Exam 26: Tax Practice and Ethics

In a criminal tax fraud case, the burden is on the taxpayer to show that he or she was innocent beyond the shadow of any reasonable doubt.

Which of the following statements correctly reflects the rules governing interest to be paid on an individual's Federal tax deficiency or claim for refund?

The IRS is a subsidiary agency of the Department of the .

Malik, Inc., a calendar year C corporation subject to a 21% marginal income tax rate, claimed a Form 1120 charitable contribution deduction of $30,000 for a sculpture that the IRS later valued at $10,000. The applicable overvaluation penalty is:

Under Circular 230, Burke cannot complete a client's original Form 1040 and charge a fee equal to one-third of the resulting refund.

Silvio, a cash basis calendar year taxpayer, filed his income tax return 75 days after the due date. He never extended his return, and with the return, he paid the full amount of taxes that were due. What penalties will Silvio incur, and how much is the penalty if his additional tax is $5,000? Disregard any additional interest he must pay.

When a tax dispute is resolved, interest is paid by or to the government. How are IRS interest amounts determined? To which tax amounts do they apply?

Ling has hired CPA Gracie to complete this year's Form 1040. Ling uses online accounting software to keep the books for her interior design sole proprietorship. Ling tells Gracie that a $5,000 amount for business supplies is "close enough" to report for this year's deduction. Gracie can use this estimate in completing the Form 1040.

Evaluate this statement: A taxpayer is liable not only for tax penalties as described in the tax Code and Regulations. Sanctions elsewhere in Federal law, such as in the criminal code, also apply in a tax dispute.

Under Circular 230, tax preparer Winston cannot disclose to a mortgage banker the income level of her client Pickett or other information acquired by preparing the return without Pickett's permission.

Which statement is correct as to the conduct of IRS income tax audits?

Last year, Ned's property tax deduction on his residence was $22,500. Although he lives in the same house, he tells his CPA that this year's taxes will be only $7,500. The CPA can use this estimate in computing Ned's itemized deductions under the Statements of Standards for Tax Services.

The tax professional can reduce the chances that staff personnel will incur IRS preparer penalties by adopting a "tone at the top" that stresses integrity, diligence, and other elements of an ethical tax practice.

Match each of the following tax penalties with the type of tax penalty as specified by the Code. A letter can be used more than once. The correct solution may include more than one letter. -Improper refund claim.

Lisa, a calendar year taxpayer subject to a 32% marginal Federal income tax rate, claimed a Form 1040 charitable contribution deduction of $250,000 for a sculpture that the IRS later valued at $160,000. The applicable overvaluation penalty is:

A(n) member must follow the Statements of Standards for Tax Services in conducting a tax practice.

The accuracy-related penalties typically relate to on the part of the taxpayer or other understatements of tax.

Juanita, who is subject to a 40% marginal Federal gift tax rate, made a gift of a sculpture to Bianca, valuing the property at $150,000. The IRS later valued the gift at $300,000. The applicable undervaluation penalty is:

A taxpayer's return might be selected for audit on the basis of the score that the IRS computes.

In the context of civil tax fraud litigation, the burden of proof is on the taxpayer to show the court by a preponderance of the evidence that he or she was not acting with an intent to evade a tax.