Area 1 - Ethics, Prof Responsibility, & Fed Tax Procedure

Question 1

Which agency is responsible for determining the continuing professional education requirements for licensed CPAs?

Answer 1

The board of accountancy for the state in which the licensed CPA practices (CPE reqs)

Question 2

If the state board of accountancy revokes Nataliya’ CPA license…then….

Answer 2

She will be automatically expulsed from the AICPA.

Question 3

What % is “reasonable basis”?

Answer 3

≥ 20% chance of approval)

Question 4

What positions does “reasonable basis” apply to?

Answer 4

Disclosed positions

Question 5

Late filing penalty?

Answer 5

5% per month; Is capped at 25% of the amount of taxes

Question 6

Late payment penalty?

Answer 6

.005% or .5 percent per month; 0.5% of net tax due per month (capped at 25%)

Question 7

Substantial understatement (individual)

Answer 7

The greater of 10% of the tax, or $5,000. The penalty is 20% of the underpayment

Question 8

Substantial understatement (corp)

Answer 8

The lesser of 10% of the tax (or, if greater, $10,000),

OR $10 million. The penalty will be 20% of the underpayment

Question 9

Undisclosed position must have what kind of authority?

Answer 9

“Substantial authority” (≥40% chance)

Question 10

Tax Shelter position must have what kind auth?

Answer 10

“More likely than not” (>50% chance)

Question 11

Administrative sources of the tax law are…

Answer 11

Private letter rulings, Revenue rulings, Technical advice memoranda

Question 12

Sources of Authority for Tax Law:

Answer 12

1. Legislative 2. Admin 3. Judicial

Question 13

Statutory Law Development

Answer 13

1. House Ways & Means Committee 2. House of Reps 3. Senate Finance Committee 4. Senate 5. Joint Conference Committee 6. back to house & senate 7. president signs or vetos