ch18 - H Chapter Eighteen H TAX PRACTICE AND PROCEDURE...

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H Chapter Eighteen H TAX PRACTICE AND PROCEDURE SOLUTIONS TO RESEARCH PROBLEMS RESEARCH PROBLEMS 18-64 The IRS is likely to prevail. Section 6501(c)(1) states that the tax may be assessed at any time on a false or fraudulent return. (In other words, the statute of limitations never expires.) In E. Badaracco, Sr. (SupCt 84-1 USTC { 9150, 104 SCt 756), the U.S. Supreme Court held that the filing of a non-fraudulent amended return does not start the running of the three-year statute of limitations, since the original return filed was fraudulent. Consequently, an unlimited time for assessment applies. 18-65 N should be penalized for failure to file. N gave information that was later determined to be incorrect to her accountant, and his reply was based on that incorrect information. Section 6651(a)(1) states that a penalty for failure shall be imposed, ‘‘unless it is shown that such failure is due to reasonable cause and not due to willful neglect.’’ In R. L. Stovall (CA-11, 85-2 USTC { 9450, 762 F.2d 891), the taxpayer was unable to avoid the failure to file penalty by claiming that he relied on his accountant. Since the taxpayer was unable to prove that he provided his accountant with all relevant information, the reliance on the accountant was not ‘‘reasonable.’’ 18-1
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H Chapter Eighteen H TAX PRACTICE AND PROCEDURE TEST BANK True or False 1. An example of involuntary taxpayer compliance is found in a sales tax system. 2. The Secretary of the Treasury has delegated the rule-making authority to the Commissioner of the IRS, subject to the Secretary’s approval. 3. Only a small percentage of tax returns are scanned for mathematical errors as well as exclusions, deductions, and credits. 4. Exceeding a ‘‘normal’’ range for itemized deductions at various income levels may trigger an audit by the IRS. 5. Generally, an audit must be performed within three years of the due date of the tax return. 6. A taxpayer who agrees with a revenue agent’s proposed audit adjustment and signs Form 870 waives the right to pursue the appeals process within the IRS and the courts. 7. The IRS allows a taxpayer an appellate conference as a matter of right. 8. If a taxpayer recognizes that she is liable for $1,500 of a $3,000 adjustment made by the IRS after an audit, it is probably wise to agree with the adjustment and pay the entire amount, even though she is convinced that she is not liable for the entire $3,000. 9. The general period of limitations for tax assessment is three years from the due date of the return or the date the return is filed, whichever is later. 10. Taxpayer D filed his 2009 tax return on April 1, 2010. Absent fraud or a substantial omission from gross income, the statute of limitations will expire on April 1, 2013. 11.
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This note was uploaded on 07/26/2011 for the course TAX 772 taught by Professor Ber during the Spring '11 term at Hartford.

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ch18 - H Chapter Eighteen H TAX PRACTICE AND PROCEDURE...

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