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Exam 26: Tax Practice and Ethics

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Question 51

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Maria's AGI last year was $95,000.To avoid a penalty,her estimated tax payments and withholdings for this year must equal the lesser of ____________________ percent of last year's taxes or ____________________ percent of this year's taxes.

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100,90
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Question 52

True/False

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Maria and Miguel Blanco are in the midst of negotiating a divorce.Because both parties are unwilling to share any current financial information,their joint Form 1040 for 2016 is not filed until October 31,2017,when the respective divorce attorneys forced them to cooperate.The Blancos should not be subject to any Federal late-filing penalties,because the reasonable cause exception applies to their family discord.

A) True
B) False

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Question 53

Multiple Choice

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Juanita,who is subject to a 40% marginal Federal gift tax rate,made a gift of a sculpture to Bianca,valuing the property at $150,000.The IRS later valued the gift at $300,000.The applicable undervaluation 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 need 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 taking an unreasonable tax return position.

Mikel prepared for compensation a Federal income tax return for Mona.Mona's return included an aggressive interpretation of the rules concerning the home office deduction.Mikel is not liable for a preparer penalty for taking an unreasonable tax return position if:

Compute the undervaluation penalty for each of the following independent cases involving the executor's reporting of the value of a closely held business in the decedent's gross estate.In each case,assume a marginal Federal estate tax rate of 40%.

The taxpayer or a tax advisor may be subject to penalties if there is a misstatement of the valuation of an item reported on the tax return.Describe how these penalties work.

​The tax law requires that all paid tax preparers:

Yin-Li is the preparer of the Form 1120 for Cloves Corporation.On the return,Cloves claimed a deduction that the IRS later disallowed on audit.Compute the tax preparer penalty that could be assessed against Yin-Li in each of the following independent situations.

Vera is audited by the IRS for three tax years.Her returns were prepared by the following parties,to each of whom Vera paid a professional fee. Vera wants help in appearing before the IRS Revenue Agent for the audit.Which of the following statements is correct?

The IRS employs almost 80,000 personnel,making it one of the largest Federal agencies.

Jenny prepared Steve's income tax returns for no compensation for 2015 and 2016.Jenny is Steve's mother.In 2018,the IRS notifies Steve that it will audit his returns for 2015 and 2016.Jenny cannot represent Steve during the audit of the returns,as she is not a "registered tax return preparer."

The accuracy-related penalties typically relate to ____________________on the part of the taxpayer,or other understatements of tax.

Compute the overvaluation penalty for each of the following independent cases involving the taxpayer's reporting of the fair market value of charitable contribution property.In each case,assume a marginal Federal income tax rate of 35%.

The IRS pays interest on a refund to the taxpayer,unless the IRS's payment is made within ____________________ days of the date that a return is filed.

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.

A penalty can be assessed from an appraiser who knew that his/her improper appraisal would be used as part of a tax computation,in the amount of the lesser of ____________________% of the tax understatement or ____________________ % of the appraisal fee collected.

A taxpayer penalty may be waived if there is shown to be reasonable cause for the misstatement on the tax return.The courts have applied this standard strictly.List three or more assertions for a waiver of a taxpayer penalty that courts have found not to constitute reasonable cause.Example: Ignorance of the tax law.

After the completion of an audit,the taxpayer has 90 days to petition the ____________________ Court to modify the proposed tax due.

Minnie,your tax client,has decided to dispute the Revenue Agent's Report.List and discuss at least four of your "next steps" as you prepare to represent Minnie concerning her tax issue within the IRS and in the courts.