Question 1

A six-year statute of limitation rule applies if the taxpayer

Accepted Answer

A) understates taxable income by 25%. 
B) understates AGI by 25%. 
C) understates gross income by 25%. 
D) none of the above 
A) understates taxable income by 25%. 
B) understates AGI by 25%. 
C) understates gross income by 25%. 
D) none of the above

Question 2

Pete has reported a tax liability of $3,500 on his 2012 tax return.His 2013 withholding was $3,800.He did not file his 2013 return until June 12,2014.What penalties does Pete owe?

Accepted Answer

Pete owes no penalty for failu

Question 3

On August 13 of the following year,Joy files her current calendar-year tax return and pays the amount due without having requested an extension.The tax shown on her return is $25,000.Her current-year withholding tax is $15,000.Joy pays no estimated taxes and does not claim any tax credits on her current-year return.Will Joy owe interest,and if so,on what amount and for how many days?

Accepted Answer

Joy owes interest on $5,000 fr

Question 4

On July 25 of the following year,Joy files her current calendar-year tax return.She had requested extensions as required.On October 8,she pays the amount due.The tax shown on her return is $22,000.Her current-year withholding tax is $21,000.Joy pays no estimated taxes and does not claim any tax credits on her current-year return.Calculate the penalties that the IRS is likely to assess.Ignore the penalty for underpayment of estimated taxes.Assume she did not commit fraud.

Accepted Answer

If Joy requests an extension,the failure

Question 5

Anyone who prepares a tax return is subject to the provisions of Circular 230.

Accepted Answer

A) True 
 B)False

Question 6

The IRS will issue a ruling

Accepted Answer

A) on prospective transactions only. 
B) only if regulations have been issued on the subject. 
C) on a completed transaction for which a return has been filed. 
D) to clarify the tax treatment of a transaction. 
A) on prospective transactions only. 
B) only if regulations have been issued on the subject. 
C) on a completed transaction for which a return has been filed. 
D) to clarify the tax treatment of a transaction.

Question 7

Identify which of the following statements is false.

Accepted Answer

A) Appeals officers usually have the operating authority to settle disputes with taxpayers based on the "hazards of litigation." 
B) When an appeals officer is dealing with an "appeals coordinated issue," he has the authority to settle with the taxpayer based on the "hazards of litigation." 
C) A Technical Advice Memorandum may be requested by an IRS auditor if the transaction in question involves an especially complex tax issue. 
D) If the taxpayer and the appeals officer fail to reach agreement,the IRS issues a 90-day letter. 
A) Appeals officers usually have the operating authority to settle disputes with taxpayers based on the "hazards of litigation." 
B) When an appeals officer is dealing with an "appeals coordinated issue," he has the authority to settle with the taxpayer based on the "hazards of litigation." 
C) A Technical Advice Memorandum may be requested by an IRS auditor if the transaction in question involves an especially complex tax issue. 
D) If the taxpayer and the appeals officer fail to reach agreement,the IRS issues a 90-day letter.

Question 8

Which of the following activities is protected by accountant-client privilege?

Accepted Answer

A) written communications between a CPA and a corporation regarding a tax shelter 
B) communications related to tax return preparation 
C) communications related to criminal tax evasion 
D) advice given regarding tax issues in a divorce 
A) written communications between a CPA and a corporation regarding a tax shelter 
B) communications related to tax return preparation 
C) communications related to criminal tax evasion 
D) advice given regarding tax issues in a divorce

Question 9

Which of the following items can be omitted from a taxpayer's request for a ruling?

Accepted Answer

A) names,addresses,and taxpayer identification numbers of all interested parties 
B) a detailed explanation of the transaction 
C) the particular conclusion desired by the taxpayer 
D) the location of the IRS district office that has examination jurisdiction 
A) names,addresses,and taxpayer identification numbers of all interested parties 
B) a detailed explanation of the transaction 
C) the particular conclusion desired by the taxpayer 
D) the location of the IRS district office that has examination jurisdiction

Question 10

Which of the following communications between an accountant and client are not privileged?
a)An accountant orally communicates to his client that he should set up a foreign subsidiary to shift taxable income to a lower tax jurisdiction.
b)An accountant privately submits to the client a plan for shifting taxable income to a lower tax jurisdiction.
c)During a meeting in which a client is asking for advice relating to criminal fraud,the client tells his accountant that he lied to the IRS.

Accepted Answer

Communications (b)and (c)are not privile

Question 11

Jayne and Jon jointly file a tax return this year.Jayne fraudulently reports two expenses on Schedule C: $2,000 and $2,500.The IRS audits the return,assesses a $1,050 deficiency,and begins collection efforts two years after the timely filing by Jayne and Jon.What must Jon do to be relieved of the $1,050 tax liability?

Accepted Answer

Jon must meet all five conditions to ele

Question 12

What is the IRS guideline for determining whether a tax return position has substantial authority?

Accepted Answer

A) A person knowledgeable in the tax law concludes that the position has a something less than 50% likelihood of being supported. 
B) A person knowledgeable in the tax law concludes that the position has at least a 50% likelihood of being supported. 
C) A person knowledgeable in the tax law concludes that the position has at least a two-thirds likelihood of being supported. 
D) A person knowledgeable in the tax law concludes that the position has at least a 75% likelihood of being supported. 
A) A person knowledgeable in the tax law concludes that the position has a something less than 50% likelihood of being supported. 
B) A person knowledgeable in the tax law concludes that the position has at least a 50% likelihood of being supported. 
C) A person knowledgeable in the tax law concludes that the position has at least a two-thirds likelihood of being supported. 
D) A person knowledgeable in the tax law concludes that the position has at least a 75% likelihood of being supported.

Question 13

Identify which of the following statements is false.

Accepted Answer

A) If fraud is asserted in a tax transaction,the burden of proof falls on the IRS. 
B) The civil fraud penalty consists of 75% of the tax underpayment attributable to fraud plus 25% of the interest payable on the portion of the underpayment resulting from the fraud. 
C) The government must prove its case "beyond a reasonable doubt" in order for the court or jury to convict a taxpayer of criminal fraud. 
D) The fraud penalty can be imposed with respect to income,gift,and estate tax returns. 
A) If fraud is asserted in a tax transaction,the burden of proof falls on the IRS. 
B) The civil fraud penalty consists of 75% of the tax underpayment attributable to fraud plus 25% of the interest payable on the portion of the underpayment resulting from the fraud. 
C) The government must prove its case "beyond a reasonable doubt" in order for the court or jury to convict a taxpayer of criminal fraud. 
D) The fraud penalty can be imposed with respect to income,gift,and estate tax returns.

Question 14

The IRS audited the tax returns of Dan Jackson,a gifted painter.It contended that,between 2003 and 2005,Jackson received $500,000 for his paintings,but reported only $75,000.Jackson attributed the shortfall to his receipt of cash at art fairs and street fairs.He allegedly concealed the cash payments in separate bank accounts unbeknownst to his CPA.What tax compliance issues regarding the alleged underreporting are pertinent to the CPA?

Accepted Answer

Dan Jackson,his agent,and CPA (tax retur

Question 15

Identify which of the following statements is false.

Accepted Answer

A) The IRS will not issue a ruling on the topic of whether compensation is reasonable. 
B) Tax returns for all taxpayers must be filed on or before the fifteenth day of the fourth month following the year-end. 
C) A corporation must file a tax return even if it has no gross income. 
D) Extensions of time for filing tax returns may be obtained. 
A) The IRS will not issue a ruling on the topic of whether compensation is reasonable. 
B) Tax returns for all taxpayers must be filed on or before the fifteenth day of the fourth month following the year-end. 
C) A corporation must file a tax return even if it has no gross income. 
D) Extensions of time for filing tax returns may be obtained.

Question 16

If a return's due date is extended,a taxpayer

Accepted Answer

A) also extends the period in which to pay taxes without interest. 
B) still should pay the tax by the original return due date. 
C) has 30 days following the original due date to pay estimated taxes without penalty. 
D) has 30 days following the original due date to pay estimated taxes without interest. 
A) also extends the period in which to pay taxes without interest. 
B) still should pay the tax by the original return due date. 
C) has 30 days following the original due date to pay estimated taxes without penalty. 
D) has 30 days following the original due date to pay estimated taxes without interest.

Question 17

Pablo,a bachelor,owes $80,000 of additional taxes,all due to fraud.What is the amount of the civil fraud penalty? What criminal fraud penalty might be imposed under Sec.7201?

Accepted Answer

a)The civil fraud penalty is $

Question 18

Identify which of the following statements is true.

Accepted Answer

A) The 90-day letter offers the taxpayer the choice of paying the tax assessed or filing a petition refuting the tax assessment with the Tax Court. 
B) A taxpayer can choose to initiate tax litigation in a U.S.district court,the Tax Court,or a Court of Appeals. 
C) The IRS cannot raise a new tax issue after issuance of the Statutory Notice of Deficiency (90-day letter). 
D) All of the above are false. 
A) The 90-day letter offers the taxpayer the choice of paying the tax assessed or filing a petition refuting the tax assessment with the Tax Court. 
B) A taxpayer can choose to initiate tax litigation in a U.S.district court,the Tax Court,or a Court of Appeals. 
C) The IRS cannot raise a new tax issue after issuance of the Statutory Notice of Deficiency (90-day letter). 
D) All of the above are false.

Question 19

Kelly,a calendar-year taxpayer,files her 2008 individual return on March 30,2013,and pays the amount due at the same time.Later,she discovers some deductions that she should have claimed on the return.By what date must she file a claim for refund?

Accepted Answer

She would file by th

Question 20

Identify which of the following statements is false.

Accepted Answer

A) In general,the taxpayer has the burden of proof in Tax Court cases.However,the IRS has the burden of proof for issues raised after the issuance of the 90-day letter. 
B) A taxpayer may want to avoid using the Tax Court to litigate an issue because decisions from this court cannot be appealed. 
C) The Tax Court can be used to litigate a tax issue without first paying the tax assessment. 
D) In order to litigate in the Tax Court,a petition must be filed within 90 days of the issuance of a notice of deficiency. 
A) In general,the taxpayer has the burden of proof in Tax Court cases.However,the IRS has the burden of proof for issues raised after the issuance of the 90-day letter. 
B) A taxpayer may want to avoid using the Tax Court to litigate an issue because decisions from this court cannot be appealed. 
C) The Tax Court can be used to litigate a tax issue without first paying the tax assessment. 
D) In order to litigate in the Tax Court,a petition must be filed within 90 days of the issuance of a notice of deficiency.

Exam 15: Administrative Procedures

A six-year statute of limitation rule applies if the taxpayer

Pete has reported a tax liability of $3,500 on his 2012 tax return.His 2013 withholding was $3,800.He did not file his 2013 return until June 12,2014.What penalties does Pete owe?

Anyone who prepares a tax return is subject to the provisions of Circular 230.

The IRS will issue a ruling

Identify which of the following statements is false.

Which of the following activities is protected by accountant-client privilege?

Which of the following items can be omitted from a taxpayer's request for a ruling?

What is the IRS guideline for determining whether a tax return position has substantial authority?

Identify which of the following statements is false.

Identify which of the following statements is false.

If a return's due date is extended,a taxpayer

Pablo,a bachelor,owes $80,000 of additional taxes,all due to fraud.What is the amount of the civil fraud penalty? What criminal fraud penalty might be imposed under Sec.7201?

Identify which of the following statements is true.

Kelly,a calendar-year taxpayer,files her 2008 individual return on March 30,2013,and pays the amount due at the same time.Later,she discovers some deductions that she should have claimed on the return.By what date must she file a claim for refund?

Identify which of the following statements is false.

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