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Exam 17: Tax Practice and Ethics

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Question 71

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A tax professional needs to know how the IRS is structured and how it works to carry out its mission. Evaluate this statement.

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The tax practitioner needs to study the ...

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Question 72

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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 "ninety­day letter."

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B) False

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Question 73

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The Statements on Standards for Tax Services are issued by the:

The IRS can require that the taxpayer produce its financial accounting records, to determine if taxable income is computed correctly.

The taxpayer can avoid a valuation penalty for overstating the value of the charitable contribution of an artwork by showing that the deduction claimed was based on a qualified .

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

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.

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

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 might 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 -Failure to pay a tax that is due.

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

With respect to the Small Cases Division of the Tax Court,

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

A negligence penalty can be waived if the taxpayer discloses a tax return position that is contrary to a judicial precedent and there is a for the taxpayer's position.

Which of the following statements correctly reflects the rules governing interest to be paid on an individual's Federal tax deficiency or claim for refund?

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?

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

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

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 might 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 -Substantial understatement of tax liability.

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:

Fiona, a VITA volunteer for her college's tax clinic, is not a tax preparer as defined by the Code. Thus, Fiona is exempted from the Code's tax preparer penalties.