Question 1

Gadsden, who is subject to a 35% marginal gift tax rate, made a gift of a sculpture to Marvin, valuing the property at $150,000.The IRS later valued the gift at $400,000.The applicable undervaluation penalty is:

Accepted Answer

A)  $0.
B)  $17,500.
C)  $25,000 (maximum penalty) .
D)  $35,000. D

Question 2

The IRS can pay an informant's fee of up to ____________________% of the recovered tax, interest, and penalty amounts.The reward can be as high as ____________________% for information provided by a "whistle blower."
or

Accepted Answer

15, 30 fifteen, thirty

Question 3

During an audit, IRS personnel might request a(n) ____________________ from the IRS National Office, to clarify the application of tax law concerning a tax deduction.

Accepted Answer

technical advice memorandum

Question 4

A(n) ___________________ member is required to follow the Statements of Standards for Tax Services in conducting a tax practice.

Accepted Answer

The answer of A(n) ___________________ member is required to follow...

Question 5

In a letter ruling, the IRS responds to a taxpayer request concerning the tax treatment of a proposed transaction.

Accepted Answer

A) True 
 B)False

Question 6

A taxpayer can be subject to both ____________________ and ____________________ penalties for tax misconduct.
or

Accepted Answer

The answer of A taxpayer can be subject to both...

Question 7

When a "prompt assessment" of the tax liability is requested, the taxpayer essentially is volunteering for an IRS audit of the tax return.

Accepted Answer

A) True 
 B)False

Question 8

During any month in which both the failure-to-file and failure-to-pay penalties apply, both penalties must be paid in full.

Accepted Answer

A) True 
 B)False

Question 9

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 10

The privilege of confidentiality applies to a CPA tax preparer concerning the client's information relative to:

Accepted Answer

A)  Financial accounting tax accrual workpapers.
B)  A tax research memo used to determine an amount reported on the tax return.
C)  Building a defense against a penalty assessed for the use of a tax shelter.
D)  Building a defense against a charge brought by the SEC.

Question 11

A ____________________% penalty may result when a taxpayer overstates by 150% or more the value of an asset contributed to a charity.
or

Accepted Answer

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

Question 12

Compute the undervaluation penalty for each of the following independent cases involving the executor's reporting of the value of a closely held business in the decedent's gross estate.In each case, assume a marginal estate tax rate of 45%.

Accepted Answer

The answer of Compute the undervaluation penalty for each of...

Question 13

The special tax penalty imposed on appraisers:

Accepted Answer

A)  Is waived if the taxpayer also was charged with his/her own valuation penalty.
B)  Applies if the appraiser knew that the appraisal would be used in preparing a Federal income tax return.
C)  Equals 10% of the appraised value of the property, with a $5,000 minimum penalty.
D)  Can be as much as 200% of the appraisal fee that was charged.

Question 14

A CPA 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 15

The IRS processes about ____________________ million individual tax returns every year, about ____________________ million of which are filed electronically.

Accepted Answer

The answer of The IRS processes about ____________________ million individual...

Question 16

Which of the following statements does not reflect the rules governing the accuracy-related penalty for negligence?

Accepted Answer

A)  The penalty rate is 20%.
B)  The penalty applies whenever the taxpayer takes a return position that is contrary to a court decision.
C)  The penalty applies when the taxpayer does not keep records adequate to compute the tax correctly.
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 17

Which of the following is subject to tax return preparer penalties?

Accepted Answer

A)  Lizzie, the firm's administrative assistant, makes copies of returns and assembles the mailings that the client must make to the taxing agencies.
B)  Meredith is the director of Federal taxes for a C corporation.
C)  Sammy is a volunteer who prepares returns at the retirement home under the IRS Tax Counseling for the Elderly program.
D)  Abbie prepares her mother's tax returns for $50 a year.A CPA, Abbie would charge a client $750 for completing a similar return.

Question 18

Vera is audited by the IRS for three tax years.Her returns were prepared by the following parties, to each of whom Vera paid a professional fee.  Vera wants help in appearing before the IRS Revenue Agent for the audit. Which of the following statements is correct?

Accepted Answer

A)  Sally may represent Vera for all tax years involved.
B)  Wesley may represent Vera, but only for tax year 2.
C)  Alex can represent Vera, but only for tax year 3.
D)  Vera may represent herself for all tax years involved.

Question 19

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 20

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

Accepted Answer

A) True 
 B)False

Exam 26: Tax Practice and Ethics

Gadsden, who is subject to a 35% marginal gift tax rate, made a gift of a sculpture to Marvin, valuing the property at $150,000.The IRS later valued the gift at $400,000.The applicable undervaluation penalty is:

The IRS can pay an informant's fee of up to % of the recovered tax, interest, and penalty amounts.The reward can be as high as % for information provided by a "whistle blower." or

During an audit, IRS personnel might request a(n) ____________________ from the IRS National Office, to clarify the application of tax law concerning a tax deduction.

A(n) ___________________ member is required to follow the Statements of Standards for Tax Services in conducting a tax practice.

In a letter ruling, the IRS responds to a taxpayer request concerning the tax treatment of a proposed transaction.

A taxpayer can be subject to both and penalties for tax misconduct. or

When a "prompt assessment" of the tax liability is requested, the taxpayer essentially is volunteering for an IRS audit of the tax return.

During any month in which both the failure-to-file and failure-to-pay penalties apply, both penalties must be paid in full.

The privilege of confidentiality applies to a CPA tax preparer concerning the client's information relative to:

A ____________________% penalty may result when a taxpayer overstates by 150% or more the value of an asset contributed to a charity. or

Compute the undervaluation penalty for each of the following independent cases involving the executor's reporting of the value of a closely held business in the decedent's gross estate.In each case, assume a marginal estate tax rate of 45%.

The special tax penalty imposed on appraisers:

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

The IRS processes about million individual tax returns every year, about million of which are filed electronically.

Which of the following statements does not reflect the rules governing the accuracy-related penalty for negligence?

Which of the following is subject to tax return preparer penalties?

Vera is audited by the IRS for three tax years.Her returns were prepared by the following parties, to each of whom Vera paid a professional fee. Vera wants help in appearing before the IRS Revenue Agent for the audit. Which of the following statements is correct?

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.

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

Exam 26: Tax Practice and Ethics

Gadsden, who is subject to a 35% marginal gift tax rate, made a gift of a sculpture to Marvin, valuing the property at $150,000.The IRS later valued the gift at $400,000.The applicable undervaluation penalty is:

The IRS can pay an informant's fee of up to ____________________% of the recovered tax, interest, and penalty amounts.The reward can be as high as ____________________% for information provided by a "whistle blower." or

During an audit, IRS personnel might request a(n) ____________________ from the IRS National Office, to clarify the application of tax law concerning a tax deduction.

A(n) ___________________ member is required to follow the Statements of Standards for Tax Services in conducting a tax practice.

In a letter ruling, the IRS responds to a taxpayer request concerning the tax treatment of a proposed transaction.

A taxpayer can be subject to both ____________________ and ____________________ penalties for tax misconduct. or

When a "prompt assessment" of the tax liability is requested, the taxpayer essentially is volunteering for an IRS audit of the tax return.

During any month in which both the failure-to-file and failure-to-pay penalties apply, both penalties must be paid in full.

The privilege of confidentiality applies to a CPA tax preparer concerning the client's information relative to:

A ____________________% penalty may result when a taxpayer overstates by 150% or more the value of an asset contributed to a charity. or

Compute the undervaluation penalty for each of the following independent cases involving the executor's reporting of the value of a closely held business in the decedent's gross estate.In each case, assume a marginal estate tax rate of 45%.

The special tax penalty imposed on appraisers:

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

The IRS processes about ____________________ million individual tax returns every year, about ____________________ million of which are filed electronically.

Which of the following statements does not reflect the rules governing the accuracy-related penalty for negligence?

Which of the following is subject to tax return preparer penalties?

Vera is audited by the IRS for three tax years.Her returns were prepared by the following parties, to each of whom Vera paid a professional fee. Vera wants help in appearing before the IRS Revenue Agent for the audit. Which of the following statements is correct?

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.

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

The IRS can pay an informant's fee of up to % of the recovered tax, interest, and penalty amounts.The reward can be as high as % for information provided by a "whistle blower." or

A taxpayer can be subject to both and penalties for tax misconduct. or

The IRS processes about million individual tax returns every year, about million of which are filed electronically.