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Exam 26: Tax Practice and Ethics

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Question 61

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Quon filed his Federal income tax return on time,but he did not remit the full balance due.Compute Quon's failure to pay penalty in each of the following cases.The IRS has not yet issued a deficiency notice. a.Three months late, $5,000 additional tax due. b.Nine months late, $5,000 additional tax due. c.Five years late, $5,000 additional tax due.

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The failure to pay penalty is ...

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Question 62

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Specific factors that are used in selecting tax returns for audit,and the weights for such factors,are not released to the public.Summarize the public information about tax audit selection; how might a tax return's chances of audit increase above national norms?

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Question 63

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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:

Describe the potential outcomes to a party who provides information to the IRS under the informant or whistleblower program.

In the context of civil tax fraud litigation,the burden of proof is on the taxpayer to show the court by a "preponderance of the evidence" that he or she was not acting with an intent to evade a tax.

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.

When a tax dispute is resolved,interest is paid by or to the government.How are IRS interest amounts determined? To which tax amounts do they apply?

Faye,a CPA,is preparing Judith's tax return.Last year,Judith's return included dividend income from the P&G Company.This year,Judith reports no such income.Faye should inquire as to whether Judith sold the P&G stock during the year.

Currently,the IRS charges a ____________________% interest rate on taxes that the taxpayer underpays.

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

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.

The IRS can waive the penalty for a substantial understatement of a tax liability if the taxpayer shows ____________________ for the position taken on the tax return.

Gadsden,who is subject to a 40% marginal Federal 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 chief executive of the IRS is the _________________________.

IRS computers use document matching programs for both individuals and business taxpayers to keep the audit rate low.

Circular 230 requires that a paid tax preparer apply a thorough quality review system in preparing tax returns for her clients.

If the taxpayer comes to the office of the IRS for the audit of a tax return,the review is called a(n) ____________________ audit.

Lori,a calendar year individual taxpayer,files her 2016 return on February 10,2018.She had obtained a six-month extension for filing her return.There was additional income tax of $30,000 due with the return. a.What are Lori's penalties for failure to file and to pay? a. change if Lori, before the due date of the return, had retained a CPA to prepare the return and it was the CPA's negligence that caused the delay? b.Would your answer to

Describe the following written determinations that are issued by the IRS. a.Determination letter. b.Technical advice memorandum. c.Letter ruling.

Yang,a calendar year taxpayer,did not file a tax return for 2010 because she honestly believed that no additional tax was due.In 2018,Yang is audited by the IRS and the agent assesses a deficiency of $17,000 for 2010.Yang need not pay this deficiency,since the three-year statute of limitations expired on April 15,2014,meaning that the IRS no longer can adjust Yang's tax for the 2010 tax year.