1994. CHAPTER 17—TAX PRACTICE AND ETHICS Question MC #1 The Chief Counsel of the IRS is appointed by the: a. Secretary of the Treasury Department. b. U. S. Senate. c. U. S. House of Representatives. d. U. S. President. e. American Bar Association President. 1995. CHAPTER 17—TAX PRACTICE AND ETHICS Question MC #2 Which statement appearing below does not correctly describe the IRS letter ruling process? a. They are issued by the Secretary of the Treasury Department. b. Some letter rulings are of such importance and general interest that they are later published (in anonymous form) as Revenue Rulings. c. Letter rulings are private and can be seen only by the taxpayer who requested the ruling. d. Letter rulings can benefit both taxpayers and the IRS. 1996. CHAPTER 17—TAX PRACTICE AND ETHICS Question MC #3 Which of the following statements is incorrect as to the conduct of IRS income tax audits? a. Only the Appeals Division of the IRS has the authority to settle tax disputes based on the hazards of litigation. b. The IRS publishes the factors its computers use for audit selection purposes annually in the Commissioner’s Report. c. For a Form 1040 that is filed on April 11 2012 if the taxpayer has not received an audit notification from the IRS by the end of 2012 the return may still be audited. d. Most IRS examinations of Forms 1040 are conducted solely through the mail. 1997. CHAPTER 17—TAX PRACTICE AND ETHICS Question MC #4 Which of the following statements is correct as to the conduct of IRS income tax audits? a. Office audits are conducted at the office of the IRS. b. The most common type of Federal income tax audit is the field audit. c. An office audit typically is used for a business taxpayer. d. A correspondence audit usually is concluded after a meeting with the taxpayer at the IRS auditor’s office. 1998. CHAPTER 17—TAX PRACTICE AND ETHICS Question MC #5 With respect to the Small Cases Division of the Tax Court a. The taxpayer (but not the IRS) can appeal a contrary judgment. b. The IRS (but not the taxpayer) can appeal a contrary judgment. c. Either the IRS or the taxpayer can appeal a contrary judgment. d. Neither the IRS nor the taxpayer can appeal a contrary judgment. 1999. CHAPTER 17—TAX PRACTICE AND ETHICS Question MC #6 Which of the following statements correctly reflects the rules governing interest to be paid on an individual’s Federal tax deficiency or claim for refund? a. The IRS has full discretion in determining the rate that will apply. b. The simple interest method for calculating interest is used. c. The rate of interest for assessments is one percentage point lower than the rate of interest for refunds. d. The IRS adjusts the rate of interest quarterly. 2000. CHAPTER 17—TAX PRACTICE AND ETHICS Question MC #7 Which of the following statements does not reflect the rules governing the accuracy-related penalty for negligence? a. The penalty rate is 20%. b. The penalty is imposed only on the part of the deficiency attributable to negligence. c. The penalty applies only to intentional tax understatements by the taxpayer. d. The penalty is waived if the taxpayer uses Form 8275 to disclose a return position that is reasonable though contrary to the IRS position. 2001. CHAPTER 17—TAX PRACTICE AND ETHICS Question MC #8 The penalty for substantial understatement of tax liability does not apply if: a. The taxpayer has substantial authority for the treatment taken on the tax return. b. The relevant facts affecting the treatment are adequately disclosed in the return or on Form 8275. c. The IRS failed to meet its burden of proof in showing the taxpayer’s error. d. All of the above statements are correct. e. None of the above statements are correct. 2002. CHAPTER 17—TAX PRACTICE AND ETHICS Question MC #9 Ming (a calendar year taxpayer) donates a painting to a local art museum (a qualified charity). The painting cost Ming $2 000 ten years ago and according to one of Ming’s friends (an amateur artist) is worth $40 000. On his income tax return Ming deducts $40 000 as a Form 1040 charitable contribution. Upon later audit by the IRS it is determined that the true value of the painting was $30 000. Assuming that Ming is subject to a 30% marginal Federal income tax rate his penalty for overvaluation is: a. $5 000. b. $2 000. c. $1 000. d. $0. e. $10 000 (minimum penalty). 2003. CHAPTER 17—TAX PRACTICE AND ETHICS Question MC #10 Harold a calendar year taxpayer subject to a 35% marginal tax rate claimed a Form 1040 charitable contribution deduction of $20 000 for a sculpture that the IRS later valued at $10 000. The applicable overvaluation penalty is: a. $10 000. b. $7 000. c. $3 500. d. $0.
