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Exam 2: Tax Compliance, the Irs, and Tax Authorities

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Question 61

True/False

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An extension to file a tax return does not extend the due date for tax payments.

A) True
B) False

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Question 62

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Because the U.S. District Court hears a broader set of cases, decisions by the U.S. District Court may be considered to have more authoritative weight than the U.S. Court of Federal Claims.

A) True
B) False

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Question 63

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Edie would like to better understand a new code section enacted four weeks ago. Which of the following authorities will help Edie understand the newly enacted code section?

If the President vetoes tax legislation, Congress:

Mel recently received a 30-day letter from the IRS. Although his tax return being audited has several potential large issues (potential tax consequences of $70,000 - $80,000), the IRS agent auditing his return only identified one item that will require a modest adjustment of $10,000. Mel feels strongly that the $10,000 adjustment would not hold up in court and was surprised that the IRS agent did not identify some of the other potential larger issues. What are Mel's choices with respect to the 30-day letter and what factors should influence his decisions?

Raul was researching an issue and found two Tax Court decisions issued within 6 months of each other, one for a taxpayer residing in California and the other for a taxpayer residing in New York whose rulings were inconsistent. Raul knows that the federal tax law does not differ by state and the issue was exactly the same in both cases. Raul is confused because he thought that a basic judicial doctrine was that a court is supposed to rule consistently. Name and describe this judicial doctrine that requires judicial consistency and discuss why the Tax Court may have intentionally ruled inconsistently in this example.

The statute of limitations for IRS assessment generally ends four years after the date a tax return is filed.

Lavonda discovered that the 5^th Circuit (where Lavonda resides) has recently issued a favorable opinion with respect to an issue that she is going to litigate with the IRS. Lavonda should choose which of the following trial courts to hear her case?

Lavonda discovered that the U.S. Circuit Court of Appeals for the Federal Circuit has recently issued a favorable opinion with respect to an issue that she is going to litigate with the IRS. Lavonda should choose which of the following trial courts to hear her case?

For fraudulent tax returns, the statute of limitations for IRS assessment is ten years.

If the IRS assesses additional tax on a tax return upon audit, a taxpayer may be subject to interest and penalties on the underpayment.