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Exam 17: Tax Practice and Ethics

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Question 51

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Which of the following statements does not reflect the rules governing the accuracy-related penalty for negligence?

A) The penalty rate is 20%.
B) The penalty is imposed only on the part of the deficiency attributable to negligence.
C) The penalty applies only to intentional tax understatements by the taxpayer.
D) The penalty is waived if the taxpayer uses Form 8275 to disclose a return position that is reasonable though contrary to the IRS position.

E) B) and D)
F) A) and D)

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Question 52

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The client has decided to dispute the Revenue Agent's Report. What is the tax advisor's next step?

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Carrying out a level of due di...

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Question 53

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After a tax audit, the taxpayer receives the Revenue Agent's Report as part of the "90-day letter."

In taking a dispute to the Appeals Division, a written protest is required of the taxpayer when the proposed deficiency exceeds $____________________.

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

Neither the taxpayer nor the government can appeal a decision of the Tax Court Small Cases Division.

Mickey, a calendar year taxpayer, filed a return correctly showing no Federal income tax liability for 2010. During 2011, his AGI is $120,000 and his tax liability is $20,000. To avoid a penalty for 2011, Mickey must make aggregate estimated tax payments of at least:

Quon filed an amended return, claiming a $100,000 refund. The IRS disallowed the refund, and it can assess a penalty if there was no reasonable basis of support for the refund claim, in the amount of ____________________% of the disallowed amount. or

Which of the following statements is correct as to the conduct of IRS income tax audits?

Juanita, who is subject to a 45% marginal 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:

A tax preparer cannot disclose to a mortgage banker the client's income level, or other information acquired by preparing the return, without the client's permission.

In a letter ruling, the IRS responds to a taxpayer request concerning the tax treatment of a proposed transaction.

After the completion of an audit, the taxpayer has ____________________ days to petition the Tax Court to modify the proposed tax due. or

Babs filed an amended return in 2011, claiming a refund relative to her 2009 tax computation. When the IRS approves the amended return, it will pay Babs interest with respect to the overpayment.

Maria's AGI last year was $195,000. 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. or

Jenny prepared Steve's income tax returns for no compensation for 2008 and 2009. Jenny is Steve's mother. In 2011, the IRS notifies Steve that it will audit his returns for 2007-2009. If Steve so desires, Jenny may represent him during the audit of all three returns.

If a taxpayer is audited by the IRS and is unwilling to accept the findings of the agent, how does the taxpayer's audit strategy change when the dispute is taken to the IRS Appeals Division? Hint: What are the "hazards of litigation?"

Circular 230 requires that a tax preparer be aware of changes in the tax law. Furthermore, office practices of the preparer must be up to industry standards.

The special tax penalty imposed on appraisers:

Margaurite did not pay her Federal income tax on time. When she eventually filed the return, she reported a balance due. Compute Margaurite's failure to file penalty in each of the following cases.