Exam 26: Tax Practice and Ethics

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%.

A taxpayer can take a dispute to the Small Cases Division of the Tax Court when the disputed amounts do not exceed $____________________.

Margaurite did not pay her Federal income tax on time.When she eventually filed the return,she reported a balance due.Compute Margaurite's failure to file penalty in each of the following cases.

Mickey,a calendar year taxpayer,was not required to file a 2009 Federal income tax return.During 2010,his AGI is $120,000 and his tax liability is $20,000.To avoid a penalty for tax underpayments for 2010,Mickey must make aggregate estimated tax payments of at least:

Circular 230 prohibits a tax preparer from charging an unconscionable fee for his/her services.

Orange Ltd.withheld from its employees' paychecks $300,000 in Federal income and Social Security taxes for the May 30 payroll.It then spent the $300,000 on equipment upgrades,missing altogether the June 2 due date for the tax remittances.How much does Orange now owe the government in taxes and penalties? Ignore interest accruals,and assume that the Treasury can prove that Orange's redirecting of the tax withholdings was willful.

Juanita,who is subject to a 45% marginal gift tax rate,made a gift of a sculpture to Bianca,valuing the property at $150,000.The IRS later valued the gift at $300,000.The applicable undervaluation penalty is:

Roger prepared for compensation a Federal income tax return for Joan.Joan's return included an aggressive interpretation of the rules concerning overnight business travel.Roger is not liable for a preparer penalty for taking an unreasonable tax return position if:

The tax professional can render valuable services to the client in consultation over the strategy and tactics of dealing with a Federal tax audit.

If a taxpayer is audited by the IRS and is unwilling to accept the findings of the agent,how does the taxpayer's audit strategy change when the dispute is taken to the IRS Appeals Division? Hint: What are the "hazards of litigation?"

Which of the following is subject to tax return preparer penalties?

What taxpayer penalties can arise when a tax return includes an item that is assigned a fair market value?

Maria's AGI last year was $195,000.To avoid a penalty,her estimated tax payments and withholdings for this year must equal the lesser of ____________________ percent of last year's taxes or ____________________ percent of this year's taxes.

The special tax penalty imposed on appraisers:

A letter ruling can be used to establish the level of reasonable employee compensation.

With respect to the Small Cases Division of the Tax Court,

Ron,a calendar year taxpayer subject to a 35% marginal tax rate,claimed a charitable contribution deduction of $500,000 for a sculpture that the IRS later valued at $150,000.The applicable overvaluation penalty is:

A penalty can be assessed from an appraiser who knew that his/her improper appraisal would be used as part of a tax computation,in the amount of the lesser of ____________________% of the tax understatement or ____________________ % of the appraisal fee collected.

In the context of civil 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.

Which of the following statements correctly reflects the rules governing interest to be paid on an individual's Federal tax deficiency or claim for refund?