Exam II Chapters 7-12 SOLUTIONS

Exam II Chapters 7-12 SOLUTIONS - Exam II Chapters 7 12...

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Exam II, Chapters 7 – 12 SOLUTIONS 1. The Seventh Circuit in Goulding v. U.S., 957 F.2d 1420 found that a tax return preparer of a partnership could be considered the preparer of the partners’ returns. For each partner, it would depend on whether or not the Sch. K-1 item was a “substantial portion” of that return because CPA Rosemary would be a nonsigning preparer. In making this determination, the length and complexity of the tax liability on the portion of the return in question would have to be compared to the length and complexity of the entire return. It may that for one partner it would be substantial, while for another partner it would not. CPA Rosemary has no way of knowing this since she has no access to the partners’ returns. Since the IRS would be assessing a civil penalty it would have the burden of proof and only the IRS has access to the partners’ returns. The preparer of a partnership return can never be certain of his/her status with respect to individual partner returns. In order to protect themselves, such preparers should always recommend disclosure of any aggressive return position. The penalty applies to each return and the preparer could be at risk for IRS sanction under Circular 230 if this constitutes a pattern of conduct. The penalty is > $1,000 or (.5)(income from preparing returns) 2. §7701(a)(36)(B)(ii) exempts employees from the definition of a preparer when the employer prepares a return for the employer or for an officer or employee of the employer. To fall under this exception, the employee must be regularly and continuously employed by that employer. Also, Richard does not sign the return. 3. They are not being paid and do not fit the definition of preparers. And, they are exempted from the rules. Discussion should revolve around signing and non-signing preparers. They meet the definition of a non-signing preparer but are not considered a preparer. 4. No, you are not subject to the penalty, the member of the firm who signs the return as the preparer will be considered the preparer even if another, nonsigning member provided advice that would otherwise constitute substantial preparation. 5.
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Exam II Chapters 7-12 SOLUTIONS - Exam II Chapters 7 12...

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