Chapter 5 Flashcards
Are IRS Publications Primary?
No
Whats the likelihood of a tax position is upheld when it says reasonable basis
greater than 20%
Whats the difference between tax avoidance and tax evasion?
tax avoidance is a legal way and tax evasion is illegal way to avoid taxes
Whats the likelihood of a tax position is upheld when it says substantial authority
greater than 33% but less than 50% (objective standard)
Whats the likelihood of a tax position is upheld when it says more likely than not
greater than 50%
whats the difference between tax preparer vs tax practitioner?
Tax preparer is for compensation. Tax practitioner is cpas, attorneys, enrolled agents and so on that practice for IRS
A position is deemed unreasonable unless the following are upheld by what tax position for the tax preparer:
- Undisclosed
- Disclosed
- Has a tax shelter or a reportable transaction
- substantial authority
- reasonable basis
- more likely than not
What are the rules on how long you cant participate in a specific situation because of potential “conflicts of interest” by former gov employees, their partners and associates:
- personally and substantially participated
- had official responsibility
- participated in the development
- never represent that party
- two years
- one year
How many members are in the PCAOB and what are their duties?
- 5 members. 2 CPA 3 Non
- register public accounting firms, establish rules relating to preparation of audit reports and conduct inspections, investigations
How long do you have to keep tax workpapers and audit workpapers?
tax - 3
audit - 7
When are inspections done by the PCAOB for audits?
100 and more audits a year - annual inspections
others - inspected every 3 years
What are the steps for tax legislation?
- House Ways and Means Committee
- then it is voted and approved by the full House.
- Then it goes to the senate, specifically the Finance Committee for approval.
- Then voted and approved by the full Senate.
- The Joint Conference Committee resolves the differences
- and a compromise bill must be approved by both the House and Senate.
What makes US Tax Court so unique?
The taxpayer doesn’t have to pay the tax before going to court. 19 regular judges who travel to hear the cases. (only need one) No Jury (only district court)
What makes the District court so unique?
Only one with a jury
What happens if you appeal Tax court or District court and what makes them different?
you go to the US court of Appeals. Its a 3 judge panel. They handle situations from geographic situations
What is the penalty for
- failure to file penalty
- failure to pay penalty
- negligence penalty with respect to understatement of tax (accuracy related penalty)
- substantial understatement of tax (accuracy related penalty)
- fraud
- 5% of tax due per month
- 1/2 of 1% per month
- 20%
- 20% just more difficult to avoid penalty
- 75%
Whats the following positions percentages in likelihood of prevailing in court?
- position that is not frivolous
- reasonable basis standard (disclosed)
- substantial authority standard (undisclosed)
- more likely than not standard (tax shelter)
- less than 20%
- greater than 20%
- greater than 33% but less than 50%
- more than 50%
What is an accuracy related penalty?
Negligence of penalty with respect to understatement of tax and substantial understatement of tax
What are the 1933 and 1934 acts?
1933- IPO 1934 - Reporting & Fraud
What are not deemed securities?
CDs and General Partnerships
For 1933 companies, what are the registrations steps for the SEC?
- The prospectus (a written offer to sell securities)
- Information about the securities being issued like Audited financial statements, material facts requiring disclosure (names and addresses of officers, shareholders that own 1- or more, type of stock and debt, purposes, and so on)
What is a shelf registration?
prepare just one registration statement for all securities that they will offer in the future (u just have to make sure its continuously updated)
What is the timetable of sales activity for an IPO?
- Before registration
- After registration
- 30 days before registration you are able to negotiate with underwriters
- 20 days after registration, you are able to start advertising but only verbal, tombstone ads, preliminary
What are the exemptions to the 1933 act?
BRINGS Banks Railroads Insurance Non for profit Governments (SALT) Short term commercial paper (maturity date of nine months or less)
