Question 1

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. C

Question 2

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.

Accepted Answer

A) True 
 B)False  False

Question 3

One of your corporate clients comes to you asking for advice regarding a proposed merger with XYZ Company.You (a)issue an opinion concerning the FMV of XYZ, (b)prepare pro forma financials for the merged entity to be, (c)draft shareholder resolutions for your client approving the proposed merger, (d)file a shareholder proxy statement with the U.S.Securities and Exchange Commission,and (e)advise your client's board of directors concerning the advantages of a Type A versus a Type B reorganization.Which of these activities,if any,constitutes the unauthorized practice of law?

Accepted Answer

Activities (c)and (d)constitute the unauthorized practice of law because they involve the drafting and filing of legal documents.Activities (a)and (b)fall within the traditional domain of accountants.Activity (e)may properly be conducted by either an accountant or a lawyer.

Question 4

How does a taxpayer determine if "substantial authority" exists for a tax treatment the taxpayer desires to adopt?

Accepted Answer

A taxpayer should initially look to prim

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

An automatic extension of time from the regular filing date for an individual tax return may be received,without giving the IRS a reason,for

Accepted Answer

A) 2 months. 
B) 3 months. 
C) 4 months. 
D) 6 months. 
A) 2 months. 
B) 3 months. 
C) 4 months. 
D) 6 months.

Question 7

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

Accepted Answer

A) TCMP. 
B) DIF program. 
C) instant audit program. 
D) 1040 program. 
A) TCMP. 
B) DIF program. 
C) instant audit program. 
D) 1040 program.

Question 8

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 9

A taxpayer's return is audited and additional taxes are assessed.The IRS also asserts that a negligence penalty should be assessed.The taxpayer concurs with the additional $15,000 tax liability; $7,000 of this amount is attributable to negligence.What is the amount of the penalty for negligence?

Accepted Answer

A) $700 
B) $1,400 
C) $5,600 
D) $1,750 
A) $700 
B) $1,400 
C) $5,600 
D) $1,750

Question 10

Which,if any,of the following could result in penalties against an income tax return preparer? I.Knowing or reckless disclosure or use of tax information obtained in preparing a return.
II)A willful attempt to understate any client's tax liability on a return or claim for a refund.

Accepted Answer

A) I only 
B) II only 
C) neither I nor II 
D) both I and II 
A) I only 
B) II only 
C) neither I nor II 
D) both I and II

Question 11

Lucy files her current-year individual income tax return on August 5 of the following year,without having requested an extension.Her total tax is $10,000.Lucy pays $7,500 in a timely manner and the $2,500 balance when she files the return.Lucy did not engage in fraud and has no reasonable cause for late filing and late payment.Compute Lucy's penalties.

Accepted Answer

The answer of Lucy files her current-year individual income tax...

Question 12

Jeff's tax liability for last year was $30,000.Jeff projects that his tax for this year will be only $25,000.Jeff is self-employed and,thus,will have no withholding.His AGI for last year did not exceed $150,000.How much estimated tax,at a minimum,should Jeff pay for this year to avoid the penalty for underpayment of estimated taxes? How would your answer change if his income exceeded last year's due to a large capital gain at the end of the year?

Accepted Answer

Jeff's AGI for last year does not exceed

Question 13

What is the difference between the burden of proof for civil and criminal fraud?

Accepted Answer

The burden of proof is:
Clear

Question 14

Explain accountant-client privilege.What are the similarities and differences between it and attorney-client privilege?

Accepted Answer

According to judicial doctrine,certain c

Question 15

Kristina and Victor filed a joint return for the current year.They are in the 31% marginal tax bracket.Victor did not know that Kristina failed to report a prize valued at $16,000 that she won.She used the money to buy Victor a motorcycle.Does Victor meet the tests for relief under the innocent spouse provisions?

Accepted Answer

Probably not.Although (1)Victor and Kris

Question 16

Treasury Department Circular 230 regulates the practice of attorneys,CPAs,enrolled agents,and enrolled actuaries before the IRS.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following is not a reason for relief from the substantial understatement penalty?

Accepted Answer

A) disclosure of the relevant facts pertaining to the questionable tax return position 
B) substantial authority for the tax return position 
C) reliance on a tax return preparer 
D) reasonable cause and a good faith effort to comply with the tax law 
A) disclosure of the relevant facts pertaining to the questionable tax return position 
B) substantial authority for the tax return position 
C) reliance on a tax return preparer 
D) reasonable cause and a good faith effort to comply with the tax law

Question 18

Which of the following communications between an accountant and client are privileged?
a)During the preparation of her 2008 tax return,Tammy informs her accountant that she contributed $25,000 to a qualified charitable organization.
b)After filing his tax return,a client mentions to his accountant that he forgot to report a $7,000 prize that he won playing bingo.He asks how he should correct the error.
c)A client tells his accountant that he will no longer pay alimony to his ex-wife.

Accepted Answer

Only communication (b)is privileged beca

Question 19

The "Statement on Practice in the Field of Federal Income Taxation" includes all of the following areas of mutual competence except

Accepted Answer

A) preparing federal income tax returns. 
B) determining the tax effect of proposed transactions. 
C) representing clients in criminal investigations. 
D) representing taxpayers before the U.S.Tax Court. 
A) preparing federal income tax returns. 
B) determining the tax effect of proposed transactions. 
C) representing clients in criminal investigations. 
D) representing taxpayers before the U.S.Tax Court.

Question 20

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.

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

Exam 15: Administrative Procedures

A taxpayer will receive a 30-day letter

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.

How does a taxpayer determine if "substantial authority" exists for a tax treatment the taxpayer desires to adopt?

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

An automatic extension of time from the regular filing date for an individual tax return may be received,without giving the IRS a reason,for

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.

A taxpayer's return is audited and additional taxes are assessed.The IRS also asserts that a negligence penalty should be assessed.The taxpayer concurs with the additional $15,000 tax liability; $7,000 of this amount is attributable to negligence.What is the amount of the penalty for negligence?

Which,if any,of the following could result in penalties against an income tax return preparer? I.Knowing or reckless disclosure or use of tax information obtained in preparing a return. II)A willful attempt to understate any client's tax liability on a return or claim for a refund.

What is the difference between the burden of proof for civil and criminal fraud?

Explain accountant-client privilege.What are the similarities and differences between it and attorney-client privilege?

Treasury Department Circular 230 regulates the practice of attorneys,CPAs,enrolled agents,and enrolled actuaries before the IRS.

Which of the following is not a reason for relief from the substantial understatement penalty?

The "Statement on Practice in the Field of Federal Income Taxation" includes all of the following areas of mutual competence except

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.

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