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

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Question 31

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

A) True
B) False

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Question 32

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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.

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The House Ways and Means Committee, Sena...

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Question 33

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

Basu received a letter from the IRS that gave him the choice of (1) paying a proposed deficiency or (2) filing a petition with the U.S. Tax Court. Basu received the:

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

A taxpayer can avoid a substantial understatement of tax penalty:

Which of the following is not considered a primary authority?

Temporary Regulations have more authoritative weight than revenue rulings.

Corporations are required to file a tax return annually regardless of their taxable income.

Office examinations are the most common type of IRS audit.

The regulation with the lowest authoritative weight is the:

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.

Which of the following is not a common tool used in conducting tax research?

Proposed and Temporary Regulations have the same authoritative weight.

An extension to file a tax return does not extend the due date for tax payments.

If a taxpayer is due a refund, she does not have to file a tax return.

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 identified one item that will require a more modest adjustment ($10,000). Mel feels strongly that the $10,000 adjustment would not hold in court and was surprised that the IRS agent did not identify some of the other potential larger issues. What are Mel's choices with the 30 day letter and what factors should influence his decisions?

Which of the following is not a source of a tax practitioner's professional responsibilities?

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

In researching a question of fact, the researcher will focus her efforts on identifying authorities with fact patterns similar to her client's facts.