Exam 26: Tax Practice and Ethics

When the IRS issues a notice of tax due, the taxpayer has 90 days to either pay the tax or file a petition with the Tax Court.This is conveyed in the "ninety-day letter."

A negligence penalty is assessed when the taxpayer is found to have not made a reasonable attempt to apply with the tax law.

The penalty for substantial understatement of tax liability does not apply if:

Ron, a calendar year taxpayer subject to a 35% marginal income tax rate, claimed a Form 1040 charitable contribution deduction of $250,000 for a sculpture that the IRS later valued at $150,000.The applicable overvaluation penalty is:

Yin-Li is the preparer of the Form 1120 for Cloves Corporation.On the return, Cloves claimed a deduction that the IRS later disallowed on audit.Compute the tax preparer penalty that could be assessed against Yin-Li in each of the following independent situations.

The general statute of limitations regarding Federal tax returns extends for ____________________ years.It is ____________________ years if a substantial understatement of income is found, and ____________________ years with respect to worthless securities. or

A tax preparer can incur a penalty if the client's return includes an unreasonable or ___________________ tax return position that understates the tax liability.