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Exam 17: Tax Practice and Ethics

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Question 1

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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. -Preparer penalty for reckless conduct. A)Taxpayer penalty B)Tax preparer penalty C)Appraiser's penalty

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F

Question 2

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Maria's AGI last year was $95,000. To avoid a penalty, her estimated tax payments and withholdings for this year must equal the lesser of ____________________ percent of last year's taxes or ____________________ percent of this year's taxes.

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100, 90
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Question 3

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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. -Willful and reckless conduct.

During an audit, the IRS might require that the taxpayer produce the ____________________ that underlie the tax return data.

Chung's AGI last year was $180,000. Her Federal income tax came to $45,000, which she paid through a combination of withholding and estimated payments. This year, her AGI will be $250,000, with a projected tax liability of $60,000, all to be paid through estimates. Ignore the annualized income method. Compute Chung's quarterly estimated payment schedule for this year.

The tax preparer penalty for taking an unreasonable tax return position is the greater of $____________________ or ____________________ of the tax professional's income from preparing the return.

An individual's amended tax return, computing a refund or amount due, generally uses Form ____________________.

When the IRS issues a notice of tax due, the taxpayer has 90 days to either pay the tax or file a petition with the Tax Court. This is conveyed in the "ninety-day letter."

A tax preparer is in violation of Circular 230 if he or she:

Compute the failure to pay and failure to file penalties for John, who filed his 2016 income tax return on December 14, 2017, paying the $10,000 amount due. On April 1, 2017, John submitted a six-month extension of time in which to file his return; he paid no tax with the extension request. He has no reasonable cause for failing to file his return by October 15, or for failing to pay the tax that was due on April 15, 2017. John's failure to comply with the tax laws was not fraudulent.

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. $\begin{array}{llr} \text { Gross receipts} &&\$3,500,000\\ \text { Cost of sales } &&(1,000,000)\\ \text { Gross profit } &&\$2,500,000\\ \text { Capital gain } &\$100,000\\ \text {Capital loss } &(30,000)&70,000\\ \text {Total income } &&\$2,570,000\\\end{array}$

Juanita, who is subject to a 40% marginal Federal gift tax rate, made a gift of a sculpture to Bianca, valuing the property at $150,000. The IRS later valued the gift at $300,000. The applicable undervaluation penalty is:

In a criminal tax fraud case, the burden is on the taxpayer to show that he or she was innocent "beyond the shadow of any reasonable doubt."

LaCharles made a charitable contribution of property that he valued at $80,000. 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. LaCharles is in the 33% Federal income tax bracket. Determine LaCharles's amount due for both tax and any penalty.

Evaluate this statement: a taxpayer is liable not only for tax penalties as described in the tax Code and Regulations. Sanctions elsewhere in Federal law, such as in the criminal code, also apply in a tax dispute.

Attorneys are allowed an "attorney-client privilege" of confidentiality with clients. Does a CPA tax preparer enjoy the same privilege? On which types of tax and financial work?

The IRS employs over 80,000 personnel, making it one of the largest Federal agencies.

A CPA can take a tax return position for a client that is contrary to current IRS interpretations of the law.

Yang, a calendar year taxpayer, did not file a tax return for 2007 because she honestly believed that no additional tax was due. In 2016, Yang is audited by the IRS and the agent assesses a deficiency of $17,000 for 2007. Yang need not pay this deficiency, since the three-year statute of limitations expired on April 15, 2011, meaning that the IRS no longer can adjust Yang's tax for the 2007 tax year.

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