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

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Question 31

Multiple Choice

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

A) 30-day letter.
B) Tax adjustment letter.
C) Appeals letter.
D) 90-day letter.
E) None of the choices are correct.

F) D) and E)
G) A) and E)

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Question 32

Multiple Choice

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Lavonda discovered that the 5th Circuit (where Lavonda resides) 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 or the U.S. Court of Federal Claims.
B) U.S. Court of Federal Claims only.
C) Tax Court or the U.S. District Court.
D) U.S. District Court only.
E) Tax Court only.

F) C) and D)
G) A) and E)

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Question 33

True/False

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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.

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

A taxpayer can avoid a substantial understatement of tax penalty:

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.

Which of the following has the highest authoritative weight?

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

If an individual taxpayer is unable to file a tax return by its original due date, thetaxpayer can request an automatic 9-month extension to file the return.

If a taxpayer loses a case at the Circuit Court level, he is granted an automatic appeal hearing with the Supreme Court.

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 anyfederal 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.

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?

The Internal Revenue Code of 1986 is the name of the current income tax code of theUnited States of America.

Which of the following has the lowest authoritative weight?

In a planning context,

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

Which of the following is not considered a secondary authority?

Dominic earned $1,500 this year, and his employer withheld $200 of federal income tax from his salary. Assuming that Dominic is single, 30 years old, and will have zero tax liability this year, he:

In researching a tax issue, Eric finds that the U.S. Circuit Court of Appeals for the Federal Circuit previously has ruled in favor of his tax position, whereas the 11th Circuit (Eric's circuit) previously has ruled against his tax position. If Eric is contemplatinglitigating his tax position with the IRS, he should prefer to have his case first tried by theU.S. Tax Court.

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