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

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Question 51

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A taxpayer can avoid a substantial understatement of tax penalty:

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 the position is not frivolous and disclosed on the tax return.
D) if the position has a reasonable basis and is disclosed on the tax return.
E) None of the choices are correct.

F) B) and C)
G) A) and E)

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Question 52

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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.

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(a)April 15, 2024. The statute of limita...

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Question 53

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If a taxpayer has little cash and a very technical tax case about which she feels very strongly that the tax rules are "on her side," she should prefer to have her case tried in the U.S. Tax Court.

Josephine is considering taking a six-month rotation in Paris for her job. Which type of authority may be especially helpful in determining the tax consequences of Josephine's job in Paris?

Which of the following has the lowest authoritative weight?

If April 15 ^th falls on a Saturday, the due date for individual tax returns will be on Monday, April 17 ^th (assuming it is not a holiday).

The regulation with the lowest authoritative weight is the:

Henry filed his 2020 tax return on May 15 ^th, 2021. The statute of limitations for IRS assessment on Henry's 2020 tax return should end:

Which of the following committees typically initiates tax legislation?

An extension to file a tax return does not extend the due date for tax payments.

Hong, an introductory tax student, is beginning his first research project. He has a complete understanding of the relevant facts for his project and has identified the initial research questions. He is now ready to begin using a tax service to identify relevant authorities. What are some suggestions for him on how to use tax services to identify relevant authorities?

An acquiescence indicates that the IRS lost a court case and that it has decided to follow the court's ruling in the future.

Proposed and temporary regulations have the same authoritative weight.

If Paula requests an extension to file her individual tax return in a timely manner, the latest she could file her return without a failure-to-file penalty is:

Ramon's tax return was randomly selected for audit. Which IRS program likely selected Ramon's return for audit?

Under the Statements on Standards for Tax Services, a CPA may recommend a tax return position if the position is frivolous and the position is not disclosed on the tax return.

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.

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.

Which of the following is a false statement? A taxpayer filing a fraudulent tax return:

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