Question 1

The IRS pays interest on a refund to the taxpayer, unless the IRS's payment is made within________________ days of the date that a return is filed.

Accepted Answer

45

Question 2

The AICPA's Statements on Standards for Tax Services (SSTS) provide principles-based guidelines as to how a tax professional should conduct business.

Accepted Answer

A) True 
 B)False  False

Question 3

Minnie, your tax client, has decided to dispute the Revenue Agent's Report. List and discuss at least four of your
"next steps" as you prepare to represent Minnie concerning her tax issue within the IRS and in the courts.

Accepted Answer

Carrying out a level of due diligence in preparing for such a proceeding is part of the tax professional's responsibility in representing the client.
? Make certain that both sides agree on the issues to be resolved in the audit. The goal here is to bring closure to the agent's list of open issues.
? Identify all of the facts underlying the issues in dispute, including those favorable to the IRS. Gather evidence to support the taxpayer's position, and evaluate the evidence supporting the other side.
? Identify current tax law authorities as they bear on the facts and open issues.
Remember that the IRS agent is bound only by Supreme Court cases and IRS pronouncements. Determine here the degree of discretion that the IRS is likely to have in disposing of the case.
? Prepare a list of points, ranging from those bearing little weight to the core principles upon which the taxpayer's case may rest, supporting and contradicting that position. Short research memos will be useful as well in the discussion with the agent. Pro-taxpayer points should be mentioned during the discussion and "entered into the record."
? Prepare tax and interest computations as to the effects of points that are in dispute, so that the effects of closing or compromising an issue always can be determined.
? Determine a "litigation point" (i.e., at which the taxpayer's position will be withdrawn from further audit negotiation and taken to the courts). This position should reflect the dollars of tax, interest, and penalty involved, the chances of prevailing in various trial-level courts, and other strategies discussed with the taxpayer. One must have an "end game" strategy for the audit, and thorough tax research is critical in developing that position in this context.

Question 4

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."

Accepted Answer

A) True 
 B)False

Question 5

For each of the indicated tax penalties, indicate the appropriate taxpayer defense. A letter may be used more than once. Not all of the letters need be used.
a. Ignorance of the tax law 
b. Reasonable basis
c. Reasonable cause
d. Complexity of the tax law 
e. Substantial authority
f. Disclosure on return
-Failure to pay a tax that is due.

Accepted Answer

The answer of For each of the indicated tax penalties,...

Question 6

Maria's AGI last year was $95,000. 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.

Accepted Answer

100, 90
on

Question 7

Match each of the following tax penalties with the type of tax penalty as specified by the Code. A letter can be used more than once. The correct solution may include more than one letter.
a. Taxpayer penalty
b. Tax preparer penalty 
c. Appraiser's penalty
-Fraudulent failure to file a tax return.

Accepted Answer

The answer of Match each of the following tax penalties...

Question 8

The taxpayer can avoid a valuation penalty for overstating the value of the charitable contribution of an artwork by showing that the deduction claimed was based on a qualified ________________ .

Accepted Answer

The answer of The taxpayer can avoid a valuation penalty...

Question 9

The tax law requires that all paid tax preparers:

Accepted Answer

A)  Have a current Preparer Tax Identification Number (PTIN). 
B)  Hold a bachelor's degree. 
C)  Hold a bachelor's degree in business or economics. 
D)  Complete at least 20 hours or continuing education courses every year. 
A)  Have a current Preparer Tax Identification Number (PTIN). 
B)  Hold a bachelor's degree. 
C)  Hold a bachelor's degree in business or economics. 
D)  Complete at least 20 hours or continuing education courses every year.

Question 10

In the case of bad debts and worthless securities, the statute of limitations on claims for refund is three years.

Accepted Answer

A) True 
 B)False

Question 11

After a tax audit, the taxpayer receives the Revenue Agent's Report as part of the "30-day letter."

Accepted Answer

A) True 
 B)False

Question 12

Because he undervalued property that he transferred by gift, Dan owes additional gift taxes of $4,000. The penalty for undervaluation does not apply in this situation, because the tax understatement was too small.

Accepted Answer

A) True 
 B)False

Question 13

After receiving a ninety-day letter, the taxpayer has 90 days to:

Accepted Answer

A)  Pay any outstanding tax, interest, and penalties. 
B)  Appeal the dispute to the Tax Court. 
C)  Either a. or b. 
D)  Neither a. nor b. 
A)  Pay any outstanding tax, interest, and penalties. 
B)  Appeal the dispute to the Tax Court. 
C)  Either a. or b. 
D)  Neither a. nor b.

Question 14

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.

Accepted Answer

10, 125
te

Question 15

A letter ruling should be requested when the taxpayer wants to know the IRS interpretation of how the tax law will be applied to a ________________ (proposed, completed) transaction.

Accepted Answer

The answer of A letter ruling should be requested when...

Question 16

On July 1, Hernandez files a refund claim with the IRS, and the IRS agrees with his computations. The IRS can avoid paying any interest to Hernandez if:

Accepted Answer

A)  The total tax involved does not exceed $5,000 (indexed for inflation). 
B)  The IRS pays Hernandez the amount owed on August 10. 
C)  Both a. and b. 
D)  Neither a. nor b. 
A)  The total tax involved does not exceed $5,000 (indexed for inflation). 
B)  The IRS pays Hernandez the amount owed on August 10. 
C)  Both a. and b. 
D)  Neither a. nor b.

Question 17

Circular 230 applies to all paid tax practitioners. But attorneys, CPAs, and enrolled agents are exempt from the Circular 230 rules, because each of the groups has its own code of professional conduct.

Accepted Answer

A) True 
 B)False

Question 18

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

Accepted Answer

A)  Most IRS examinations of Forms 1040 are conducted solely through the mail. 
B)  The "office audit" occurs less frequently than all other audit types. 
C)  The IRS publishes the factors its computers use for audit selection purposes annually in the Commissioner's Report. 
D)  For a Form 1040 that is filed on April 11, if the taxpayer has not received an audit notification from the IRS by the end of the year, the return still may be audited. 
A)  Most IRS examinations of Forms 1040 are conducted solely through the mail. 
B)  The "office audit" occurs less frequently than all other audit types. 
C)  The IRS publishes the factors its computers use for audit selection purposes annually in the Commissioner's Report. 
D)  For a Form 1040 that is filed on April 11, if the taxpayer has not received an audit notification from the IRS by the end of the year, the return still may be audited.

Question 19

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)  Avoid signing a tax return that is likely to be audited. 
C)  Charge a $5,000 fee to prepare a Form 1040EZ. 
D)  Operate the "Tax Nerd's Blog" on the Internet. 
A)  Take a position on a tax return that is contrary to a decision of the U.S. Supreme Court. 
B)  Avoid signing a tax return that is likely to be audited. 
C)  Charge a $5,000 fee to prepare a Form 1040EZ. 
D)  Operate the "Tax Nerd's Blog" on the Internet.

Question 20

A negligence penalty can be waived if the taxpayer discloses a tax return position that is contrary to a judicial precedent and there is a ________________ for the taxpayer's position.

Accepted Answer

The answer of A negligence penalty can be waived if...

Exam 26: Tax Practice and Ethics

The IRS pays interest on a refund to the taxpayer, unless the IRS's payment is made within________________ days of the date that a return is filed.

The AICPA's Statements on Standards for Tax Services (SSTS) provide principles-based guidelines as to how a tax professional should conduct business.

Minnie, your tax client, has decided to dispute the Revenue Agent's Report. List and discuss at least four of your "next steps" as you prepare to represent Minnie concerning her tax issue within the IRS and in the courts.

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."

Maria's AGI last year was $95,000. 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.

Match each of the following tax penalties with the type of tax penalty as specified by the Code. A letter can be used more than once. The correct solution may include more than one letter. a. Taxpayer penalty b. Tax preparer penalty c. Appraiser's penalty -Fraudulent failure to file a tax return.

The taxpayer can avoid a valuation penalty for overstating the value of the charitable contribution of an artwork by showing that the deduction claimed was based on a qualified ________________ .

The tax law requires that all paid tax preparers:

In the case of bad debts and worthless securities, the statute of limitations on claims for refund is three years.

After a tax audit, the taxpayer receives the Revenue Agent's Report as part of the "30-day letter."

Because he undervalued property that he transferred by gift, Dan owes additional gift taxes of $4,000. The penalty for undervaluation does not apply in this situation, because the tax understatement was too small.

After receiving a ninety-day letter, the taxpayer has 90 days to:

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.

A letter ruling should be requested when the taxpayer wants to know the IRS interpretation of how the tax law will be applied to a ________________ (proposed, completed) transaction.

On July 1, Hernandez files a refund claim with the IRS, and the IRS agrees with his computations. The IRS can avoid paying any interest to Hernandez if:

Circular 230 applies to all paid tax practitioners. But attorneys, CPAs, and enrolled agents are exempt from the Circular 230 rules, because each of the groups has its own code of professional conduct.

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

Circular 230 allows a tax preparer to:

A negligence penalty can be waived if the taxpayer discloses a tax return position that is contrary to a judicial precedent and there is a ________________ for the taxpayer's position.

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

Property Transactions: Determination of Gain or Loss, Basis Considerations, and Nontaxable Exchanges

Property Transactions: Capital Gains and Losses, Section 1231, and Recapture Provisions

Taxing Business Income

Accounting Periods and Methods

Corporations: Introduction and Operating Rules

Corporations: Organization and Capital Structure

Corporations: Distributions Not in Complete Liquidation

Corporations: 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

Maria's AGI last year was $95,000. 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.