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ACC547 Chapter 2: Tax Compliance




Question;Discussion Questions1.(LO1)Name three factors that determine whether a taxpayer is required to file a tax return.2.(LO1)Benita is concerned that she will not be able to complete her tax return by April 15. Can she request an extension to file her return? By what date must she do so? Assuming she requests an extension, what is the latest date that she could file her return this year without penalty?3.(LO1)Agua Linda, Inc., is a calendar-year corporation. What is the original due date for the corporate tax return? What happens if the original due date falls on a Saturday?4.(LO2)Approximately what percentage of tax returns does the IRS audit? What are the implications of this number for the IRS?s strategy in selecting returns for audit?5.(LO2)Explain the difference between the DIF system and the National Research Program? How do they relate to each other?6.(LO2)Describe the differences between the three types of audits in terms of their scope and taxpayer type.7.(LO2)Simon just received a 30-day letter from the IRS indicating a proposed assessment. Does he have to pay the additional tax? What are his options?8.(LO2)Compare and contrast the three trial-level courts.9.(LO3)Compare and contrast the three types of tax law sources and give examples of each.10.(LO3)The U.S. Constitution is the highest tax authority but provides very little in the way of tax laws. What are the next highest tax authorities beneath the U.S. Constitution?11.(LO3)Jackie has just opened her copy of the Code for the first time. She looks at the table of contents and wonders why it is organized the way it is. She questions whether it makes sense to try and understand the Code?s organization. What are some reasons why understanding the organization of the Internal Revenue Code may prove useful?12.(LO3)Laura Li, a U.S. resident, works for three months this summer in Hong Kong. What type of tax authority may be especially useful in determining the tax consequences of her foreign income?13.(LO3)What are the basic differences between regulations, revenue rulings, and private letter rulings?14.(LO3)Under what circumstance would the IRS issue an acquiescence? a nonacquiescence? An action on decision?15.(LO3)Carlos has located a regulation that appears to answer his tax research question. He is concerned because the regulation is a temporary regulation. Evaluate the authoritative weight of this type of regulation. Should he feel more or less confident in his answer if the regulation was a proposed regulation?16.(LO3)Tyrone recently read a regulation that Congress specifically requested the IRS to issue. What type of regulation is this? How does this regulation?s authoritative weight compare to other regulations?17.(LO3)In researching a tax question, you find only one authority (a trial-level court opinion) that is directly on point. Which court would you least prefer to have heard this case and why?18.(LO3)What isstare decisisand how does it relate to the Golsen rule?19.(LO3)Mason was shocked to learn that the current Code is the Internal Revenue Code of 1986. He thought that U.S. tax laws change more frequently. What is wrong with Mason?s perception?20.(LO4)Describe in general the process by which new tax legislation is enacted.21.(LO4)What are the three committees that debate proposed tax legislation? What documents do these committees generate, and how might they be used?22.(LO4)The president recently vetoed a tax act passed by the House and Senate. Is the tax act dead? If not, what will it take for the act to be passed?23.(LO5)What are the five basic parts of an internal research memo?24.(LO5)What is the difference between primary and secondary authorities? Explain the role of each authority type in conducting tax research.25.(LO5)Jorge is puzzled that the IRS and his CPA could legitimately reach different conclusions on a tax issue. Why does this happen?26.(LO5)What is the difference between open and closed facts? How is this distinction important in conducting tax research?27.(LO5)In writing a research memo, what types of facts should be included in the memo?28.(LO5)Amber is a tax expert, whereas Rob is a tax novice. Explain how their process in identifying tax issues may differ.29.(LO5)Discuss the basic differences between annotated and topical tax services. How are these services used in tax research?30.(LO5)In constructing a keyword search, what should the keyword search include?31.(LO5)Lindley has become very frustrated in researching a tax issue using keyword searches. What suggestions can you give her?32.(LO5)Nola, a tax novice, has a fairly simple tax question. Besides tax services, what are some sources that she can use to answer her question?33.(LO5)Armando identifies a tax research question as being a question of fact. What types of authorities should he attempt to locate in his research?34.(LO5)How are citators used in tax research?35.(LO5)What is the general rule for how many authorities a research memo should discuss?36.(LO6)Identify some of the sources for tax professional standards. What are the potential ramifications of failing to comply with these standards?37.(LO6)Levi is recommending a tax return position to his client. What standard must he meet to satisfy his professional standards? What is the source of this professional standard?38.(LO6)What is Circular 230?39.(LO7)What are the basic differences between civil and criminal tax penalties?40.(LO7)What are some of the most common civil penalties imposed on taxpayers?41.(LO7)What are the taxpayer?s standards to avoid the substantial understatement of tax penalty?42.(LO7)What are the tax practitioner?s standards to avoid a penalty for recommending a tax return position?Problems43.(LO1)Ahmed does not have enough cash on hand to pay his taxes. He was excited to hear that he can request an extension to file his tax return. Does this solve his problem? What are the ramifications if he doesn?t pay his tax liability by April 15?44.(LO1)Molto Stancha Corporation had zero earnings this fiscal year, in fact, they lost money. Must they file a tax return?45.(LO1)The estate of Monique Chablis earned $450 of income this year. Is the estate required to file an income tax return?46.(LO1)Jamarcus, a full-time student, earned $2,500 this year from a summer job. He had no other income this year and will have zero federal income tax liability this year. His employer withheld $300 of federal income tax from his summer pay. Is Jamarcus required to file a tax return? Should Jamarcus file a tax return?47.(LO1)Shane has never filed a tax return despite earning excessive sums of money as a gambler. When does the statute of limitations expire for the years in which Shane has not filed a tax return?48.(LO1)Latoya filed her tax return on February 10 this year. When will the statute of limitations expire for this tax return?49.(LO1)Using the facts from the previous problem, how would your answer change if Latoya understated her income by 40 percent? How would your answer change if Latoya intentionally failed to report as taxable income any cash payments she received from her clients?50.(LO2)Paula could not reach an agreement with the IRS at her appeals conference and has just received a 90-day letter. If she wants to litigate the issue but does not have sufficient cash to pay the proposed deficiency, what is her best court choice?51.(LO2)In choosing a trial-level court, how should a court?s previous rulings influence the choice? How should circuit court rulings influence the taxpayer?s choice of a trial-level court?52.(LO2)Sophia recently won a tax case litigated in the 7th Circuit. She recently heard that the Supreme Court denied thewrit of certiorari. Should she be happy or not, and why?53.(LO2)Campbell?s tax return was audited because she failed to report interest she earned on her tax return. What IRS audit selection method identified her tax return?54.(LO2)Yong?s tax return was audited because he calculated his tax liability incorrectly. What IRS audit procedure identified his tax return for audit?55.(LO2)Randy deducted a high level of itemized deductions two years ago relative to his income level. He recently received an IRS notice requesting documentation for his itemized deductions. What audit procedure likely identified his tax return for audit?56.(LO2)Jackie has a corporate client that has recently received a 30 day notice from the IRS with a $100,000 tax assessment. Her client is considering requesting an appeals conference to contest the assessment. What factors should Jackie advise her client to consider before requesting an appeals conference?57.(LO2)The IRS recently completed an audit of Shea?s tax return and assessed $15,000 additional tax. Shea requested an appeals conference but was unable to settle the case at the conference. She is contemplating which trial court to choose to hear her case. Provide her a recommendation based on the following alternative facts:Shea resides in the 2nd Circuit, and the 2nd Circuit has recently ruled against the position Shea is litigating.The Federal Circuit Court of Appeals has recently ruled in favor of Shea?s position.The issue being litigated involves a question of fact. Shea has a very appealing story to tell but little favorable case law to support her position.The issue being litigated is highly technical, and Shea believes strongly in her interpretation of the law.Shea is a local elected official and would prefer to minimize any local publicity regarding the case.58.(LO3)Juanita, a Texas resident (5th Circuit), is researching a tax question and finds a 5th Circuit case ruling that is favorable and a 9th Circuit case that is unfavorable. Which circuit case has more ?authoritative weight? and why? How would your answer change if Juanita were a Kentucky resident (6th Circuit)?59.(LO3)Faith, a resident of Florida (11th Circuit) recently found a circuit court case that is favorable to her research question. Which two circuits would she prefer to have issued the opinion?60.(LO3)Robert has found a ?favorable? authority directly on point for his tax question. If the authority is a court case, which court would he prefer to have issued the opinion? Which court would he least prefer to have issued the opinion?61.(LO3)Jamareo has found a ?favorable? authority directly on point for his tax question. If the authority is an administrative authority, which specific type of authority would he prefer to answer his question? Which administrative authority would he least prefer to answer his question?62.(LO4)Justine would like to clarify her understanding of a code section recently enacted by Congress. What tax law sources are available to assist Justine?63.(LO5)Aldina has identified conflicting authorities that address her research question. How should she evaluate these authorities to make a conclusion?64.(LO5)Georgette has identified a 1983 court case that appears to answer her research question. What must she do to determine if the case still represents ?current? law?65.(LO5)Sandy has determined that her research question depends upon the interpretation of the phrase ?not compensated by insurance.? What type of research question is this?66.(LO5)J. C. has been a professional gambler for many years. He loves this line of work and believes the income is tax-free. Use an available tax research service to determine whether J. C.?s thinking is correct. Is the answer to this question found in the Internal Revenue Code? If not, what type of authority answers this question?67.(LO5)Katie recently won a ceramic dalmatian valued at $800 on a television game show. She questions whether this prize is taxable since it was a ?gift? she won on the show. Use an available tax research service to answer Katie?s question.68.(LO5)Pierre recently received a tax penalty for failing to file a tax return. He was upset to receive the penalty, but he was comforted by the thought that he will get a tax deduction for paying the penalty. Use an available tax research service to determine if Pierre is correct.69.(LO5)Paris was happy to provide a contribution to her friend Nicole?s campaign for mayor, especially after she learned that charitable contributions are tax deductible. Use an available tax service to determine whether Paris can deduct this contribution.70.(LO5)Matt and Lori recently were divorced. Although grief stricken, Matt was at least partially comforted by his monthly receipt of $10,000 alimony. He was particularly excited to learn from his friend, Denzel, that the alimony was not taxable. Use an available tax service to determine if Denzel is correct. Would your answer change if Matt and Lori continued to live together?71.(LO5)Shaun is a huge college football fan. In the past, he has always bought football tickets on the street from ticket scalpers. This year, he decided to join the university?s ticket program, which requires a $2,000 contribution to the university for the ?right? to purchase tickets. Shaun will then pay $400 per season ticket. Shaun understands that the price paid for the season tickets is not tax deductible as a charitable contribution. However, contributions to a university are typically tax deductible. Use an available tax service to determine how much, i f any, of Shaun?s $2,000 contribution for the right to purchase tickets is tax deductible.72.(LO5)Latrell recently used his Delta Skymiles to purchase a free roundtrip ticket to Milan, Italy (value $1,200). The frequent flyer miles used to purchase the ticket were generated from Latrell?s business travel as a CPA. Latrell?s employer paid for his business trips, and he was not taxed on the travel reimbursement. Use an available tax research service to determine how much income, if any, does Latrell have to recognize as a result of purchasing an airline ticket with Skymiles earned from business travel.73.(LO6)Randy has found conflicting authorities that address a research question for one of his clients. The majority of the authorities provide an unfavorable answer for his client. Randy estimates that if the client takes the more favorable position on its tax return that there is approximately a 48 percent chance that the position will be sustained upon audit or judicial proceeding. If the client takes this position on its tax return, will Randy be subject to penalty? Will the client potentially be subject to penalty?74.(LO6)Using the same facts from the previous problem, how would your answer change if Randy estimates that there is only a 20 percent chance that the position will be sustained upon audit or judicial proceeding?75.(LO7)Sasha owes additional tax imposed in a recent audit. In addition to the tax, will she be assessed other amounts? If so, how will these amounts be determined?76.(LO7)Maurice has a client that recently asked him about the odds of the IRS detecting cash transactions not reported on a tax return. What are some of the issues that Maurice should discuss with his client?


Paper#39348 | Written in 18-Jul-2015

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