Question 1

Malik, Inc., a calendar year C corporation subject to a 35% marginal income tax rate, claimed a Form 1120 charitable contribution deduction of $30,000 for a sculpture that the IRS later valued at $10,000. The applicable overvaluation penalty is:

Accepted Answer

A)  $0. 
B)  $7,000. 
C)  $10,000 (minimum penalty). 
D)  $20,000.

Question 2

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 3

Keepert uses "two sets of books." She only reports one-half of her cash sales on the records that she uses to complete her Federal income tax return. The statute of limitations for Keepert's return is six years.

Accepted Answer

A) True 
 B)False

Question 4

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 5

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.

Question 6

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

Accepted Answer

A)  Office audits are conducted at the office of the IRS. 
B)  An office audit involves a line­by­line review of the taxpayer's return. 
C)  The most common type of Federal income tax audit is the field audit. 
D)  A correspondence audit usually is concluded after a meeting with the taxpayer at the IRS auditor's office.

Question 7

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

The answer of Minnie, your tax client, has decided to...

Question 8

Loren Ltd., a calendar year taxpayer, had the following transactions, all of which were properly reported on a timely filed return. Presuming the absence of fraud, how much of an omission from gross income must occur for Loren before the six-year statute of limitations applies? Show your computations.

Accepted Answer

The answer of Loren Ltd., a calendar year taxpayer, had...

Question 9

CPA Norma and her client Colin hold a privilege of confidentiality from the IRS, as to their tax planning discussions about completing Colin's tax returns. The IRS cannot successfully subpoena records concerning these discussions.

Accepted Answer

A) True 
 B)False

Question 10

The IRS national office is organized into operating divisions, broadly on the basis of the tax returns that are each division's responsibilities. List at least four the IRS's operating divisions.

Accepted Answer

The answer of The IRS national office is organized into...

Question 11

According to the IRS, the annual "Tax Gap" totals about $ billion.

Accepted Answer

The answer of According to the IRS, the annual "Tax...

Question 12

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
-Willful and reckless conduct.

Accepted Answer

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

Question 13

A negligence penalty is assessed when the taxpayer is found to have not made a reasonable attempt to comply with the tax law.

Accepted Answer

A) True 
 B)False

Question 14

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

The answer of The IRS pays interest on a refund...

Question 15

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

The answer of A penalty can be assessed from an...

Question 16

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...

Question 17

A(n) $ penalty applies if the tax preparer does not sign the client's tax return.

Accepted Answer

The answer of A(n) $ penalty applies if the tax...

Question 18

Linwell underpaid his taxes by $250,000. Portions of the underpayment were attributable to negligence ($210,000) and to civil fraud ($40,000). Compute the total penalties incurred.

Accepted Answer

The answer of Linwell underpaid his taxes by $250,000. Portions...

Question 19

Silvio, a cash basis, calendar year taxpayer, filed his income tax return 75 days after the due date. Silvio never extended his return, and with the return he paid the full amount of taxes that were due. What penalties will Silvio incur, and how much is the penalty if his additional tax is $5,000? Disregard any additional interest he must pay.

Accepted Answer

The answer of Silvio, a cash basis, calendar year taxpayer,...

Question 20

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

The answer of Maria's AGI last year was $95,000. To...

Exam 17: Tax Practice and Ethics

Malik, Inc., a calendar year C corporation subject to a 35% marginal income tax rate, claimed a Form 1120 charitable contribution deduction of $30,000 for a sculpture that the IRS later valued at $10,000. The applicable overvaluation penalty is:

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.

Keepert uses "two sets of books." She only reports one-half of her cash sales on the records that she uses to complete her Federal income tax return. The statute of limitations for Keepert's return is six years.

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?

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

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.

CPA Norma and her client Colin hold a privilege of confidentiality from the IRS, as to their tax planning discussions about completing Colin's tax returns. The IRS cannot successfully subpoena records concerning these discussions.

The IRS national office is organized into operating divisions, broadly on the basis of the tax returns that are each division's responsibilities. List at least four the IRS's operating divisions.

According to the IRS, the annual "Tax Gap" totals about $ billion.

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 -Willful and reckless conduct.

A negligence penalty is assessed when the taxpayer is found to have not made a reasonable attempt to comply with the tax law.

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.

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.

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(n) $ penalty applies if the tax preparer does not sign the client's tax return.

Linwell underpaid his taxes by $250,000. Portions of the underpayment were attributable to negligence ($210,000) and to civil fraud ($40,000). Compute the total penalties incurred.

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.