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Exam 26: Tax Practice and Ethics

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Question 1

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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 2014 is not filed until October 31,2015,when the respective divorce attorneys forced them to cooperate.The Blancos should not be subject to any Federal late-filing penalties,because the reasonable cause exception applies to their family discord.

A) True
B) False

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Question 2

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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 3

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The IRS national office is organized into operating divisions,broadly on the basis of the tax returns that are each division's responsibilities.List at least four the IRS's operating divisions.

Megan prepared for compensation a Federal income tax return for Joan.Joan's return included an aggressive interpretation of the rules concerning overnight business travel.Megan is not liable for a preparer penalty for taking an unreasonable tax return position if:

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

An IRS letter ruling might determine that an employee's compensation is unreasonable in amount.

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:

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

The IRS is a subsidiary agency of the Department of the ____________________.

Recently,the overall Federal income tax audit rate for the Form 1040 has been about 1%.

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.

Minnie,a calendar year taxpayer,filed a return correctly showing a zero Federal income tax liability for last year,because her Form 1040 showed various deductions and credits.For this tax year,Minnie's AGI is $120,000 and her tax liability is $20,000.To avoid a penalty for the current year,Minnie must make aggregate estimated tax payments of at least:

The AICPA's Statements on Standards for Tax Services provide principles-based guidelines as to how a tax professional should conduct business.

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.

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

A ____________________% penalty may result when the value of an asset contributed to a charity is reported at an amount that exceeds 150% of the correct valuation.

A taxpayer's return might be selected for audit on the basis of the ____________________ score that the IRS computes.

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.

An IRS "office audit" takes place at the headquarters office of the corporate taxpayer.

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 -Aiding in preparing an improper tax return.