Exam (elaborations)
R4M3 FEDERAL TAX PROCEDURES AND TAXPAYER PENALTIES || MC
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R4M3 FEDERAL TAX PROCEDURES AND TAXPAYER PENALTIES || MC
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R4M3 FEDERAL TAX PROCEDURES AND TAXPAYERPENALTIES || MC
MCQ #4: The substantial authority standard involves a position that has a more than 40
percent chance, not a one-in-four chance, but a less than 50 percent chance of
succeeding. - Answers -MCQ #4: The reasonable basis standard involves a position
that is arguable but fairly unlikely to prevail in court. A numerical statement of this
standard has at least a 20 percent chance, not a 10 percent chance, of succeeding.
MCQ #5: If an individual taxpayer rejects the IRS examiner's findings in an audit of the
taxpayer's tax return, the IRS will issue the taxpayer a 30-day letter (preliminary notice)
notifying the taxpayer of the right to appeal.
The taxpayer has 30 days to request an administrative appeals conference with the IRS
Office of Appeals. - Answers -MCQ #7: The courts of original jurisdiction for tax cases,
i.e., the courts in which a taxpayer would first bring a lawsuit against the IRS, are the
Tax Court, the U.S. District Court, and the U.S. Court of Federal Claims.
MCQ #9: Upon receipt of a notice of deficiency from the IRS, the taxpayer has 90 days
to pay the deficiency or file a petition with the Tax Court for a redetermination of the
deficiency. - Answers -MCQ #10: A statutory notice of deficiency, or 90-day letter,
explains that the taxpayer has 90 days to either pay the deficiency or file a petition with
the U.S. Tax Court. The taxpayer does not have to first pay the deficiency and file a
claim for a refund with the IRS to file a petition with the U.S. Tax Court.
MCQ #11: If an agreement cannot be reached between the taxpayer and the revenue
agent following an audit, the taxpayer receives a copy of the revenue agent's report and
a 30-day letter notifying the taxpayer of the right to appeal. The taxpayer has 30 days to
either request an administrative appeals conference or agree to the IRS proposed
adjustments. - Answers -MCQ #12: The 90-day letter is sent to the taxpayer after the
30-day letter if the taxpayer does not respond to the 30-day letter notifying the taxpayer
of the right to appeal or if the taxpayer does appeal but does not agree with the
proposed adjustments at the administrative appeals conference. The 90-day letter gives
the taxpayer 90 days to either pay the tax deficiency or file a petition with the U.S. Tax
Court.
MCQ #19: Imposition of the civil fraud penalty requires conduct that transcends
negligence or stupidity. Maintaining false records and reporting fictitious transactions is
adequate to demonstrate civil fraud, a willful and deliberate attempt to evade taxes. -
Answers -MCQ #20: A penalty of 20 percent of the understatement is assessed for a
substantial understatement of tax. This penalty can be avoided if the taxpayer has a
reasonable basis for taking the position, the taxpayer has disclosed the position on the
tax return, and the position does not pertain to a tax shelter.
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