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Exam 26: Tax Practice and Ethics

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Question 51

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A % penalty may result when the value of an asset contributed to a charity is reported at an amount that exceeds 150% of the correct valuation.

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Question 52

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A taxpayer can take a dispute to the Division of the Tax Court when the disputed amounts do not exceed $50,000.

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Question 53

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After a tax audit, the taxpayer receives the Revenue Agent's Report as part of the "30­day letter."

It typically is advisable that an IRS audit be conducted at the office of the tax advisor, and not of the client.

For each of the indicated tax penalties, indicate the appropriate taxpayer defense. A letter may be used more than once. Not all of the letters might be used. -Negligence in filing a return.

Carole, a CPA, feels that she cannot act as an aggressive advocate for tax clients in today's environment. What aspects of the ethical conduct of a tax practice might have influenced Carole's attitude?

The government can appeal a decision of the Tax Court Small Cases Division, but the taxpayer cannot.

A taxpayer's return might be selected for audit on the basis of the score that the IRS computes.

For each of the indicated tax penalties, indicate the appropriate taxpayer defense. A letter may be used more than once. Not all of the letters might be used. -Filing an improper refund claim.

The tax professional can reduce the chances that staff personnel will incur IRS preparer penalties by adopting a "tone at the top" that stresses integrity, diligence, and other elements of an ethical tax practice.

The penalty for substantial understatement of tax liability does not apply if:

The Treasury document regulating the professional conduct of tax return preparers is the Regulation known as _________________________.

Match each of the following tax penalties with the type of tax penalty as specified by the Code. A letter can be used more than once. The correct solution may include more than one letter. -Fraudulent failure to file a tax return.

Lisa, a calendar year taxpayer subject to a 33% marginal Federal income tax rate, claimed a Form 1040 charitable contribution deduction of $250,000 for a sculpture that the IRS later valued at $160,000. The applicable overvaluation penalty is:

For each of the indicated tax penalties, indicate the appropriate taxpayer defense. A letter may be used more than once. Not all of the letters might be used. -Substantial understatement of tax liability.

During an audit, IRS personnel might request a(n) from the IRS National Office, to clarify the application of tax law concerning a tax deduction.

LaCharles made a charitable contribution of property that he valued at $80,000. He deducted this amount as an itemized deduction on his tax return. The IRS can show that the actual value of the property is $50,000. LaCharles is in the 33% Federal income tax bracket. Determine LaCharles's amount due for both tax and any penalty.

An individual's amended tax return, computing a refund or amount due, generally uses Form ____________________.

An individual is not subject to an underpayment penalty until more than $ is due and unpaid through estimated taxes.

The IRS can waive the penalty for a substantial understatement of a tax liability if the taxpayer shows for the position taken on the tax return.