According to the AICPA Statements on Standards for Tax Services, which of the following factors should a CPA consider in choosing whether to provide oral or written advice to a client?
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1 .In evaluating the hierarchy of authority in tax law, which of the following carries the greatest authoritative value for tax planning of transactions?
A IRS regulations. B Internal Revenue Code. C Tax court decisions. D IRS agents' reports.
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A Guess may use estimates provided by Bates due to the fact that she has been preparing returns for Bates for more than 10 years. B Guess may not use estimates provided by Bates in any situation. C Guess may use estimates provided by Bates only if the use of the estimates is disclosed on the return ...
3 .Arthur Younger, a CPA and a member of the AICPA, is preparing a federal tax return for his client, Albert Capon, a reputed member of an organized crime family near Chicago. Capon is very reluctant to provide any information to Younger to answer questions that are posed on the return.According to the AICPA's Statements on Standards for Tax Services, which of the following statements is correct for this situation?
A Not all questions on a return are of equal importance. However, Younger must make a reasonable effort to answer all questions. B Younger should make an effort to extract from Capon the information needed to answer the questions, and, if he cannot obtain the information, he can just "forget" to ans...
4 .A member would be in violation of the Standards for Tax Services if the member recommends a return position under which of the following circumstances?
A It does not meet the realistic possibility standard but is not frivolous and is disclosed on the return. B It might result in penalties and the member advises the taxpayer and discusses avoiding such penalties through disclosing the position. C It does not meet the realistic possibility standard b...
5 .Ivan von Hindenberg, CPA and a member of the AICPA, has been preparing federal tax returns for one of his clients for many years. Two years ago, he took a position on a return and that position was settled in an appeals conference. He is now considering a different position on the current return. According to the AICPA's Statements on Standards for Tax Services, which of the following statements is correct for this situation?
A Ivan cannot take a different position on the current return under any circumstances. He is bound by the earlier determination. B Ivan cannot take a different position on the current return because the IRS is bound to be consistent in their positions and so is he. C If the determination on the prio...
7 .A CPA assists a taxpayer in tax planning regarding a transaction that meets the definition of a tax shelter as defined in the Internal Revenue Code. Under the AICPA Statements on Standards for Tax Services, the CPA should inform the taxpayer of the penalty risks unless the transaction, at the minimum, meets which of the following standards for being sustained if challenged?
A More likely than not. B Realistic possibility. C Substantial authority. D Not frivolous.
8 .A CPA prepares income tax returns for a client. After the client signs and mails the returns, the CPA discovers an error. According to Treasury Circular 230, the CPA must:
A Promptly resign from the engagement and cooperate with the successor accountant. B Document the error in the workpapers. C Promptly advise the client of the error. D Prepare an amended return within 30 days of the discovery of the error.
9 .Starr, CPA, prepared and signed Cox's Year 1 federal income tax return. Cox informed Starr that Cox had paid doctors' bills of USD20,000 although Cox actually had paid only USD7,000 in doctors' bills during Year 1. Based on Cox's representations, Starr computed the medical expense deduction that resulted in an understatement of tax liability. Starr had no reason to doubt the accuracy of Cox's figures and Starr did not ask Cox to submit documentation of the expenses claimed. Cox orally assured Starr that sufficient evidence of the expenses existed. In connection with the preparation of Cox's Year 1 return, Starr is:
A Not liable to the IRS for any penalty or interest. B Liable to the IRS for negligently preparing the return. C Not liable to the IRS for any penalty, but is liable to the IRS for interest on the underpayment of tax. D Liable to Cox for interest on the underpayment of tax.
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A To avoid the preparer penalty for willful understatement of tax liability, Kopel was obligated to examine the underlying documentation for the deduction. B To avoid the preparer penalty for willful understatement of tax liability, Kopel would be required to obtain Raff's representation in writing....
