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Exam 26: Tax Practice and Ethics

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Question 51

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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.

A) True
B) False

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Question 52

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Leo underpaid his taxes by $250,000.Portions of the underpayment were attributable to negligence ($90,000)and to civil fraud ($160,000).Compute the total penalties incurred.

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If the underpayment is partial...

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Question 53

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The Code's scope of privileged communications for a CPA extends only to ____________________ advice given.

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

A negligence penalty is 20% of the underpayment attributable to negligence.

The AICPA's Statements on Standards for Tax Services must be followed its members; they are more than merely advisory.

Compute the undervaluation penalty for each of the following independent cases involving the executor's reporting of the value of a closely held business in the decedent's gross estate.In each case,assume a marginal estate tax rate of 45%.

Ron,a calendar year taxpayer subject to a 35% marginal tax rate,claimed a Form 1040 charitable contribution deduction of $250,000 for a sculpture that the IRS later valued at $150,000.The applicable overvaluation penalty is:

Circular 230 requires that the tax practitioner use the "best practices" of the tax profession in carrying out a tax engagement.Specify what some of these best practices entail.

Harold,a calendar year taxpayer subject to a 35% marginal tax rate,claimed a Form 1040 charitable contribution deduction of $20,000 for a sculpture that the IRS later valued at $10,000.The applicable overvaluation penalty is:

The rules of Circular 230 need not be followed by which of the following paid tax preparers?

When a "prompt assessment" of the tax liability is requested,the taxpayer essentially is volunteering for an IRS audit of the tax return.

Circular 230 prohibits a tax preparer from charging an unconscionable fee for his/her services.

Compute the failure to pay and failure to file penalties for John,who filed his 2010 income tax return on December 14,2011,paying the $10,000 amount due.On April 1,2011,John submitted a six-month extension of time in which to file his return; he paid no tax with the extension request.He has no reasonable cause for failing to file his return by October 15 or for failing to pay the tax that was due on April 15,2011.John's failure to comply with the tax laws was not fraudulent. Failure to Pay Failure to File

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

Concerning a taxpayer's requirement to make quarterly estimated tax payments:

A(n)___________________ member is required to follow the Statements of Standards for Tax Services in conducting a tax practice.

A CPA and his/her client hold a privilege of confidentiality from the IRS,as to their discussions about completing a tax return.

If the taxpayer shows ____________________ for an underpayment of tax,the failure to pay penalty can be reduced or eliminated.

Yin-Li is the preparer of the Form 1120 for Cloves Corporation.On the return,Cloves claimed a deduction that the IRS later disallowed on audit.Compute the tax preparer penalty that could be assessed against Yin-Li in each of the following independent situations.