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Exam 17: Tax Practice and Ethics

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Question 81

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Arnold made a charitable contribution of property that he valued at $70,000. He deducted this amount as an itemized deduction on his tax return. The IRS can show that the actual value of the property is $50,000. Arnold is in the 35% income tax bracket. Determine Arnold's amount due for both tax and any penalty.

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The § 6662 penalty applies when the tax ...

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Question 82

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Concerning a taxpayer's requirement to make quarterly estimated tax payments:

A) An individual must make estimated payments if his or her balance due for the Federal income tax for the year will exceed $1,000.
B) The due dates of the payments for a calendar-year C corporation are March, June, September, and December 15.
C) A C corporation must make estimated payments if its Federal income tax liability for the year will exceed $250.
D) A trust is not required to make estimated payments.

E) All of the above
F) A) and B)

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Question 83

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Last year, Ned's property tax deduction on his residence was $22,500. Although he lives in the same house, he tells his CPA that this year's taxes will be only $7,500. The CPA can use this estimate in computing Ned's itemized deductions, under the Statements of Standards for Tax Services.

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 ____________________.

In connection with the taxpayer penalty for substantial understatement of tax liability, what defenses (if any) are available?

Maria and Miguel Blanco are in the midst of negotiating a divorce. Because both parties are unwilling to share any current financial information, their joint Form 1040 for 2011 is not filed until October 31, 2012, when the respective divorce attorneys forced them to cooperate. The Blancos should not be subject to any Federal late-filing penalties, because of the reasonable cause exception.

Does the tax preparer enjoy an "attorney-client privilege" of confidentiality with his or her clients?

In the case of bad debts and worthless securities, the statute of limitations on claims for refund is seven years.

The usual three-year statute of limitations on additional tax assessments applies in the following situation(s) .

Circular 230 applies to all tax practitioners. This includes attorneys, CPAs, and enrolled agents, even though each of the groups has its own code of conduct.

The AICPA's Statements on Standards for Tax Services must be followed its members; they are more than merely advisory.

Yin-Li is the preparer of the Form 1120 for Cloves Corporation. On the return, Cloves claimed a deduction that the IRS later disallowed on audit. Compute the tax preparer penalty that could be assessed against Yin-Li in each of the following independent situations.

Leo underpaid his taxes by $250,000. Portions of the underpayment were attributable to negligence ($90,000) and to civil fraud ($160,000). Compute the total penalties incurred.