Question & Answer

How are citators used in tax research?

Identify some of the sources for tax professional standards.  What are the potential ramifications of failing to comply with these standards

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?

What is Circular 230?

What are the basic differences between civil and criminal tax penalties?

What are some of the most common civil penalties imposed on taxpayers?

What are the taxpayer’s standards to avoid the substantial understatement of tax penalty?

Molto Stancha Corporation had zero earnings this fiscal year; in fact, they lost money. Must they file a tax return

The estate of Monique Chablis earned $450 of income this year. Is the estate required to file an income tax return?

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?

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?

Latoya filed her tax return on February 10th this year.  When will the statute of limitations expire for this tax return?

Latoya filed her tax return on February 10th this year.  When will the statute of limitations expire for this tax return?

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?

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?

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?

Sophia recently won a tax case litigated in the 7th Circuit.  She recently heard that the Supreme Court denied the writ of certiorari.  Should she be happy or not, and why?

Yong’s tax return was audited because he calculated his tax liability incorrectly.  What IRS audit procedure identified his tax return for audit?

Streep Factory provides a 2-year warranty with one of its products which was first sold in 2014. In that year, Streep spent $70,000 servicing warranty claims. At year-end, Streep estimates that an additional $400,000 will be spent in the future to service warranty claims related to 2014 sales. Prepare Streep’s journal entry to record the $70,000 expenditure and the December 31 adjusting entry, assuming the expenditures are inventory costs.

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?

Marjorie sold her condominium for $500,000 on September 14, 2014; she had paid $330,000 for it in 2006. Marjorie collected the selling price as follows: 2014, $80,000; 2015, $320,000; and 2016, $100,000. Marjorie appropriately uses the installment-sales method. Prepare a schedule to determine the gross profit for 2014, 2015, and 2016 from the installment sale.

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.

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)?

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?

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?