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Exam 2: Tax Compliance , the Irs, and Tax Authorities

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Question 51

Multiple Choice

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Basu received a letter from the IRS that gave him the choice of (1) paying a proposed deficiency or (2) filing a petition with the U.S. Tax Court. Basu received the:

A) 30-day letter.
B) 90-day letter.
C) Appeals letter.
D) Tax adjustment letter.
E) None of the above.

F) None of the above
G) A) and B)

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Question 52

Multiple Choice

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A tax practitioner can avoid IRS penalty relating to a tax return position:

A) if the position is frivolous and disclosed on the tax return.
B) if the position has a realistic possibility of being sustained by the IRS or courts.
C) if there is substantial authority to support the position.
D) if the position has a reasonable basis and is not disclosed on the tax return.
E) None of the above.

F) B) and C)
G) D) and E)

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Question 53

True/False

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The three basic types of IRS examinations are computer exams, office exams, and business exams.

In researching a tax issue, Eric finds that the U.S. Circuit Court of Appeals for the Federal Circuit previously has ruled in favor of his tax position, whereas the 11^th Circuit (Eric's circuit) previously has ruled against his tax position. If Eric is contemplating litigating his tax position with the IRS, he should prefer to have his case first tried by the U.S. Tax Court.

Corporations are required to file a tax return only if their taxable income is greater than:

If the IRS assesses additional tax on a tax return upon audit, a taxpayer may be subject to interest and penalties on the underpayment.

Mary Ann is working on a pretty big research project. Her manager has alerted her to the possibility that some of her research questions are likely to be questions of fact, whereas others are likely to be questions of law. Explain the difference between the two types of questions and how this would influence her research.

Dominic earned $1,500 this year, and his employer withheld $200 of federal income tax from his salary. Assuming that Dominic will have zero tax liability this year, he:

If a taxpayer is due a refund, she does not have to file a tax return.

Because the U.S. District Court hears a broader set of cases, decisions by the U.S. District Court may be considered to have more authoritative weight than the U.S. Court of Federal Claims.

Which of the following courts is the only court that provides for a jury trial?

Rebecca is at a loss. A new tax law was recently passed, and she needs to get a better understanding of why the tax law was passed and the intent of the law from an official authority. Describe what authorities may be especially helpful to Rebecca and why she can't find many authorities that discuss the new law.

Which of the following types of tax services are arranged by code section?

Edie would like to better understand a new code section enacted four weeks ago. Which of the following authorities will help Edie understand the newly enacted code section?

Which types of penalties are only imposed after normal due process including a trial?

The Senate Ways and Means Committee is in charge of drafting tax bills in the U.S. Senate.

Lakeisha, a 1^st year staff accountant, was researching a tax issue and found what appears to be the answer to her question in her introductory tax textbook that she bought three years ago. She is thrilled because she thought it would take much longer to find her answer. What type of authority is the textbook? What are other examples of this type of authorities? Can Lakeisha base her research conclusion on the textbook or similar authorities? Any suggestions for Lakeisha?

For the 2016 tax returns, indicate when the statute of limitation expires and why. a. Phoenix filed his tax return on February 28, 2017. b. Jill and Randy filed their tax return on August 16, 2017. c. Although required to file, Catherine chose not to file a tax return this year because she was expecting a tax refund and could not pull together all the information needed to file the return. d. Jerry filed his tax return on May 22, 2017 but has accidentally underreported his taxable income by 30%.

Houston has found conflicting authorities that address a research question for one of his clients. The majority of the authorities provide a favorable answer for his client. Nonetheless, there are several authorities that provide an unfavorable answer. Houston estimates that if the client takes the more favorable position on its tax return that there is approximately a 60 percent chance that the position will be sustained upon audit or judicial proceeding. If the client takes this position on its tax return, will Houston be subject to penalty? Will the client potentially be subject to penalty?

Which of the following is not a factor that determines whether a taxpayer is required to file a tax return?