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

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Question 41

True/False

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

A) True
B) False

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Question 42

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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 there is substantial authority to support the position.
D) if the position has a reasonable basis and is not disclosed on the tax return.
E) None of these.

F) All of the above
G) A) and B)

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Question 43

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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.

Which of the following is not a common method that the IRS uses to select returns for audit?

The IRS DIF system checks each tax return for mathematical mistakes.

Which of the following has the lowest authoritative weight?

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?

Which of the following has the highest authoritative weight?

Allen filed his 2014 tax return on May 15th, 2015 and underreported his gross income by 30 percent. Assuming Allen's underreporting is not due to fraud, the statute of limitations for IRS assessment on Allen's 2013 tax return should end:

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.

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.

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

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

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

The Internal Revenue Code and tax treaties are examples of statutory authorities.

Circular 230 was issued by:

Which of the following courts is the only court that provides for a jury trial?

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 depends 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 7th Circuit (where Elizabeth resides) recently issued an opinion that is very favorable to the issue that Elizabeth plans to litigate with the IRS.

Which of the following committees typically initiates for tax legislation?

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