Exam 17: Tax Practice and Ethics

Evaluate this statement: the audited taxpayer has more freedom to "trade issues" with the IRS when the dispute progresses to an Appeals conference.Hint: What are the "hazards of litigation?"

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

A registered tax return preparer who is not also a CPA,attorney,or Enrolled Agent:

Georgio,a calendar year taxpayer subject to a 35% marginal income tax rate,claimed a Form 1040 charitable contribution deduction of $300,000 for a sculpture that the IRS later valued at $100,000.The applicable overvaluation penalty is:

Michelle,a calendar year taxpayer subject to a 30% marginal 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:

Currently,the IRS charges a ____________________% interest rate on taxes that the taxpayer underpays. or

Henrietta has hired Gracie,a CPA,to complete this year's Form 1040.Henrietta uses software to keep the books for her business.She tells Gracie that a $5,000 amount for business supplies is "close enough" to constitute the deduction.Gracie can use this estimate in completing the Form 1040.

The taxpayer or a tax advisor may be subject to penalties if there is a misstatement of the valuation of an item reported on the tax return.Describe how these penalties work.

Compute the undervaluation penalty for each of the following independent cases involving the executor's reporting of the value of a closely held business in the decedent's gross estate.In each case,assume a marginal estate tax rate of 45%.

The tax professional can do more than just tax compliance work.He or she can work with the client in consultation over the strategy and tactics of dealing with a Federal tax audit.

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.

Circular 230 requires that a tax preparer be aware of changes in the tax law.Furthermore,office practices of the preparer must be up to industry standards.

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

As part of a tax return engagement for XYZ Partnership,Enrolled Agent Wang can draft an amendment to the XYZ partnership agreement.

A(n)____________________ should be requested when the taxpayer wants to know the IRS interpretation of how the tax law will be applied to a proposed transaction.

Compute the overvaluation penalty for each of the following independent cases involving the taxpayer's reporting of the fair market value of charitable contribution property.In each case,assume a marginal income tax rate of 35%.

If the taxpayer shows ____________________ for an underpayment of tax,the failure to pay penalty can be reduced or eliminated.

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

Describe the potential outcomes to a party who provides information to the IRS under the informant or whistleblower program.

In the context of civil tax fraud,the burden of proof is on the IRS to show by a "preponderance of the evidence" that the taxpayer had a specific intent to evade a tax.