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

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Question 31

True/False

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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 11ᵗʰ 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.

A) True
B) False

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Question 32

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Princess, who resides in the 2ⁿᵈ Circuit, recently found a circuit court case that is favorable to her income tax research question. Which of the following circuits would she prefer to have issued the opinion?

A) 2ⁿᵈ Circuit.
B) Federal Circuit.
C) 1ˢᵗ Circuit.
D) 2ⁿᵈ Circuit or the Federal Circuit.
E) None of the choices are correct.

F) A) and D)
G) All of the above

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Question 33

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

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?

Lavonda discovered that the U.S. Circuit Court of Appeals for the Federal Circuit has recently issued a favorable opinion with respect to an issue that she is going to litigate with the IRS. Lavonda should choose which of the following trial courts to hear her case:

Under the tax law, taxpayers may be subject to both civil and criminal penalties for underpaying their tax liability (e.g., due to fraud).

Under the Statement on Standards for Tax Services, a CPA may recommend a tax return position if the position is frivolous and the position is not disclosed on the tax return.

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:

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

Leslie made a mathematical mistake in computing her tax liability. Which audit program will likely catch Leslie's mistake?

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 modest adjustment of $10,000. Mel feels strongly that the $10,000 adjustment would not hold up 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 respect to the 30-day letter and what factors should influence his decisions?

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

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

Which of the following audits is the most common and typically less comprehensive?

Proposed and Temporary Regulations have the same authoritative weight.

Tyrone claimed a large amount of charitable contributions as a tax deduction relative to taxpayers with similar levels of income. If Tyrone's tax return is chosen for audit because of his large charitable contributions, which audit program likely identified Tyrone's tax return for audit?

Lakeisha, a 1ˢᵗ year staff accountant, was researching a tax issue and found what appears to be the answer to her question in her introductory tax textbook that she bought three years ago. She is thrilled because she thought it would take much longer to find her answer. What type of authority is the textbook? What are other examples of this type of authorities? Can Lakeisha base her research conclusion on the textbook or similar authorities? Any suggestions for Lakeisha?

Of the two basic types of tax services, beginning tax researchers often prefer topical tax services.

Martin has never filed a 2018 tax return despite earning approximately $30,000 providing landscaping work in the community. In what tax year, will the statute of limitations expire for Martin's 2018 tax return?