Question 1

Carole, a CPA, feels that she cannot act as an aggressive advocate for tax clients in today's environment. What aspects of the ethical conduct of a tax practice might have influenced Carole's attitude?

Accepted Answer

The answer of Carole, a CPA, feels that she cannot...

Question 2

A ____________________% penalty may result when a taxpayer overstates by _____________________ percent or more the value of an asset contributed to a charity.
or

Accepted Answer

The answer of A ____________________% penalty may result when a...

Question 3

As part of a tax return engagement for XYZ Partnership, Enrolled Agent Wang can draft an amendment to the XYZ partnership agreement.

Accepted Answer

A) True 
 B)False

Question 4

Maureen, a calendar year taxpayer subject to a 35% marginal tax rate, claimed a Form 1040 charitable contribution deduction of $250,000 for a sculpture that the IRS later valued at $200,000. The applicable overvaluation penalty is:

Accepted Answer

A)  $17,500. 
B)  $14,000. 
C)  $3,500. 
D)  $0.

Question 5

If the taxpayer shows ____________________ for an underpayment of tax, the failure to pay penalty can be reduced or eliminated.

Accepted Answer

The answer of If the taxpayer shows ____________________ for an...

Question 6

Ron, a calendar year taxpayer subject to a 35% marginal tax rate, claimed a Form 1040 charitable contribution deduction of $250,000 for a sculpture that the IRS later valued at $150,000. The applicable overvaluation penalty is:

Accepted Answer

A)  $0. 
B)  $7,000. 
C)  $10,000 (maximum penalty). 
D)  $14,000.

Question 7

A taxpayer penalty may be waived if there is shown to be reasonable cause for the misstatement on the tax return. The courts have applied this standard strictly. List three or more assertions for a waiver of a taxpayer penalty that courts have found not to constitute reasonable cause. Example: Ignorance of the tax law.

Accepted Answer

The answer of A taxpayer penalty may be waived if...

Question 8

The penalty for substantial understatement of tax liability does not apply if:

Accepted Answer

A)  The taxpayer has substantial authority for the treatment taken on the tax return. 
B)  The relevant facts affecting the treatment are adequately disclosed in the return or on Form 8275. 
C)  The IRS failed to meet its burden of proof in showing the taxpayer's error. 
D)  All of the above statements are correct. 
E)  None of the above statements are correct.

Question 9

Clara underpaid her taxes by $50,000. Of this amount, $15,000 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 Clara underpaid her taxes by $50,000. Of...

Question 10

Freddie has been assessed a preparer penalty for willful and reckless conduct. When he completed Peggy's Federal income tax return (who is in the 35% tax bracket), Freddie purposely omitted $100,000 of cash receipts that should have been reported as gross income. Freddie charged Peggy $6,000 to prepare the return. What is Freddie's preparer penalty?

Accepted Answer

A)  $0, because Peggy incurred her own understatement penalty for the return. 
B)  $3,000. 
C)  $5,000. 
D)  $17,500.

Question 11

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

Accepted Answer

The answer of The general statute of limitations regarding Federal...

Question 12

What are the chief responsibilities of the IRS Commissioner, and of the Chief Counsel of the IRS?

Accepted Answer

The answer of What are the chief responsibilities of the...

Question 13

According to AICPA rules, the CPA cannot take an aggressive tax return position on the basis of the "audit ____________________."

Accepted Answer

The answer of According to AICPA rules, the CPA cannot...

Question 14

George, a calendar year taxpayer subject to a 45% marginal gift tax rate, made a gift of a sculpture to Redd, valuing the property at $100,000. The IRS later valued the gift at $140,000. The applicable undervaluation penalty is:

Accepted Answer

A)  $7,200. 
B)  $3,600. 
C)  $1,000 (minimum penalty). 
D)  $0.

Question 15

A CPA can take a tax return position for a client that is contrary to current IRS interpretations of the law.

Accepted Answer

A) True 
 B)False

Question 16

Harold, a calendar year taxpayer subject to a 35% marginal 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:

Accepted Answer

A)  $10,000. 
B)  $7,000. 
C)  $3,500. 
D)  $0.

Question 17

The Statements on Standards for Tax Services are issued by the:

Accepted Answer

A)  IRS. 
B)  AICPA. 
C)  ABA. 
D)  SEC.

Question 18

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

Accepted Answer

The answer of About ____________________% of all Forms 1040 are...

Question 19

A letter ruling is issued by the IRS at no charge.

Accepted Answer

A) True 
 B)False

Question 20

The Treasury issues "private letter rulings" and other determinations, usually in response to a taxpayer request. What is the purpose of the rulings program? Answer from both the taxpayer and the government points of view.

Accepted Answer

The answer of The Treasury issues "private letter rulings" and...

Exam 17: Tax Practice and Ethics

Carole, a CPA, feels that she cannot act as an aggressive advocate for tax clients in today's environment. What aspects of the ethical conduct of a tax practice might have influenced Carole's attitude?

A % penalty may result when a taxpayer overstates by _ percent or more the value of an asset contributed to a charity. or

As part of a tax return engagement for XYZ Partnership, Enrolled Agent Wang can draft an amendment to the XYZ partnership agreement.

Maureen, a calendar year taxpayer subject to a 35% marginal tax rate, claimed a Form 1040 charitable contribution deduction of $250,000 for a sculpture that the IRS later valued at $200,000. The applicable overvaluation penalty is:

If the taxpayer shows ____________________ for an underpayment of tax, the failure to pay penalty can be reduced or eliminated.

Ron, a calendar year taxpayer subject to a 35% marginal tax rate, claimed a Form 1040 charitable contribution deduction of $250,000 for a sculpture that the IRS later valued at $150,000. The applicable overvaluation penalty is:

The penalty for substantial understatement of tax liability does not apply if:

Clara underpaid her taxes by $50,000. Of this amount, $15,000 was due to negligence on her part, as her record-keeping system is highly inadequate. Determine the amount of any negligence penalty

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

What are the chief responsibilities of the IRS Commissioner, and of the Chief Counsel of the IRS?

According to AICPA rules, the CPA cannot take an aggressive tax return position on the basis of the "audit ____________________."

George, a calendar year taxpayer subject to a 45% marginal gift tax rate, made a gift of a sculpture to Redd, valuing the property at $100,000. The IRS later valued the gift at $140,000. The applicable undervaluation penalty is:

A CPA can take a tax return position for a client that is contrary to current IRS interpretations of the law.

Harold, a calendar year taxpayer subject to a 35% marginal 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 Statements on Standards for Tax Services are issued by the:

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

A letter ruling is issued by the IRS at no charge.

The Treasury issues "private letter rulings" and other determinations, usually in response to a taxpayer request. What is the purpose of the rulings program? Answer from both the taxpayer and the government points of view.

Exam 17: Tax Practice and Ethics

Carole, a CPA, feels that she cannot act as an aggressive advocate for tax clients in today's environment. What aspects of the ethical conduct of a tax practice might have influenced Carole's attitude?

A ____________________% penalty may result when a taxpayer overstates by _____________________ percent or more the value of an asset contributed to a charity. or

As part of a tax return engagement for XYZ Partnership, Enrolled Agent Wang can draft an amendment to the XYZ partnership agreement.

Maureen, a calendar year taxpayer subject to a 35% marginal tax rate, claimed a Form 1040 charitable contribution deduction of $250,000 for a sculpture that the IRS later valued at $200,000. The applicable overvaluation penalty is:

If the taxpayer shows ____________________ for an underpayment of tax, the failure to pay penalty can be reduced or eliminated.

Ron, a calendar year taxpayer subject to a 35% marginal tax rate, claimed a Form 1040 charitable contribution deduction of $250,000 for a sculpture that the IRS later valued at $150,000. The applicable overvaluation penalty is:

The penalty for substantial understatement of tax liability does not apply if:

Clara underpaid her taxes by $50,000. Of this amount, $15,000 was due to negligence on her part, as her record-keeping system is highly inadequate. Determine the amount of any negligence penalty

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

What are the chief responsibilities of the IRS Commissioner, and of the Chief Counsel of the IRS?

According to AICPA rules, the CPA cannot take an aggressive tax return position on the basis of the "audit ____________________."

George, a calendar year taxpayer subject to a 45% marginal gift tax rate, made a gift of a sculpture to Redd, valuing the property at $100,000. The IRS later valued the gift at $140,000. The applicable undervaluation penalty is:

A CPA can take a tax return position for a client that is contrary to current IRS interpretations of the law.

Harold, a calendar year taxpayer subject to a 35% marginal 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 Statements on Standards for Tax Services are issued by the:

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

A letter ruling is issued by the IRS at no charge.

The Treasury issues "private letter rulings" and other determinations, usually in response to a taxpayer request. What is the purpose of the rulings program? Answer from both the taxpayer and the government points of view.

A % penalty may result when a taxpayer overstates by _ percent or more the value of an asset contributed to a charity. or

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

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