Question 1

Carey was researching a tax issue and located what appears to be a favorable IRS regulation. He knows that regulations serve different purposes and are issued in different forms. Which purpose and which form of regulation would provide Carey the most confidence that he has found an authority that carries a lot of weight for the long term? How could Carey check the status of this regulation?

Accepted Answer

The answer of Carey was researching a tax issue and...

Question 2

Chris and Chuck were recently debating whether the Internal Revenue Code is "logical." Chris offers that she has briefly reviewed the Code and could hardly understand its organizational structure, if there is one. Please describe the basic organization of the Code and how understanding its organization may be especially beneficial to the tax researcher.

Accepted Answer

The answer of Chris and Chuck were recently debating whether...

Question 3

For the following tax returns, identify which of the three audit types will most likely be utilized.
a. The IRS selected Don's return for audit because of his high itemized deductions. The IRS would like documentation of these deductions.
b. Large Public Corporation is a very large publicly traded corporation. It is involved in many complex transactions that have significant tax ramifications.
c. George and Barbara operate a small business out of their home. The IRS has identified a couple of issues that may relate to their business.
d. The IRS selected Bill and Hillary's tax return for review because of some of their investment sales. They would like a better understanding of the transactions and parties involved.

Accepted Answer

The answer of For the following tax returns, identify which...

Question 4

For the 2020 tax returns, indicate when the statute of limitations expires and why.
a. Phoenix filed his tax return on February 28, 2021.
b. Jill and Randy filed their tax return on August 16, 2021.
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, 2021, but has accidentally underreported his taxable income by 30 percent.

Accepted Answer

The answer of For the 2020 tax returns, indicate when...

Question 5

Raul was researching an issue and found two tax court decisions issued within six months of each other, one for a taxpayer residing in California and the other for a taxpayer residing in New York, whose rulings were inconsistent. Raul knows that the federal tax law does not differ by state and the issue was exactly the same in both cases. Raul is confused because he thought that a basic judicial doctrine was that a court is supposed to rule consistently. Name and describe this judicial doctrine that requires judicial consistency and discuss why the tax court may have intentionally ruled inconsistently in this example.

Accepted Answer

The answer of Raul was researching an issue and found...

Question 6

Mel recently received a 30-day letter from the IRS. Although his tax return being audited has several potential large issues (potential tax consequences of $70,000 − $80,000), the IRS agent auditing his return only identified one item that will require a modest adjustment of $10,000. Mel feels strongly that the $10,000 adjustment would not hold up in court and was surprised that the IRS agent did not identify some of the other potential larger issues. What are Mel's choices with respect to the 30-day letter and what factors should influence his decisions?

Accepted Answer

The answer of Mel recently received a 30-day letter from...

Question 7

The IRS has recently completed its audit of Lorene's corporation. As a tax novice, she has very little understanding regarding the audit process and what happens next. Describe the post-audit process for Lorene and identify her options.

Accepted Answer

The answer of The IRS has recently completed its audit...

Question 8

For the following taxpayers, indicate whether the taxpayer should file a tax return and why.
a. Robert earned $50,000 this year as a staff accountant. His estimated tax liability is $4,500, and he expects to receive a $500 tax refund.
b. Amy earned $4,000 this year working part-time. She will have no federal tax liability and has not made any federal tax payments.
c. Ty earned $2,500 this summer and had $200 of federal taxes withheld from his paycheck. He will have no federal tax liability this year.
d. Startup Corporation had a $50,000 loss this year.
e. The Walker Family Trust earned $500 of gross income this year.

Accepted Answer

The answer of For the following taxpayers, indicate whether the...

Question 9

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

Accepted Answer

A tax practitioner can avoid an IRS penalty if there is substantial authority to support the position, as this indicates a strong likelihood that the position is legally defensible.

Question 10

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

Accepted Answer

A tax practitioner can avoid IRS penalties relating to a tax return position if the position has a reasonable basis and is disclosed on the tax return. The other options may provide some level of protection against penalties, but they have more stringent requirements such as having a more likely than not chance of being sustained or substantial authority to support the position.

Question 11

A taxpayer can avoid a substantial understatement of tax penalty:

Accepted Answer

A taxpayer can avoid a substantial understatement of tax penalty if the position has a reasonable basis and is disclosed on the tax return.

Question 12

Campbell was researching a tax issue and found a favorable tax court opinion and an IRC Code Section that appear to answer the question. Is she finished with the research process? If so, why? If not, what must she do?

Accepted Answer

The answer of Campbell was researching a tax issue and...

Question 13

Kim has decided to litigate a tax issue with the IRS. Describe the trial-level courts that Kim may use to litigate the case.

Accepted Answer

The answer of Kim has decided to litigate a tax...

Question 14

Roddy was researching an issue and found a favorable tax court decision that addresses his issue. He also determined that there was a nonacquiescence for the case. Who issued the nonacquiescence? What is it? What does it mean and how would it affect Roddy's reliance on the court case?

Accepted Answer

The answer of Roddy was researching an issue and found...

Question 15

For the following tax returns, identify the method the IRS likely used to select the return for audit.
a. Dan made a mistake in adding his income on his tax return.
b. Juanita failed to report her salary from her second job on her tax return.
c. Michael and Venita deducted a relatively large amount of travel expenses on their tax return for their business. The travel expense is large relative to other taxpayers in similar businesses with similar levels of income.
d. Paul and Melissa recently went through a very nasty divorce. One of the issues was Paul's less than forthright accounting of his income in determining the appropriate level of alimony.

Accepted Answer

The answer of For the following tax returns, identify the...

Question 16

For the following taxpayers, please recommend the most advantageous trial-level court(s)to litigate a tax issue with the IRS. a. Joe is litigating a tax issue with the IRS that is considered a question of fact (i.e., the answers depend on the facts of the case). There is not a lot of authority on point for this case, but Joe has a very appealing story to justify his position that is likely to be viewed sympathetically by his peers. b. The Circuit Court of Appeals for the Federal Circuit recently issued an opinion that is very favorable to the issue that Jesse plans to litigate with the IRS. c. The Circuit Court of Appeals for the Federal Circuit recently issued an opinion that is not favorable to the issue that Hank plans to litigate with the IRS. d. The 7 ^th Circuit (where Elizabeth resides)recently issued an opinion that is very favorable to the issue that Elizabeth plans to litigate with the IRS.

Accepted Answer

The answer of For the following taxpayers, please recommend the...

Question 17

For the 2020 tax returns, indicate when the statute of limitations expires and why.
a. Simon filed his tax return on April 10, 2021.
b. Billy and Barbara filed their tax returns late on December 1, 2021.
c. Pearson earns a living through various illegal activities. He filed his tax return on March 14, 2021, but did not report his illegal income on his tax return.
d. Luther filed his tax return on July 17, 2021, but has accidentally underreported his gross income by 20 percent.

Accepted Answer

The answer of For the 2020 tax returns, indicate when...

Question 18

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

Accepted Answer

Criminal penalties can only be imposed after normal due process which includes a trial and a conviction beyond a reasonable doubt. Civil penalties, such as fines and sanctions, can be imposed through administrative proceedings without a trial. The failure-to-file penalty can also be imposed without a trial, as it is a specific penalty for not filing a tax return on time.

Question 19

A taxpayer can avoid a substantial understatement of tax penalty:

Accepted Answer

A taxpayer can avoid a substantial understatement of tax penalty if there is substantial authority to support the position, as it indicates a strong likelihood that the position is correct.

Question 20

A client has recently learned of a proposed tax bill that would increase the tax rates on investment gains by 5 percent. The president does not support this increase. Please describe for your client the process by which new tax legislation is created and how the president's disapproval may influence the enactment of the bill.

Accepted Answer

The answer of A client has recently learned of a...

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

The IRS has recently completed its audit of Lorene's corporation. As a tax novice, she has very little understanding regarding the audit process and what happens next. Describe the post-audit process for Lorene and identify her options.

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

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

A taxpayer can avoid a substantial understatement of tax penalty:

Campbell was researching a tax issue and found a favorable tax court opinion and an IRC Code Section that appear to answer the question. Is she finished with the research process? If so, why? If not, what must she do?

Kim has decided to litigate a tax issue with the IRS. Describe the trial-level courts that Kim may use to litigate the case.

Roddy was researching an issue and found a favorable tax court decision that addresses his issue. He also determined that there was a nonacquiescence for the case. Who issued the nonacquiescence? What is it? What does it mean and how would it affect Roddy's reliance on the court case?

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

A taxpayer can avoid a substantial understatement of tax penalty: