Question 1

Circular 230 allows a tax preparer to:

Accepted Answer

A) Take a position on a tax return that is contrary to a decision of the U.S.Supreme Court. 
B) Charge a $5,000 fee to prepare a Form 1040EZ. 
C) Advertise tax preparation services on the Internet. 
D) Avoid signing a tax return that is likely to be audited. 
A) Take a position on a tax return that is contrary to a decision of the U.S.Supreme Court. 
B) Charge a $5,000 fee to prepare a Form 1040EZ. 
C) Advertise tax preparation services on the Internet. 
D) Avoid signing a tax return that is likely to be audited.

Question 2

If a taxpayer understates her cash sales by 30% of the adjusted gross income on the return,the statute of limitations on assessments is increased to six years.

Accepted Answer

A) True 
 B)False

Question 3

A negligence penalty is 20% of the underpayment attributable to negligence.

Accepted Answer

A) True 
 B)False

Question 4

Kim underpaid her taxes by $30,000.Of this amount,$10,000 was due to negligence on her part,as her record-keeping system is highly inadequate.Determine the amount of any negligence penalty.

Accepted Answer

$2,000 (20

Question 5

Max (a calendar year taxpayer)donates a painting to a local art museum (a qualified charity).The painting cost Max $2,000 ten years ago and,according to one of Max's friends (an amateur artist),is worth $50,000.On his income tax return,Max deducts $50,000 as a charitable contribution.Upon later audit by the IRS,it is determined that the true value of the painting was $30,000.Assuming that Max is subject to a 30% marginal income tax rate,his penalty for overvaluation is:

Accepted Answer

A) $0. 
B) $1,200. 
C) $2,400. 
D) $5,000 (maximum penalty). 
E) $6,000. 
A) $0. 
B) $1,200. 
C) $2,400. 
D) $5,000 (maximum penalty). 
E) $6,000.

Question 6

The client has decided to dispute the Revenue Agent's Report.What is the tax advisor's next step?

Accepted Answer

Carrying out a level of due di

Question 7

Anthony,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?

Accepted Answer

A) The six-year rule cannot apply here. 
B) More than $115,000. 
C) More than $137,500. 
D) More than $212,500. 
A) The six-year rule cannot apply here. 
B) More than $115,000. 
C) More than $137,500. 
D) More than $212,500.

Question 8

Arnold made a charitable contribution of property that he valued at $70,000.He deducted this amount as an itemized deduction on his tax return.The IRS can show that the actual value of the property is $50,000.Arnold is in the 35% income tax bracket.Determine Arnold's amount due for both tax and any penalty.

Accepted Answer

The § 6662 penalty applies when the tax

Question 9

A tax preparer and his/her client hold a privilege of confidentiality from the IRS,as to their discussions about completing a tax return.

Accepted Answer

A) True 
 B)False

Question 10

When a practitioner discovers an error in a client's prior return,AICPA tax ethics rules require that an amended return immediately be filed.

Accepted Answer

A) True 
 B)False

Question 11

The taxpayer can use a(n)____________________ to pay off a deficiency over a longer period of time.

Accepted Answer

The answer of The taxpayer can use a(n)____________________ to pay...

Question 12

Most practitioners encourage their clients to attend an IRS office audit.

Accepted Answer

A) True 
 B)False

Question 13

Carol's AGI last year was $180,000.Her Federal income tax came to $60,000,which she paid through a combination of withholding and estimated payments.This year,her AGI will be $250,000,with a projected tax liability of $80,000,all to be paid through estimates.Ignore the annualized income method.Compute Carol's quarterly estimated payment schedule for this year.

Accepted Answer

Current-Year Method
 @#IMG-DLM& Prior-Year Method

Question 14

During an audit,either the IRS or the taxpayer might request that the National Office issue a(n)____________________ memorandum concerning a disputed issue.

Accepted Answer

The answer of During an audit,either the IRS or the...

Question 15

Which of the following statements,if any,do not reflect the rules governing the accuracy-related penalty for negligence?

Accepted Answer

A) The penalty rate is 20%. 
B) The penalty is imposed only on the part of the deficiency attributable to negligence. 
C) The penalty applies only to intentional tax understatements by the taxpayer. 
D) The penalty is waived if the taxpayer uses Form 8275 to disclose a return position that is reasonable though contrary to the IRS position. 
A) The penalty rate is 20%. 
B) The penalty is imposed only on the part of the deficiency attributable to negligence. 
C) The penalty applies only to intentional tax understatements by the taxpayer. 
D) The penalty is waived if the taxpayer uses Form 8275 to disclose a return position that is reasonable though contrary to the IRS position.

Question 16

In preparing a tax return,a CPA should verify "to the penny" every item of information submitted by a client.

Accepted Answer

A) True 
 B)False

Question 17

The tax preparer penalty for taking an unreasonable tax return position is the greater of $1,000 or ____________________ of the tax professional's income from preparing the return.

Accepted Answer

The answer of The tax preparer penalty for taking an...

Question 18

Only the government can appeal a decision of the Tax Court Small Cases Division.

Accepted Answer

A) True 
 B)False

Question 19

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

Accepted Answer

3,6,7 or t

Question 20

A penalty for understating a tax liability can be waived if the taxpayer can show ____________________ for the position taken on the tax return.

Accepted Answer

substantia

Exam 26: Tax Practice and Ethics

Circular 230 allows a tax preparer to:

If a taxpayer understates her cash sales by 30% of the adjusted gross income on the return,the statute of limitations on assessments is increased to six years.

A negligence penalty is 20% of the underpayment attributable to negligence.

Kim underpaid her taxes by $30,000.Of this amount,$10,000 was due to negligence on her part,as her record-keeping system is highly inadequate.Determine the amount of any negligence penalty.

The client has decided to dispute the Revenue Agent's Report.What is the tax advisor's next step?

Anthony,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?

A tax preparer and his/her client hold a privilege of confidentiality from the IRS,as to their discussions about completing a tax return.

When a practitioner discovers an error in a client's prior return,AICPA tax ethics rules require that an amended return immediately be filed.

The taxpayer can use a(n)____________________ to pay off a deficiency over a longer period of time.

Most practitioners encourage their clients to attend an IRS office audit.

During an audit,either the IRS or the taxpayer might request that the National Office issue a(n)____________________ memorandum concerning a disputed issue.

Which of the following statements,if any,do not reflect the rules governing the accuracy-related penalty for negligence?

In preparing a tax return,a CPA should verify "to the penny" every item of information submitted by a client.

The tax preparer penalty for taking an unreasonable tax return position is the greater of $1,000 or ____________________ of the tax professional's income from preparing the return.

Only the government can appeal a decision of the Tax Court Small Cases Division.

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

A penalty for understating a tax liability can be waived if the taxpayer can show ____________________ for the position taken on the tax return.

An Introduction to Taxation and Understanding the Federal Tax Law

Working With the Tax Law

Computing the Tax

Gross Income: Concepts and Inclusions

Gross Income: Exclusions

Deductions and Losses: in General

Deductions and Losses: Certain Business Expenses and Losses

Depreciation,cost Recovery,amortization,and Depletion

Deductions: Employee and Self-Employed-Related Expenses

Deductions and Losses: Certain Itemized Deductions

Investor Losses

Tax Credits and Payments

Part 1--Property Transactions: Determination of Gain or Loss,basis Considerations,and Nontaxable Exchanges

Part 2--Property Transactions: Determination of Gain or Loss,basis Considerations,and Nontaxable Exchanges

Property Transactions: Capital Gains and Losses,1231,and Recapure Provisions

Alternative Minimum Tax

Accounting Periods and Methods

Corporations: Introduction and Operating Rules

Corporations: Organization and Capital Structure

Corporations: Distributions Not in Complete Liquidation

Distributions in Complete Liquidation and an Overview of Reorganizations

Partnerships

S Corporations

Exempt Entities

Multistate Corporate Taxation

Taxation of International Transactions

The Federal Gift and Estate Taxes

Income Taxation of Trusts and Estates

Filters

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