Question 1

Concerning the penalty for civil tax fraud:

Accepted Answer

A)  The burden of proof is on the taxpayer to establish that no fraud was committed. 
B)  Fraudulent behavior is more than mere negligence on the part of the taxpayer. 
C)  The penalty is 100% of the underpayment. 
D)  Fraud is defined in Code §§ 6663(b) and (f).

Question 2

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 might be used.
-Failure to sign the return.

Accepted Answer

A) Taxpayer penalty 
B) Tax preparer penalty 
C) Appraiser's penalty

Question 3

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

Accepted Answer

A)  The taxpayer (but not the IRS) can appeal a contrary judgment. 
B)  The IRS (but not the taxpayer) can appeal a contrary judgment. 
C)  Either the IRS or the taxpayer can appeal a contrary judgment. 
D)  Neither the IRS nor the taxpayer can appeal a contrary judgment.

Question 4

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 might be used.
-Preparer penalty for reckless conduct.

Accepted Answer

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

Question 5

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 6

Clarita underpaid her taxes by $50,000. Of this amount, $35,000 was due to negligence on her part, as her record-keeping system is highly inadequate. Determine the amount of any negligence penalty.

Accepted Answer

The answer of Clarita underpaid her taxes by $50,000. Of...

Question 7

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 8

The Statements on Standards for Tax Services apply to members of the AICPA, a state bar association, and all Enrolled Agents.

Accepted Answer

A) True 
 B)False

Question 9

Georgio, a calendar year taxpayer subject to a 33% marginal Federal income tax rate, claimed a Form 1040 charitable contribution deduction of $300,000 for a sculpture that the IRS later valued at $120,000. The applicable overvaluation penalty is:

Accepted Answer

A)  $10,000 (maximum penalty). 
B)  $12,000. 
C)  $24,000. 
D)  $60,000.

Question 10

Under Circular 230, Burke cannot complete a client's original Form 1040 and charge a fee equal to one-third of the resulting refund.

Accepted Answer

A) True 
 B)False

Question 11

With respect to tax misconduct, a ____________________ penalty usually involves only a fine, and a ____________________ penalty also can include jail time.

Accepted Answer

The answer of With respect to tax misconduct, a ____________________...

Question 12

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.

Question 13

A(n) ___________________ must obtain a Preparer Tax Identification Number (PTIN).

Accepted Answer

The answer of A(n) ___________________ must obtain a Preparer Tax...

Question 14

Fiona, a VITA volunteer for her college's tax clinic, is not a tax preparer as defined by the Code. Thus, Fiona is exempted from the Code's tax preparer penalties.

Accepted Answer

A) True 
 B)False

Question 15

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 might be used.
-Preparer penalty for taking an unreasonable tax return position.

Accepted Answer

A) Taxpayer penalty 
B) Tax preparer penalty 
C) Appraiser's penalty

Question 16

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

Accepted Answer

A)  Can prepare returns and give tax advice. 
B)  Can represent the taxpayer before an IRS Appeals officer. 
C)  Must pass an annual qualifying exam concerning the tax law. 
D)  Is subject only to selected Circular 230 rules.

Question 17

The government can appeal a decision of the Tax Court Small Cases Division, but the taxpayer cannot.

Accepted Answer

A) True 
 B)False

Question 18

An IRS letter ruling might determine that an employee's compensation is unreasonable in amount.

Accepted Answer

A) True 
 B)False

Question 19

The IRS is organized according to the industry classification of the taxpayer. One of the operating divisions of the IRS deals exclusively with manufacturing and exporting businesses.

Accepted Answer

A) True 
 B)False

Question 20

During an audit, the IRS might require that the taxpayer produce the ____________________ that underlie the tax return data.

Accepted Answer

The answer of During an audit, the IRS might require...

Exam 17: Tax Practice and Ethics

Concerning the penalty for civil tax fraud:

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 might be used. -Failure to sign the return.

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

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 might be used. -Preparer penalty for reckless conduct.

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."

Clarita underpaid her taxes by $50,000. Of this amount, $35,000 was due to negligence on her part, as her record-keeping system is highly inadequate. Determine the amount of any negligence penalty.

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 Statements on Standards for Tax Services apply to members of the AICPA, a state bar association, and all Enrolled Agents.

Georgio, a calendar year taxpayer subject to a 33% marginal Federal income tax rate, claimed a Form 1040 charitable contribution deduction of $300,000 for a sculpture that the IRS later valued at $120,000. The applicable overvaluation penalty is:

Under Circular 230, Burke cannot complete a client's original Form 1040 and charge a fee equal to one-third of the resulting refund.

With respect to tax misconduct, a penalty usually involves only a fine, and a penalty also can include jail time.

Circular 230 allows a tax preparer to:

A(n) ___________________ must obtain a Preparer Tax Identification Number (PTIN).

Fiona, a VITA volunteer for her college's tax clinic, is not a tax preparer as defined by the Code. Thus, Fiona is exempted from the Code's tax preparer penalties.

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 might be used. -Preparer penalty for taking an unreasonable tax return position.

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

The government can appeal a decision of the Tax Court Small Cases Division, but the taxpayer cannot.

An IRS letter ruling might determine that an employee's compensation is unreasonable in amount.

The IRS is organized according to the industry classification of the taxpayer. One of the operating divisions of the IRS deals exclusively with manufacturing and exporting businesses.

During an audit, the IRS might require that the taxpayer produce the ____________________ that underlie the tax return data.