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

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Question 41

Multiple Choice

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Martin has never filed a 2016 tax return despite earning approximately $20,000 providing landscaping work in the community. In what tax year, will the statute of limitations expire for Martin's 2016 tax return?

A) 2019.
B) 2020.
C) 2023.
D) 2024.
E) None of the abovE.There is no statute of limitations if a taxpayer fails to file a tax return.

F) B) and C)
G) A) and C)

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Question 42

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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.

A) True
B) False

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Question 43

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

Which of the following courts is the only court that provides for a jury trial?

Which of the following has the lowest authoritative weight?

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

Corporations are required to file a tax return only if their taxable income is greater than:

Campbell was researching a tax issue and found a favorable Tax Court opinion and an IRC Code Section that appears to answer the question. Is she finished with the research process? If so, why? If not, what must she do?

A taxpayer can avoid an underpayment penalty if there is substantial authority that supports her tax return position.

Ramon's tax return was randomly selected for audit. Which IRS program likely selected Ramon's return for audit?

In a planning context,

Greg earned $20,500 this year and had $1,500 of federal income taxes withheld from his salary. Assuming that Greg will have a total tax liability of $1,000 (and thus will receive a $500) refund, he:

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 2^nd 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.

An acquiescence indicates that the IRS lost a court case and that it has decided to follow the court's ruling in the future.

The Internal Revenue Code of 1986 is the name of the current income tax code of the United States of America.

Closed facts are especially conducive to tax planning.

Houston has found conflicting authorities that address a research question for one of his clients. The majority of the authorities provide a favorable answer for his client. Nonetheless, there are several authorities that provide an unfavorable answer. Houston estimates that if the client takes the more favorable position on its tax return that there is approximately a 60 percent chance that the position will be sustained upon audit or judicial proceeding. If the client takes this position on its tax return, will Houston be subject to penalty? Will the client potentially be subject to penalty?

Hong, an introductory tax student, is beginning his first research project. He has a complete understanding of the relevant facts for his project and has identified the initial research questions. He is now ready to begin using a tax service to identify relevant authorities. What are some suggestions for him on how to use tax services to identify relevant authorities?

If a taxpayer loses a case at the Circuit Court level, he is granted an automatic appeal hearing with the Supreme Court.

In researching a tax issue, Eric finds that the U.S. Circuit Court of Appeals for the Federal Circuit previously has ruled in favor of his tax position, whereas the 11^th Circuit (Eric's circuit) previously has ruled against his tax position. If Eric is contemplating litigating his tax position with the IRS, he should prefer to have his case first tried by the U.S. Tax Court.