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

Allen filed his 2017 tax return on May 15th, 2018 and underreported his gross income by30 percent. Assuming Allen's underreporting is not due to fraud, the statute of limitations for IRS assessment on Allen's 2017 tax return should end:

Caitlin is a tax manager for an accounting firm, and Duff is a first year staff accountant. Describe the differences in the manner in which Caitlin and Duff may identify research issues and in general how one may identify research questions.

Nolene suspects that one of her new clients may be intentionally underreporting his taxable income.What are the potential ramifications to her client of this behavior? What are the consequences toNolene if she assists the client in underreporting income? Any advice for Nolene?

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

For fraudulent tax returns, the statute of limitations for IRS assessment is ten years.

The regulation with the lowest authoritative weight is the:

Proposed and Temporary Regulations have the same authoritative weight.

The statute of limitations for IRS assessment generally ends four years after the date atax return is filed.

Henry filed his 2017 tax return on May 15th, 2018. The statute of limitations for IRSassessment on Henry's 2017 tax return should end:

A tax practitioner can avoid IRS penalty relating to a tax return position:

For the 2017 tax returns, indicate when the statute of limitation expires and why. a. Phoenix filed his tax return on February 28, 2018.b. Jill and Randy filed their tax return on August 16, 2018.c. Although required to file, Catherine chose not to file a tax return this year because she was expecting a tax refund and could not pull together all the information needed to file the return.d. Jerry filed his tax return on May 22, 2018 but has accidentally underreported his taxable income by 30%.

A client has recently learned of a proposed tax bill that would increase the tax rates on investment gains by 5 percent. The President does not support this increase. Please describe for your client the process by which new tax legislation is created and how the President's disapproval may influence the enactment of the bill.

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 that 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?

Circular 230 was issued by:

Which of the following courts is the only court that provides for a jury trial?

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?

Jaime recently found a "favorable" trial level court opinion directly on point for her tax question. Which trial level court would she prefer to have issued the opinion?

Which of the following is not a common tool used in conducting tax research?

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 depends 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 tojustify 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 7th Circuit (where Elizabeth resides) recently issued an opinion that is very favorable to theissue that Elizabeth plans to litigate with the IRS.

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