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

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Question 21

True/False

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In general,a CPA will satisfy his professional responsibilities under the Statement on Standards for Tax Services when recommending a tax return position if he complies with the standards imposed by the applicable tax authority.

A) True
B) False

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Question 22

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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 the position is not frivolous and disclosed on the tax return.
D) if the position has a reasonable basis and is disclosed on the tax return.
E) None of these.

F) B) and D)
G) D) and E)

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Question 23

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Roddy was researching an issue and found a favorable Tax Court decision that addresses his issue.He also determined that there was a nonacquiescence for the case.Who issued the nonacquiescence? What is it? What does it mean and how would it affect Roddy's reliance on the court case?

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?

A taxpayer can avoid a substantial understatement of tax penalty:

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

If the IRS assesses additional tax upon audit,a taxpayer may be subject to interest and penalties on the underpayment.

Mary Ann is working on a pretty big research project.Her manager has alerted her to the possibility that some of her research questions are likely to be questions of fact,whereas others are likely to be questions of law.Explain the difference between the two types of questions and how this would influence her research.

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

Revenue rulings and revenue procedures are examples of primary authorities.

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

The Internal Revenue Code of 1986 is the name of the current tax code.

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

Rowanda could not settle with the IRS at the appeals conference.If she wants to litigate the issue but does not have sufficient funds to pay the proposed tax deficiency,Rowanda should litigate in the:

Because the U.S.District Court hears a broader set of cases,decisions by the U.S.District Court may be considered to have more authoritative weight than the U.S.Court of Federal Claims.

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

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

Chris and Chuck were recently debating whether the Internal Revenue Code is "logical." Chris offers that she has briefly reviewed the Code and could hardly understand its organizational structure,if there is one.Please describe the basic organization of the code and how understanding its organization may be especially beneficial to the tax researcher.

The regulation with the lowest authoritative weight is the:

Rebecca is at a loss.A new tax law was recently passed,and she needs to get a better understanding of why the tax law was passed and the intent of the law from an official authority.Describe what authorities may be especially helpful to Rebecca and why she can't find many authorities that discuss the new law.