Question 1

What is the penalty for a tax return preparer who lacks substantial authority to take a return position?

Accepted Answer

A) $50 
B) $250 
C) $1,000 
D) 20% of the understatement 
A) $50 
B) $250 
C) $1,000 
D) 20% of the understatement

Question 2

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 3

Which of the following items can be omitted from a taxpayer's request for a ruling?

Accepted Answer

A) names,addresses,and taxpayer identification numbers of all interested parties 
B) a detailed explanation of the transaction 
C) the particular conclusion desired by the taxpayer 
D) the location of the IRS district office that has examination jurisdiction 
A) names,addresses,and taxpayer identification numbers of all interested parties 
B) a detailed explanation of the transaction 
C) the particular conclusion desired by the taxpayer 
D) the location of the IRS district office that has examination jurisdiction

Question 4

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 5

A substantial understatement of tax liability involves which of the following?

Accepted Answer

A) understatement of tax exceeding the greater of 10% of tax required to be shown on the return or $5,000 for individuals 
B) underpayment of tax exceeding the greater of 15% of the tax required to be shown on the return or $5,000 for individuals 
C) underpayment of tax exceeding the lesser of 25% of the tax required to be shown on the return or $5,000 for individuals 
D) $10,000 or more difference between the amount shown on the return and the correct amount due 
A) understatement of tax exceeding the greater of 10% of tax required to be shown on the return or $5,000 for individuals 
B) underpayment of tax exceeding the greater of 15% of the tax required to be shown on the return or $5,000 for individuals 
C) underpayment of tax exceeding the lesser of 25% of the tax required to be shown on the return or $5,000 for individuals 
D) $10,000 or more difference between the amount shown on the return and the correct amount due

Question 6

What is the requirement for a substantial understatement of tax for individuals?

Accepted Answer

A) The understatement exceeds 10% of the tax required to be shown on the return. 
B) The understatement exceeds $5,000. 
C) The understatement exceeds the lesser of 10% of the tax required to be shown on the return or $5,000. 
D) The understatement exceeds the greater of 10% of the tax required to be shown on the return or $5,000. 
A) The understatement exceeds 10% of the tax required to be shown on the return. 
B) The understatement exceeds $5,000. 
C) The understatement exceeds the lesser of 10% of the tax required to be shown on the return or $5,000. 
D) The understatement exceeds the greater of 10% of the tax required to be shown on the return or $5,000.

Question 7

The "automatic" extension period for filing an individual return is seven months.

Accepted Answer

A) True 
 B)False

Question 8

The majority of the individual tax returns that are audited are selected under the DIF program.

Accepted Answer

A) True 
 B)False

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

Your client wants to avoid any penalty for underpayment of estimated taxes by making timely deposits.Determine the amount of the minimum quarterly estimated tax payments required to avoid the penalty.Assume your client's adjusted gross income last year was $140,000. $$\begin{array} { | l | r | } 
\hline \text { Last year's tax liability } & \$ 40,000 \
\hline \text { This year's estimated total tax } & 44,000 \
\hline \text { Taxes to be withheld for this year } & 9,000 \
\hline
\end{array}$$

Accepted Answer

A) $7,650 
B) $7,750 
C) $8,750 
D) $11,000 
A) $7,650 
B) $7,750 
C) $8,750 
D) $11,000

Question 11

Identify which of the following statements is true.

Accepted Answer

A) The "innocent spouse provision," if applicable,relieves both spouses from an assessment of tax caused by a spouse's understating income or gain and/or overstating deductions,losses,or credits. 
B) The IRS is precluded from assessing any residual tax liability against transferees and fiduciaries because the initial filers are responsible for meeting the tax payments in a timely fashion. 
C) Treasury Department Circular 230 regulates the practice of attorneys,CPAs,enrolled agents,and enrolled actuaries before the IRS. 
D) All of the above are false. 
A) The "innocent spouse provision," if applicable,relieves both spouses from an assessment of tax caused by a spouse's understating income or gain and/or overstating deductions,losses,or credits. 
B) The IRS is precluded from assessing any residual tax liability against transferees and fiduciaries because the initial filers are responsible for meeting the tax payments in a timely fashion. 
C) Treasury Department Circular 230 regulates the practice of attorneys,CPAs,enrolled agents,and enrolled actuaries before the IRS. 
D) All of the above are false.

Question 12

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 13

The IRS provides advice concerning an issue that arises during an audit by issuing

Accepted Answer

A) a revenue ruling. 
B) an audit memorandum. 
C) a technical advice memorandum. 
D) a private letter ruling. 
A) a revenue ruling. 
B) an audit memorandum. 
C) a technical advice memorandum. 
D) a private letter ruling.

Question 14

In order to appeal to the Appeals Division,a taxpayer must submit a protest letter to the IRS

Accepted Answer

A) if an office audit is involved. 
B) as a response to receiving a 30-day letter. 
C) in a field audit involving an assessment of taxes,interest,and penalties in excess of $25,000. 
D) if a TCMP audit is involved. 
A) if an office audit is involved. 
B) as a response to receiving a 30-day letter. 
C) in a field audit involving an assessment of taxes,interest,and penalties in excess of $25,000. 
D) if a TCMP audit is involved.

Question 15

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.

Question 16

What is the IRS guideline for determining whether a tax return position has substantial authority?

Accepted Answer

A) A person knowledgeable in the tax law concludes that the position has a something less than 50% likelihood of being supported. 
B) A person knowledgeable in the tax law concludes that the position has at least a 50% likelihood of being supported. 
C) A person knowledgeable in the tax law concludes that the position has at least a two-thirds likelihood of being supported. 
D) A person knowledgeable in the tax law concludes that the position has at least a 75% likelihood of being supported. 
A) A person knowledgeable in the tax law concludes that the position has a something less than 50% likelihood of being supported. 
B) A person knowledgeable in the tax law concludes that the position has at least a 50% likelihood of being supported. 
C) A person knowledgeable in the tax law concludes that the position has at least a two-thirds likelihood of being supported. 
D) A person knowledgeable in the tax law concludes that the position has at least a 75% likelihood of being supported.

Question 17

How long does a taxpayer have to file a petition with the U.S.Tax Court following the date of the Statutory Notice of Deficiency?

Accepted Answer

A) 90 days 
B) three months 
C) 180 days 
D) 30 days 
A) 90 days 
B) three months 
C) 180 days 
D) 30 days

Question 18

A six-year statute of limitation rule applies if the taxpayer

Accepted Answer

A) understates taxable income by 25%. 
B) understates AGI by 25%. 
C) understates gross income by 25%. 
D) none of the above 
A) understates taxable income by 25%. 
B) understates AGI by 25%. 
C) understates gross income by 25%. 
D) none of the above

Question 19

A taxpayer will receive a 30-day letter

Accepted Answer

A) to notify him that the return was selected for audit. 
B) after a response to the 90-day letter with a protest. 
C) only if the taxpayer does not sign Form 870. 
D) only if the taxpayer is more than 30 days late in filing the tax return. 
A) to notify him that the return was selected for audit. 
B) after a response to the 90-day letter with a protest. 
C) only if the taxpayer does not sign Form 870. 
D) only if the taxpayer is more than 30 days late in filing the tax return.

Question 20

Identify which of the following statements is true.

Accepted Answer

A) An individual taxpayer may be subject to a penalty for underpayment of estimated taxes if his balance of tax due when he files is $500. 
B) A penalty for substantial understatement will potentially be assessed on an individual if the underpayment of tax exceeds the greater of 15% of the tax shown on the return or $5,000. 
C) Substantial authority exists for a position that is supported by a decision rendered by the Court of Appeals for the taxpayer's own circuit. 
D) All of the above are true. 
A) An individual taxpayer may be subject to a penalty for underpayment of estimated taxes if his balance of tax due when he files is $500. 
B) A penalty for substantial understatement will potentially be assessed on an individual if the underpayment of tax exceeds the greater of 15% of the tax shown on the return or $5,000. 
C) Substantial authority exists for a position that is supported by a decision rendered by the Court of Appeals for the taxpayer's own circuit. 
D) All of the above are true.

Exam 15: Administrative Procedures

What is the penalty for a tax return preparer who lacks substantial authority to take a return position?

Identify which of the following statements is false.

Which of the following items can be omitted from a taxpayer's request for a ruling?

Identify which of the following statements is true.

A substantial understatement of tax liability involves which of the following?

What is the requirement for a substantial understatement of tax for individuals?

The "automatic" extension period for filing an individual return is seven months.

The majority of the individual tax returns that are audited are selected under the DIF program.

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 true.

The IRS will issue a ruling

The IRS provides advice concerning an issue that arises during an audit by issuing

In order to appeal to the Appeals Division,a taxpayer must submit a protest letter to the IRS

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

What is the IRS guideline for determining whether a tax return position has substantial authority?

How long does a taxpayer have to file a petition with the U.S.Tax Court following the date of the Statutory Notice of Deficiency?

A six-year statute of limitation rule applies if the taxpayer

A taxpayer will receive a 30-day letter

Identify which of the following statements is true.

Tax Research

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