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

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Question 1

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Lakeisha, a 1st 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?

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There are two broad categories of tax au...

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Question 2

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A client has recently learned of a recently 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.

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As required by the U.S. Constitution (Ar...

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Question 3

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

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?

The "90-day" letter gives the taxpayer the opportunity to pay the proposed tax adjustment or file a petition in the U.S. District Court to hear the case.

For the 2014 tax returns, indicate when the statute of limitation expires and why. a. Phoenix filed his tax return on February 28, 2015. b. Jill and Randy filed their tax return on August 16, 2015. 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, 2015 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?

A taxpayer can avoid an underpayment penalty if there is substantial authority that supports her tax return position.

If a taxpayer has little cash and a very technical tax case that 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.

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

A taxpayer can avoid a substantial understatement of tax penalty:

Joel claimed a high amount of charitable contributions as a deduction on his tax return relative to taxpayers with similar income levels. The information matching program is the IRS program most likely to identify Joel's tax return for audit.

As required by the Constitution, all tax bills are supposed to originate in the House of Representatives.

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

The Internal Revenue Code of 1986 is the name of the current tax code.

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

Dan received a letter from the IRS that gave him the choice of (1) requesting a conference with an Appeals Officer or (2) agreeing to a proposed tax adjustment. Dan received the:

Which of the following committees typically initiates for tax legislation?

Josephine is considering taking a 6 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?

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?