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

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Question 51

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Kodak is a beginning tax researcher. He knows that the 1st step of the research process is to get an understanding of the facts surrounding the transaction being researched. Describe the two basic types of facts, the sources of facts for a research project, and any advice that may help Kodak.

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There are two basic types of facts: open...

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Question 52

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For the following tax returns, identify which of the three audit types will most likely be utilized.a. The IRS selected Don's return for audit because of his high itemized deductions. The IRS would like documentation of these deductions.b. Large Public Corporation is a very large publicly traded corporation. It is involved in many complextransactions that have significant tax ramifications.c. George and Barbara operate a small business out of their home. The IRS has identified a couple of issues that may relate to their business.d. The IRS selected Bill and Hillary's tax return for review because of some of their investment sales. They would like a better understanding of the transactions and parties involved.

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(a) Correspondence exam (b) Fi...

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Question 53

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

Of the two basic types of tax services, beginning tax researchers often prefer topical tax services.

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 willprimarily involve:

For which of the following tax violations is a civil penalty not imposed on taxpayers?

Mel recently received a 30-day letter from the IRS. Although his tax return being audited has several potential large issues (potential tax consequences of $70,000 − $80,000), the IRS agent auditing his return only identifiedone item that will require a modest adjustment of $10,000. Mel feels strongly that the $10,000 adjustment would not hold up in court and was surprised that the IRS agent did not identify some of the otherpotential larger issues. What are Mel's choices with respect to the 30-day letter and what factors should influence his decisions?

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

Bill filed his 2017 tax return on March 15th, 2018. The statute of limitations for IRSassessment on Bill's 2017 tax return should end:

A taxpayer can avoid a substantial understatement of tax penalty:

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?

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

If Paula requests an extension to file her individual tax return, the latest she could file her return without a failure-to-file penalty is:

Princess, who resides in the 2nd Circuit, recently found a circuit court case that is favorable to her income tax research question. Which of the following circuits would she prefer to have issued the opinion?

For the following tax returns, identify the method the IRS likely used to select the return for audit. a. Dan made a mistake in adding his income on his tax return.b. Juanita failed to report her salary from her 2nd job on her tax return.c. Michael and Venita deducted a relatively large amount of travel expenses on their tax return for their business. The travel expense is large relative to other taxpayers in similar businesses with similar levels of income.d. Paul and Melissa recently went through a very nasty divorce. One of the issues was Paul's less thanforthright accounting of his income in determining the appropriate level of alimony.

Raul was researching an issue and found two Tax Court decisions issued within 6 months of each other, one for a taxpayer residing in California and the other for a taxpayer residing in New York whose rulings were inconsistent. Raul knows that the federal tax law does not differ by state and the issue was exactly the same in both cases. Raul is confused because he thought that a basic judicial doctrine was that a court is supposed to rule consistently. Name and describe this judicial doctrine that requires judicial consistency and discuss why the Tax Court may have intentionally ruledinconsistently in this example.

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.

The three basic types of IRS examinations are computer exams, office exams, and business exams.

Generally, code sections are arranged (grouped together) :

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