Exam 17: Tax Practice and Ethics

About ____________________% of all Forms 1040 are audited each year.The rate is about ____________________% if income exceeds $1 million. or

The usual three-year statute of limitations on additional tax assessments applies in the following situation(s).

Ming (a calendar year taxpayer)donates a painting to a local art museum (a qualified charity).The painting cost Ming $2,000 ten years ago and,according to one of Ming's friends (an amateur artist),is worth $40,000.On his income tax return,Ming deducts $40,000 as a Form 1040 charitable contribution.Upon later audit by the IRS,it is determined that the true value of the painting was $30,000.Assuming that Ming is subject to a 30% marginal Federal income tax rate,his penalty for overvaluation is:

Marco,a cash basis,calendar year taxpayer,filed his income tax return 50 days after the due date.Marco never extended his return,and with the return he paid the taxes that were due.What penalties will Marco incur,and how much is the penalty if his additional tax is $5,000? Disregard any additional interest he must pay.

Maria and Miguel Blanco are in the midst of negotiating a divorce.Because both parties are unwilling to share any current financial information,their joint Form 1040 for 2012 is not filed until October 31,2013,when the respective divorce attorneys forced them to cooperate.The Blancos should not be subject to any Federal late-filing penalties,because of the reasonable cause exception.

Harold,a calendar year taxpayer subject to a 35% marginal income tax rate,claimed a Form 1040 charitable contribution deduction of $20,000 for a sculpture that the IRS later valued at $10,000.The applicable overvaluation penalty is:

The IRS targets high-income individuals for an audit rate that is much higher than that of the general populace.

Quon filed an amended return,claiming a $100,000 refund.The IRS disallowed the refund,and it can assess a penalty if there was no reasonable basis of support for the refund claim,in the amount of ____________________% of the disallowed amount. or

The ____________________,a presidential appointee,is the "IRS's attorney."

Jake,an individual calendar year taxpayer,incurred the following transactions. Assuming that any error in timely reporting these amounts was inadvertent,how much omission from gross income would be required before the six-year statute of limitations would apply?

Which of the following statements is incorrect as to the conduct of IRS income tax audits?

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