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Exam 17: Tax Practice and Ethics

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Question 51

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Georgio, a calendar year taxpayer subject to a 33% marginal Federal income tax rate, claimed a Form 1040 charitable contribution deduction of $300,000 for a sculpture that the IRS later valued at $120,000. The applicable overvaluation penalty is:

A) $10,000 (maximum penalty) .
B) $12,000.
C) $24,000.
D) $60,000.

E) B) and D)
F) B) and C)

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Question 52

Multiple Choice

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Gadsden, who is subject to a 40% marginal Federal gift tax rate, made a gift of a sculpture to Marvin, valuing the property at $150,000. The IRS later valued the gift at $400,000. The applicable undervaluation penalty is:

A) $0.
B) $20,000.
C) $25,000 (maximum penalty) .
D) $40,000.

E) B) and C)
F) All of the above

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Question 53

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Quon filed an amended return, claiming a $100,000 refund. The IRS disallowed the refund, and it can assess a penalty if there was no reasonable basis of support for the refund claim, in the amount of % of the disallowed amount.

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

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. a. Taxpayer penalty b. Tax preparer penalty c. Appraiser's penalty -Failure to pay a tax.

The privilege of confidentiality applies to a CPA tax preparer concerning the client's information relative to:

Clarita underpaid her taxes by $50,000. Of this amount, $35,000 was due to negligence on her part, as her record- keeping system is highly inadequate. Determine the amount of any negligence penalty.

Evaluate this statement: a taxpayer is liable not only for tax penalties as described in the tax Code and Regulations. Sanctions elsewhere in Federal law, such as in the criminal code, also apply in a tax dispute.

A CPA, an attorney, and a(n) can represent taxpayers before the IRS in an Appeals conference.

Compute the failure to pay and failure to file penalties for John, who filed his 2012 income tax return on December 14, 2013, paying the $10,000 amount due. On April 1, 2013, John submitted a six-month extension of time in which to file his return; he paid no tax with the extension request. He has no reasonable cause for failing to file his return by October 15, or for failing to pay the tax that was due on April 15, 2013. John's failure to comply with the tax laws was not fraudulent.

Chung's AGI last year was $180,000. Her Federal income tax came to $45,000, which she paid through a combination of withholding and estimated payments. This year, her AGI will be $250,000, with a projected tax liability of $60,000, all to be paid through estimates. Ignore the annualized income method. Compute Chung's quarterly estimated payment schedule for this year.

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. a. Taxpayer penalty b. Tax preparer penalty c. Appraiser's penalty -Failure to sign the return.

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. a. Ignorance of the tax law b. Reasonable basis c. Reasonable cause d. Complexity of the tax law e. Substantial authority f. Disclosure on return -Preparer penalty for reckless conduct.

The Commissioner of the IRS is appointed by the:

Yang, a calendar year taxpayer, did not file a tax return for 2007 because she honestly believed that no additional tax was due. In 2014, Yang is audited by the IRS and the agent assesses a deficiency of $17,000 for 2007. Yang need not pay this deficiency, since the three-year statute of limitations expired on April 15, 2011, meaning that the IRS no longer can adjust Yang's tax for the 2007 tax year.

Latrelle prepares the tax return for Whitehall Corporation. Latrelle includes a $5,000 deduction on the return. This type of deduction previously has been disallowed by the Tax Court, although there is a 15% chance that the holding will be reversed on an appeal by Whitehall. The return does not make any special disclosure that the deduction is being claimed. Whitehall paid Latrelle a fee of $8,000 for preparing the Form 1120. Latrelle will be assessed a preparer penalty of $4,000 for taking an unreasonable position on the Whitehall return.

The , a presidential appointee, is the "IRS's attorney."

The chief executive of the IRS is the _________________________.

The IRS employs about 90,000 personnel, making it one of the largest Federal agencies.

When a tax issue is taken to court, the burden of proof is on the IRS to show that its audit adjustments are correct.