Exam 15: Administrative Procedures

Latka Novatny gave you the following information to use in the preparation of his current year's tax return: In addition, he received $40,000 from a relative for whom he had worked previously. You have researched whet $40,000 should be classified as a gift or compensation and are confident that substantial authority exists for classi as a gift. What tax compliance issues should you consider in deciding whether to report or exclude the $40,000?

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(Essay)

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Question 1

Correct Answer:

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• Will Latka be liable for a penalty if the $40,000 is excluded from his gross income?
• What statute of limitations will apply?
If you are correct in believing that substantial authority exists for excluding the $40,000, Latka should not subjected to any penalties, even if his return is audited and he agrees to include the $40,000 in his income.
Unless a disclosure concerning the $40,000 is attached to Latka's return, the statute of limitations will be si years (from the date he files his return, or from the due date for the return if later) instead of the regular three years. The reason is that he will have omitted from this gross income more than 25% of the $140,000 of gross income reported on his return (25% × $140,000 = $35,000). Perhaps Latka would like to make a disclosure to have a shorter statute of limitations. This might be the case, for example, if some of the deductions he claimed fall into the gray area.

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 6 years after the date on which the return is filed.

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(True/False)

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Question 2

Correct Answer:

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False

Identify which of the following statements is false.

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(Multiple Choice)

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Question 3

Correct Answer:

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The IRS will issue a ruling

(Multiple Choice)

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Question 4

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?

(Multiple Choice)

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Question 5

The program specifically designed to identify returns with a high potential for a deficiency assessment is the

(Multiple Choice)

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Question 6

Identify which of the following statements is false.

(Multiple Choice)

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Question 7

All of the following requirements must be met in order to establish innocent spouse relief except which of the following?

(Multiple Choice)

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Question 8

Which one of the following statements about letter rulings is false?

(Multiple Choice)

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Question 9

One of your corporate clients has recently filed for bankruptcy. In the course of the proceedings, you (a) prepare a plan of reorganization that alters the rights of preferred stockholders, (b) notify the company's creditors of an impending bulk transfer of the company's assets, (c) review IRS secured claims against these assets, (d) restructure the company's debt by reducing its principal amount and extending its maturity, and (e) advise the bankruptcy court as to how this restructuring will impact the company's NOLs. Which of these activities, if any, constitutes the unauthorized practice of law?

(Essay)

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Question 10

Richard recently won a popular television reality show and its one million dollar prize. However, he omitted the prize money from his tax return for the year. What penalties can the IRS assess?

(Essay)

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Question 11

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?

(Multiple Choice)

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Question 12

Identify which of the following statements is false.

(Multiple Choice)

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Question 13

Identify which of the following statements is true.

(Multiple Choice)

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Question 14

You are preparing the tax return for Agre Corporation, which has sales of $50 million. Agre made a $2 million expenditure for which the appropriate tax treatment, deductible or capitalizable, is a gray area. The corporation's Chief Financial Officer wants you to deduct the expenditure. What tax compliance issues should you consider in deciding whether to deduct the expenditure?

(Essay)

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Question 15

How does the IRS regulate the activities of compensated tax return preparers? In particular, list six acts that will cause a compensated tax return preparer to incur a penalty.

(Essay)

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Question 16

On April 15, 2015, a married couple filed their joint 2014 tax return showing gross income of $120,000. Their return was prepared by a professional tax preparer who mistakenly omitted $45,000 of income, which the preparer in good faith considered to be nontaxable. No information with regard to this omitted income was disclosed on the return or attached statements. By what date must the IRS assert a notice of deficiency before the statute of limitations expires?

(Multiple Choice)

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Question 17

In which of the situations below will a taxpayer not be assessed interest on the tax remitted?

(Multiple Choice)

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Question 18

Explain the four conditions that must be met in civil cases for the burden of proving any factual issue relevant to the determination of taxpayer liability to rest with the IRS.

(Essay)

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Question 19

Tax return preparers can be penalized for the following activities except

(Multiple Choice)

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Question 20

Showing 1 - 20 of 105

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 6 years after the date on which the return is filed.

Identify which of the following statements is false.

The IRS will issue a ruling

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 program specifically designed to identify returns with a high potential for a deficiency assessment is the

Identify which of the following statements is false.

All of the following requirements must be met in order to establish innocent spouse relief except which of the following?

Which one of the following statements about letter rulings is false?

Richard recently won a popular television reality show and its one million dollar prize. However, he omitted the prize money from his tax return for the year. What penalties can the IRS assess?

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?

Identify which of the following statements is false.

Identify which of the following statements is true.

How does the IRS regulate the activities of compensated tax return preparers? In particular, list six acts that will cause a compensated tax return preparer to incur a penalty.

In which of the situations below will a taxpayer not be assessed interest on the tax remitted?

Explain the four conditions that must be met in civil cases for the burden of proving any factual issue relevant to the determination of taxpayer liability to rest with the IRS.

Tax return preparers can be penalized for the following activities except

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

Tax Deductions and Travel Expenses for Employees and Self-Employed Individuals

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