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

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Question 1

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

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(a)U.S. District Court because it is the only court that offers a jury trial. (b)The U.S. Court of Federal Claims because its appellate court is the Circuit Court of Appeals for the Federal Circuit. (c)The U.S. Tax Court or the U.S. District Court because they will not appeal to the Circuit Court of Appeals for the Federal Circuit. (d)The U.S. Tax Court or the U.S. District Court because they will appeal to the 7^th Circuit.

Question 2

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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 second 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 than forthright accounting of his income in determining the appropriate level of alimony.

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(a)Document perfection (b)Information matching (c)DIF system (d)Spousal tip.

Question 3

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Which of the following has the highest authoritative weight?

Generally, if April 15 ^th falls on a Saturday, individual tax returns will be due on:

Circular 230 was issued by:

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 complex transactions 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.

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 IRS DIF system checks each tax return for mathematical mistakes and errors.

The "30-day" letter gives the taxpayer the opportunity to request an appeals conference or agree to a proposed IRS adjustment on the taxpayer's income tax return.

A taxpayer can avoid a substantial understatement of tax penalty:

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

Joel reported a high amount of charitable contributions as a deduction on his individual 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.

Greg earned $25,500 this year and had $1,500 of federal income taxes withheld from his salary. Assuming that Greg is single, 25 years old, and will have a total tax liability of $1,375 (and thus will receive a $125 refund) , he:

Lindy, a tax intern, is beginning her first 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.

Lavonda discovered that the 5 ^th 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?

Which judicial doctrine means that a court will rule consistently with its previous rulings and the rulings of higher courts with appellate jurisdiction?

Bill filed his 2020 tax return on March 15 ^th, 2021. The statute of limitations for IRS assessment on Bill's 2020 tax return should end:

Tyrone claimed a large amount of charitable contributions as a tax deduction relative to taxpayers with similar levels of income. If Tyrone's tax return is chosen for audit because of his large charitable contributions, which audit program likely identified Tyrone's tax return for audit?

The Senate Ways and Means Committee is in charge of drafting tax bills in the U.S. Senate.

The tax return filing requirements for individual taxpayers only depend on the taxpayer's filing status.