Question 1

During an audit, the IRS might require that the taxpayer produce the that underlie the tax return data.

Accepted Answer

The answer of During an audit, the IRS might require...

Question 2

Which of the following statements does not reflect the rules governing the accuracy-related penalty for negligence?

Accepted Answer

A)  The penalty rate is 20%. 
B)  The penalty applies whenever the taxpayer takes a return position that is contrary to a court decision. 
C)  The penalty applies when the taxpayer does not keep records adequate to compute the tax correctly. 
D)  The penalty is waived if the taxpayer uses Form 8275 to disclose a return position that is reasonable but contrary to the IRS position. 
A)  The penalty rate is 20%. 
B)  The penalty applies whenever the taxpayer takes a return position that is contrary to a court decision. 
C)  The penalty applies when the taxpayer does not keep records adequate to compute the tax correctly. 
D)  The penalty is waived if the taxpayer uses Form 8275 to disclose a return position that is reasonable but contrary to the IRS position.

Question 3

Maria's AGI last year was $95,000. To avoid a penalty, her estimated tax payments and withholdings for the current- year must equal the lesser of ____________________ % of prior-year taxes or ____________________ % of the current-year's taxes.

Accepted Answer

The answer of Maria's AGI last year was $95,000. To...

Question 4

The tax workpapers prepared as part of an independent financial audit are not privileged communications that can be kept confidential from an IRS subpoena.

Accepted Answer

The answer of The tax workpapers prepared as part of...

Question 5

Michelle, a calendar year taxpayer subject to a 24% marginal Federal income tax rate, claimed a Form 1040 charitable contribution deduction of $275,000 for a sculpture that the IRS later valued at $200,000. The applicable overvaluation penalty is:

Accepted Answer

A)  $0. 
B)  $3,600. 
C)  $7,200. 
D)  $18,000. 
A)  $0. 
B)  $3,600. 
C)  $7,200. 
D)  $18,000.

Question 6

A letter ruling should be requested when the taxpayer wants to know how the IRS's interpretation of the tax law will be applied to a (proposed, completed) transaction.

Accepted Answer

The answer of A letter ruling should be requested when...

Question 7

Lola, a calendar year taxpayer subject to a 40% marginal Federal gift tax rate, made a gift of a sculpture to Redd, valuing the property at $70,000. The IRS later valued the gift at $100,000. The applicable undervaluation penalty is:

Accepted Answer

A)  $0. 
B)  $1,000 (minimum penalty). 
C)  $2,400. 
D)  $12,000. 
A)  $0. 
B)  $1,000 (minimum penalty). 
C)  $2,400. 
D)  $12,000.

Question 8

The tax preparer penalty for taking an unreasonable tax return position is the greater of $
or of the tax professional's income from preparing the return.

Accepted Answer

The answer of The tax preparer penalty for taking an...

Question 9

Carole, a CPA, feels that she cannot act as an aggressive advocate for tax clients in today's environment. What aspects of the ethical conduct of a tax practice might have influenced Carole's attitude?

Accepted Answer

Carole might be reacting to the general

Question 10

Linwell underpaid his taxes by $250,000. Portions of the underpayment were attributable to negligence ($210,000)
and to civil fraud ($40,000). Compute the total penalties incurred.

Accepted Answer

@#IMG-DLM& If the underpayment is partia

Question 11

For purposes of tax penalties, a VITA volunteer is not classified as a tax return ____________________.

Accepted Answer

The answer of For purposes of tax penalties, a VITA...

Question 12

With respect to the Small Cases Division of the Tax Court,

Accepted Answer

A)  The taxpayer (but not the IRS) can appeal a contrary judgment. 
B)  The IRS (but not the taxpayer) can appeal a contrary judgment. 
C)  Either the IRS or the taxpayer can appeal a contrary judgment. 
D)  Neither the IRS nor the taxpayer can appeal a contrary judgment. 
A)  The taxpayer (but not the IRS) can appeal a contrary judgment. 
B)  The IRS (but not the taxpayer) can appeal a contrary judgment. 
C)  Either the IRS or the taxpayer can appeal a contrary judgment. 
D)  Neither the IRS nor the taxpayer can appeal a contrary judgment.

Question 13

This official does not report directly to the IRS Commissioner.

Accepted Answer

A)  Treasury Secretary. 
B)  National Taxpayer Advocate. 
C)  Director of the Whistleblower Office. 
D)  Chief Appeals Officer. 
A)  Treasury Secretary. 
B)  National Taxpayer Advocate. 
C)  Director of the Whistleblower Office. 
D)  Chief Appeals Officer.

Question 14

The IRS's attorney is known as the Chief Counsel.

Accepted Answer

A) True 
 B)False

Question 15

Quon filed his Federal income tax return on time, but he did not remit the full balance due. Compute the amount of his failure to pay penalty in each of the following cases. The IRS has not yet issued a deficiency notice.
a. Three months late, $5,000 additional tax due.
b. Nine months late, $5,000 additional tax due.
c. Five years late, $5,000 additional tax due.

Accepted Answer

The failure to pay penalty is 0.5% per m

Question 16

Cheng filed an amended return this year, claiming a refund relative to her tax computation on a prior-years return.
When the IRS approves the amended return and issues the refund, it also pays Cheng interest with respect to the overpayment.

Accepted Answer

A) True 
 B)False

Question 17

With respect to tax misconduct, a penalty usually involves only a fine, but a
penalty also can include jail time.

Accepted Answer

The answer of With respect to tax misconduct, a penalty...

Question 18

To whom do the AICPA's Statements on Standards for Tax Services apply? Are they binding or merely advisory?

Accepted Answer

The Statements are enforceable standards

Question 19

Latrelle, who prepares the tax return for Whitehall Corporation includes a $5,000 deduction on the return. This type of deduction previously has been disallowed by the Tax Court, although there is a 15% chance that the holding will be reversed on an appeal by Whitehall. The return does not make any special disclosure that the deduction is being claimed. Whitehall paid Latrelle a fee of $8,000 for preparing the Form 1120. Latrelle will be assessed a preparer penalty of $4,000 for taking an unreasonable position on the Whitehall return.

Accepted Answer

A) True 
 B)False

Question 20

The Statements on Standards for Tax Services are issued by the:

Accepted Answer

A)  IRS. 
B)  AICPA. 
C)  ABA. 
D)  SEC. 
A)  IRS. 
B)  AICPA. 
C)  ABA. 
D)  SEC.

Exam 26: Tax Practice and Ethics

During an audit, the IRS might require that the taxpayer produce the that underlie the tax return data.

Which of the following statements does not reflect the rules governing the accuracy-related penalty for negligence?

Maria's AGI last year was $95,000. To avoid a penalty, her estimated tax payments and withholdings for the current- year must equal the lesser of ____________________ % of prior-year taxes or ____________________ % of the current-year's taxes.

The tax workpapers prepared as part of an independent financial audit are not privileged communications that can be kept confidential from an IRS subpoena.

Michelle, a calendar year taxpayer subject to a 24% marginal Federal income tax rate, claimed a Form 1040 charitable contribution deduction of $275,000 for a sculpture that the IRS later valued at $200,000. The applicable overvaluation penalty is:

A letter ruling should be requested when the taxpayer wants to know how the IRS's interpretation of the tax law will be applied to a (proposed, completed) transaction.

Lola, a calendar year taxpayer subject to a 40% marginal Federal gift tax rate, made a gift of a sculpture to Redd, valuing the property at $70,000. The IRS later valued the gift at $100,000. The applicable undervaluation penalty is:

The tax preparer penalty for taking an unreasonable tax return position is the greater of $ or of the tax professional's income from preparing the return.

Carole, a CPA, feels that she cannot act as an aggressive advocate for tax clients in today's environment. What aspects of the ethical conduct of a tax practice might have influenced Carole's attitude?

Linwell underpaid his taxes by $250,000. Portions of the underpayment were attributable to negligence ($210,000) and to civil fraud ($40,000). Compute the total penalties incurred.

For purposes of tax penalties, a VITA volunteer is not classified as a tax return ____________________.

With respect to the Small Cases Division of the Tax Court,

This official does not report directly to the IRS Commissioner.

The IRS's attorney is known as the Chief Counsel.

Cheng filed an amended return this year, claiming a refund relative to her tax computation on a prior-years return. When the IRS approves the amended return and issues the refund, it also pays Cheng interest with respect to the overpayment.

With respect to tax misconduct, a penalty usually involves only a fine, but a penalty also can include jail time.

To whom do the AICPA's Statements on Standards for Tax Services apply? Are they binding or merely advisory?

The Statements on Standards for Tax Services are issued by the:

Understanding and Working With the Federal Tax Law

Working With the Tax Law

Computing the Tax

Gross Income: Concepts and Inclusions

Gross Income: Exclusions

Deductions and Losses: in General

Deductions and Losses: Certain Business Expenses and Losses

Depreciation, Cost Recovery, Amortization, and Depletion

Deductions: Employee and Self-Employed-Related Expenses

Deductions and Losses: Certain Itemized Deductions

Investor Losses

Tax Credits and Payments

Property Transactions: Determination of Gain or Loss, Basis Considerations, and Nontaxable Exchanges

Property Transactions: Capital Gains and Losses, Section 1231, and Recapture Provisions

Taxing Business Income

Accounting Periods and Methods

Corporations: Introduction and Operating Rules

Corporations: Organization and Capital Structure

Corporations: Distributions Not in Complete Liquidation

Corporations: Distributions in Complete Liquidation and an Overview of Reorganizations

Partnerships

S Corporations

Exempt Entities

Multistate Corporate Taxation

Taxation of International Transactions

The Federal Gift and Estate Taxes

Income Taxation of Trusts and Estates

Filters

Maria's AGI last year was $95,000. To avoid a penalty, her estimated tax payments and withholdings for the current- year must equal the lesser of % of prior-year taxes or % of the current-year's taxes.