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Exam 26: Tax Practice and Ethics

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Question 31

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

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Question 32

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Carole, a CPA, feels that she cannot act as an aggressive advocate for tax clients in today's environment. What aspects of the ethical conduct of a tax practice might have influenced Carole's attitude?

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Carole might be reacting to the general ...

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Question 33

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Quon filed his Federal income tax return on time, but he did not remit the full balance due. Compute the amount of his failure to pay penalty in each of the following cases. The IRS has not yet issued a deficiency notice. a. Three months late, $5,000 additional tax due. b. Nine months late, $5,000 additional tax due. c. Five years late, $5,000 additional tax due.

Linwell underpaid his taxes by $250,000. Portions of the underpayment were attributable to negligence ($210,000) and to civil fraud ($40,000). Compute the total penalties incurred.

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

To whom do the AICPA's Statements on Standards for Tax Services apply? Are they binding or merely advisory?

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.

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

With respect to tax misconduct, a penalty usually involves only a fine, but a penalty also can include jail time.

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

A letter ruling should be requested when the taxpayer wants to know how the IRS's interpretation of the tax law will be applied to a (proposed, completed) transaction.

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

Cheng filed an amended return this year, claiming a refund relative to her tax computation on a prior-years return. When the IRS approves the amended return and issues the refund, it also pays Cheng interest with respect to the overpayment.

Michelle, a calendar year taxpayer subject to a 24% marginal Federal income tax rate, claimed a Form 1040 charitable contribution deduction of $275,000 for a sculpture that the IRS later valued at $200,000. The applicable overvaluation penalty is:

This official does not report directly to the IRS Commissioner.

The IRS's attorney is known as the Chief Counsel.

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:

Latrelle, who prepares the tax return for Whitehall Corporation includes a $5,000 deduction on the return. This type of deduction previously has been disallowed by the Tax Court, although there is a 15% chance that the holding will be reversed on an appeal by Whitehall. The return does not make any special disclosure that the deduction is being claimed. Whitehall paid Latrelle a fee of $8,000 for preparing the Form 1120. Latrelle will be assessed a preparer penalty of $4,000 for taking an unreasonable position on the Whitehall return.

For purposes of tax penalties, a VITA volunteer is not classified as a tax return ____________________.

The tax workpapers prepared as part of an independent financial audit are not privileged communications that can be kept confidential from an IRS subpoena.