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Exam 26: Tax Practice and Ethics

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Question 61

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For each of the indicated tax penalties, indicate the appropriate taxpayer defense. A letter may be used more than once. Not all of the letters need be used. a. Ignorance of the tax law b. Reasonable basis c. Reasonable cause d. Complexity of the tax law e. Substantial authority f. Disclosure on return -Filing an improper refund claim.

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Question 62

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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.

A) True
B) False

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Question 63

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About % of all Forms 1040 are audited each year. The rate is about____________________% for large corporations.

It typically is advisable that an IRS audit be conducted at the office of the tax advisor, and not of the client.

Troy Center Ltd. withheld from its employees' paychecks $200,000 in Federal income and Social Security taxes for the Monday, June 30 payroll. It then spent the $200,000 on equipment upgrades, missing altogether the July 2 due date for the tax remittances. How much does Troy now owe the government in taxes and penalties? Ignore interest accruals, and assume that the Treasury can prove that Troy's redirecting of the tax withholdings was willful.

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 "whistleblower."

Clarita underpaid her taxes by $50,000. Of this amount, $35,000 was due to negligence on her part, as her record- keeping system is highly inadequate. Determine the amount of any negligence penalty.

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 -Failure to file a tax return.

The National Taxpayer Advocate reports to:

The Small Cases Division of the U.S. Tax Court is attractive to a taxpayer when:

CPA Liam discovers that last year's Form 1120 for his client PollCo claimed a $100,000 advertising deduction for a gift to candidates of the Green Party. AICPA tax ethics rules require that an amended return immediately be filed, as political expenditures are not deductible.

If the taxpayer refuses to pay an assessed tax, the IRS can seize taxpayer property under the____________________ process.

Evaluate this statement: the audited taxpayer has more freedom to "trade issues" with the IRS when the dispute progresses to an Appeals conference. Hint: What are the "hazards of litigation?"

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

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

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.

A taxpayer can take a dispute to the ________________ Division of the Tax Court when the disputed amounts do not exceed $50,000.

Lola, a calendar year taxpayer subject to a 40% marginal Federal gift tax rate, made a gift of a sculpture to Redd, valuing the property at $70,000. The IRS later valued the gift at $100,000. The applicable undervaluation penalty is:

Young-Eagle files her 2018 Form 1040 on March 1, 2019. The Federal tax statute of limitations for this return expires on:

Mickey, a calendar year taxpayer, was not required to file a Federal income tax return last year because his AGI was very low. For this tax year, his AGI is $120,000 and his tax liability is $10,000. To avoid a penalty for tax underpayments for the current year, Mickey must make aggregate estimated tax payments of at least: