Question 1

Which of the following is a false statement? A taxpayer filing a fraudulent tax return:

Accepted Answer

A)  is potentially subject to criminal penalties. 
B)  is potentially subject to civil penalties. 
C)  is potentially subject to fines and a prison sentence. 
D)  will have an unlimited statute of limitations for the fraudulent tax return. 
E)  None of the above.

Question 2

Under the Statement on Standards for Tax Services, a CPA may recommend a tax return position if the position is frivolous and the position is not disclosed on the tax return.

Accepted Answer

A) True 
 B)False

Question 3

If a taxpayer loses a case at the Circuit Court level, he is granted an automatic appeal hearing with the Supreme Court.

Accepted Answer

A) True 
 B)False

Question 4

If a taxpayer has little cash and a very technical tax case that she feels very strongly that the tax rules are "on her side," she should prefer to have her case tried in the U.S. Tax Court.

Accepted Answer

A) True 
 B)False

Question 5

For fraudulent tax returns, the statute of limitations for IRS assessment is ten years.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following has the lowest authoritative weight?

Accepted Answer

A)  Legislative regulation. 
B)  Private letter ruling. 
C)  Revenue ruling. 
D)  Interpretative regulation. 
E)  Revenue procedure.

Question 7

If Paula requests an extension to file her individual tax return, the latest she could file her return without a failure-to-file penalty is:

Accepted Answer

A)  September 15th. 
B)  October 15th. 
C)  August 15th. 
D)  November 15th. 
E)  None of the above.

Question 8

Dan received a letter from the IRS that gave him the choice of (1) requesting a conference with an Appeals Officer or (2) agreeing to a proposed tax adjustment. Dan received the:

Accepted Answer

A)  30-day letter. 
B)  90-day letter. 
C)  Appeals letter. 
D)  Tax adjustment letter. 
E)  None of the above.

Question 9

The IRS has recently completed its audit of Lorene's corporation. As a tax novice, she has very little understanding regarding the audit process and what happens next. Describe the post-audit process for Lorene and identify her options.

Accepted Answer

The answer of The IRS has recently completed its audit...

Question 10

The statute of limitations for IRS assessment generally ends four years after the date a tax return is filed.

Accepted Answer

A) True 
 B)False

Question 11

Corporations are required to file a tax return annually regardless of their taxable income.

Accepted Answer

A) True 
 B)False

Question 12

Tyrone claimed a large amount of charitable contributions as a tax deduction relative to taxpayers with similar levels of income. If Tyrone's tax return is chosen for audit because of his large charitable contributions, which audit program likely identified Tyrone's tax return for audit?

Accepted Answer

A)  DIF System. 
B)  Deduction Detective. 
C)  Document perfection. 
D)  Information matching. 
E)  None of the above.

Question 13

For the following taxpayers, please recommend the most advantageous trial level court(s) to litigate a tax issue with the IRS. a. Joe is litigating a tax issue with the IRS that is considered a question of fact (i.e., the answers depends on the facts of the case). There is not a lot of authority on point for this case but Joe has a very appealing story to justify his position that is likely to be viewed sympathetically by his peers. b. The Circuit Court of Appeals for the Federal Circuit recently issued an opinion that is very favorable to the issue that Jesse plans to litigate with the IRS. c. The Circuit Court of Appeals for the Federal Circuit recently issued an opinion that is not favorable to the issue that Hank plans to litigate with the IRS. d. The 7^th Circuit (where Elizabeth resides) recently issued an opinion that is very favorable to the issue that Elizabeth plans to litigate with the IRS.

Accepted Answer

The answer of For the following taxpayers, please recommend the...

Question 14

Which of the following is not considered a primary authority?

Accepted Answer

A)  Tax Court case. 
B)  Treasury Regulation. 
C)  Revenue Ruling. 
D)  Tax service. 
E)  None of the above.

Question 15

Circular 230 was issued by:

Accepted Answer

A)  AICPA. 
B)  State Boards of Accountancy. 
C)  American Bar Association. 
D)  IRS. 
E)  None of the above.

Question 16

For the following tax returns, identify which of the three audit types will most likely be utilized.
a. The IRS selected Don's return for audit because of his high itemized deductions. The IRS would like documentation of these deductions.
b. Large Public Corporation is a very large publicly traded corporation. It is involved in many complex transactions that have significant tax ramifications.
c. George and Barbara operate a small business out of their home. The IRS has identified a couple of issues that may relate to their business.
d. The IRS selected Bill and Hillary's tax return for review because of some of their investment sales. They would like a better understanding of the transactions and parties involved.

Accepted Answer

The answer of For the following tax returns, identify which...

Question 17

Bill filed his 2016 tax return on March 15th, 2017. The statute of limitations for IRS assessment on Bill's 2016 tax return should end:

Accepted Answer

A)  March 15th, 2019. 
B)  April 15th, 2019. 
C)  March 15th, 2020. 
D)  April 15th, 2020. 
E)  None of the above.

Question 18

For the following taxpayers indicate whether the taxpayer should file a tax return and why.
a. Robert earned $50,000 this year as a staff accountant. His estimated tax liability is $4,500, and he expects to receive a $500 tax refund.
b. Amy earned $4,000 this year working part-time. She will have no federal tax liability and has not made any federal tax payments.
c. Ty earned $2,500 this summer and had $200 of federal taxes withheld from his paycheck. He will have no federal tax liability this year.
d. Startup Corporation had a $50,000 loss this year.
e. The Walker Family Trust earned $500 of gross income this year.

Accepted Answer

The answer of For the following taxpayers indicate whether the...

Question 19

Campbell was researching a tax issue and found a favorable Tax Court opinion and an IRC Code Section that appears to answer the question. Is she finished with the research process? If so, why? If not, what must she do?

Accepted Answer

The answer of Campbell was researching a tax issue and...

Question 20

Lavonda discovered that the U.S. Circuit Court of Appeals for the Federal Circuit has recently issued a favorable opinion with respect to an issue that she is going to litigate with the IRS. Lavonda should choose which of the following trial courts to hear her case?

Accepted Answer

A)  Tax Court only. 
B)  U.S. Court of Federal Claims only. 
C)  U.S. District Court only. 
D)  Tax Court or the U.S. District Court. 
E)  Tax Court or the U.S. Court of Federal Claims.

Exam 2: Tax Compliance , the Irs, and Tax Authorities

Which of the following is a false statement? A taxpayer filing a fraudulent tax return:

Under the Statement on Standards for Tax Services, a CPA may recommend a tax return position if the position is frivolous and the position is not disclosed on the tax return.

If a taxpayer loses a case at the Circuit Court level, he is granted an automatic appeal hearing with the Supreme Court.

If a taxpayer has little cash and a very technical tax case that she feels very strongly that the tax rules are "on her side," she should prefer to have her case tried in the U.S. Tax Court.

For fraudulent tax returns, the statute of limitations for IRS assessment is ten years.

Which of the following has the lowest authoritative weight?

If Paula requests an extension to file her individual tax return, the latest she could file her return without a failure-to-file penalty is:

Dan received a letter from the IRS that gave him the choice of (1) requesting a conference with an Appeals Officer or (2) agreeing to a proposed tax adjustment. Dan received the:

The IRS has recently completed its audit of Lorene's corporation. As a tax novice, she has very little understanding regarding the audit process and what happens next. Describe the post-audit process for Lorene and identify her options.

The statute of limitations for IRS assessment generally ends four years after the date a tax return is filed.

Corporations are required to file a tax return annually regardless of their taxable income.

Tyrone claimed a large amount of charitable contributions as a tax deduction relative to taxpayers with similar levels of income. If Tyrone's tax return is chosen for audit because of his large charitable contributions, which audit program likely identified Tyrone's tax return for audit?

Which of the following is not considered a primary authority?

Circular 230 was issued by:

Bill filed his 2016 tax return on March 15^th, 2017. The statute of limitations for IRS assessment on Bill's 2016 tax return should end:

Campbell was researching a tax issue and found a favorable Tax Court opinion and an IRC Code Section that appears to answer the question. Is she finished with the research process? If so, why? If not, what must she do?

Lavonda discovered that the U.S. Circuit Court of Appeals for the Federal Circuit has recently issued a favorable opinion with respect to an issue that she is going to litigate with the IRS. Lavonda should choose which of the following trial courts to hear her case?