which of the following statements is true.

Accepted Answer

A)  The failure-to-pay penalty is waived if the additional tax due with the filing of the extended return does not exceed 15% of the tax owed for the year. 
B)  If both the failure-to-file and the failure-to-pay penalties are owed, the taxpayer will incur a maximum addition to tax of 5.5% per month. 
C)  Individuals having substantial income from sources not subject to regular withholding generally should make quarterly estimated tax payments to the IRS. 
D)  All of the above are false. 
A)  The failure-to-pay penalty is waived if the additional tax due with the filing of the extended return does not exceed 15% of the tax owed for the year. 
B)  If both the failure-to-file and the failure-to-pay penalties are owed, the taxpayer will incur a maximum addition to tax of 5.5% per month. 
C)  Individuals having substantial income from sources not subject to regular withholding generally should make quarterly estimated tax payments to the IRS. 
D)  All of the above are false.

Question 20

According to Circular 230, what should a CPA do upon discovery of an error in a client's prior-year return?

Accepted Answer

A)  Notify the IRS of the error. 
B)  Inform the client of the error and its tax consequences. 
C)  File an amended return for the client. 
D)  Do nothing. 
A)  Notify the IRS of the error. 
B)  Inform the client of the error and its tax consequences. 
C)  File an amended return for the client. 
D)  Do nothing.

The statute of limitations is unlimited for a tax return that is never filed.

Identify which of the following statements is true.

A letter ruling is a written determination that interprets and applies the tax laws to the taxpayer's specific set of facts.

Identify which of the following statements is true.

The IRS will issue a ruling

Gerald requests an extension for filing his last year's individual income tax return. His tax liability is $10,000, of which $8,000 was withheld, leaving a balance due of $2,000 when he files on August 1 of the current year. His penalty for failure to pay the tax on time is

Identify which of the following statements is false.

Identify which of the following statements is false.

Identify which of the following statements is true.

Identify which of the following statements is false.

Treasury Department Circular 230 regulates the practice of attorneys, CPAs, enrolled agents, and enrolled actuaries before the IRS.

An automatic extension of time from the regular filing date for an individual tax return may be received, without giving the IRS a reason, for

Terry files his return on March 31. The return shows taxes of $6,000, and Terry pays this entire amount when he files his return. By what time must he file a claim of refund?

The maximum failure to file penalty is a total of 25% of the underpayment.

Identify which of the following statements is true.

According to Circular 230, what should a CPA do upon discovery of an error in a client's prior-year return?

Tax Research

Corporate Formations and Capital Structure

The Corporate Income Tax

Corporate Nonliquidating Distributions

Other Corporate Tax Levies

Corporate Liquidating Distributions

Corporate Acquisitions and Reorganizations

Consolidated Tax Returns

Partnership Formation and Operation

Special Partnership Issues

S Corporations

The Gift Tax

The Estate Tax

Income Taxation of Trusts and Estates

Us Taxation of Foreign-Related Transactions

Filters

Exam 15: Administrative Procedures

The statute of limitations is unlimited for a tax return that is never filed.

Identify which of the following statements is true.

A letter ruling is a written determination that interprets and applies the tax laws to the taxpayer's specific set of facts.

Identify which of the following statements is true.

The IRS will issue a ruling

Gerald requests an extension for filing his last year's individual income tax return. His tax liability is $10,000, of which $8,000 was withheld, leaving a balance due of $2,000 when he files on August 1 of the current year. His penalty for failure to pay the tax on time is

Identify which of the following statements is false.

Identify which of the following statements is false.

Identify which of the following statements is true.

Identify which of the following statements is false.

Treasury Department Circular 230 regulates the practice of attorneys, CPAs, enrolled agents, and enrolled actuaries before the IRS.

An automatic extension of time from the regular filing date for an individual tax return may be received, without giving the IRS a reason, for

Terry files his return on March 31. The return shows taxes of $6,000, and Terry pays this entire amount when he files his return. By what time must he file a claim of refund?

The maximum failure to file penalty is a total of 25% of the underpayment.

Identify which of the following statements is true.

According to Circular 230, what should a CPA do upon discovery of an error in a client's prior-year return?

Tax Research

Corporate Formations and Capital Structure

The Corporate Income Tax

Corporate Nonliquidating Distributions

Other Corporate Tax Levies

Corporate Liquidating Distributions

Corporate Acquisitions and Reorganizations

Consolidated Tax Returns

Partnership Formation and Operation

Special Partnership Issues

S Corporations

The Gift Tax

The Estate Tax

Income Taxation of Trusts and Estates

Us Taxation of Foreign-Related Transactions

Filters