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

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Question 1

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Hong, an introductory tax student, is beginning his 1st 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?

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A novice may conduct a keyword search in the service, use the tax service's topical index, or "browse" the tax service to identify the relevant portions. Some suggestions for identifying keywords: Try to describe the transaction in three to five words. An ideal keyword search typically includes (1) the relevant area of law and (2) a fact or two that describes the transaction. Try to avoid keywords that are too broad (e.g., income, deduction, taxable, etc.) or that may be too narrow. If keyword searching is not proving beneficial, check your spelling, make sure you are searching the correct database, rethink your keywords, use another research method, use another tax service, or at as a last resort, take a break. While utilizing keyword searches or other research methods to identify potentially relevant areas of law and tax authorities, you must constantly ask yourself whether you are indeed in the correct area of law. Once the answer to this question is an authoritative "yes," you can delve deeper into the area of law and related authorities to answer the question.

Question 2

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Lavonda discovered that the U.S. Circuit Court of Appeals for the Federal Circuit has recently issued a favorable opinion with respect to an issue that she is going to litigate with the IRS. Lavonda should choose which of the following trial courts to hear her case:

A) Tax Court only.
B) U.S. Court of Federal Claims only.
C) U.S. District Court only.
D) Tax Court or the U.S. District Court.
E) Tax Court or the U.S. Court of Federal Claims.

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

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Question 3

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Leslie made a mathematical mistake in computing her tax liability. Which audit program will likely catch Leslie's mistake?

Dominic earned $1,500 this year, and his employer withheld $200 of federal income tax from his salary. Assuming that Dominic will have zero tax liability this year, he:

Lindy, a tax intern, is beginning her 1st tax research case for her employer. Her manager has given her a basic understanding of the facts and has identified the basic research question. Lindy is now ready to begin searching for relevant tax authorities. Describe the different types of research tools available to help a tax researcher locate relevant authority and identify which type may be especially useful for Lindy.

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.

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 statute of limitations for IRS assessment generally ends four years after the date a tax return is filed.

Jeremy has a new client. He has identified a research question that relates to a transaction that the client completed several months ago. This type of research question will primarily involve:

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.

In general, a CPA will satisfy his professional responsibilities under the Statement on Standards for Tax Services when recommending a tax return position if he complies with the standards imposed by the applicable tax authority.

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

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 income this year.

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.

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

Under the Statement 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.

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?

Which of the following audits is the least common, broadest in scope, and typically most complex?

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

Which of the following is not a source of a tax practitioner's professional responsibilities?