Chapters 9, 10, 11 Flashcards
When must a CPA comply with the Private Securities Litigation Reform Act?
When auditing issuers under the Securities Exchange Act of 1934
What is the minimum threshold for avoiding penalties on undisclosed tax positions?
Substantial authority or 40% standard.
Who has the greatest authoritative value for tax planning of transaction?
Internal Revenue Code
When would an underpayment penalty not apply for a corporation?
If the underpayment is < $500; annualized income; seasonal method; and paid 100% of the PY tax liability.
Is a foreign sub or a foreign branch subject to US federal tax?
A foreign sub is not subject to US tax, but a foreign branch is.
Are dividends from a foreign sub deductible?
Dividends from a foreign sub are now generally eligible for a 100% DRD.
When would an underpayment penalty not apply for a an individual?
If the underpayment is < $1,000; annualized income; and paid 100% of the PY tax liability or 90% of CY tax liability.
When would disclosure reduce or eliminate an accuracy-related penalty?
If the position: 1) does not involve a tax shelter 2) is not frivolous 3) has a reasonable basis 4) and is properly substantiated
How long would a taxpayer have to file a petition for a notice of deficiency from the IRS, barring the underpayment is not the result of a math/clerical error?
90 days to file a petition with the Tax Court or 150 if outside of the US
Who has the authority to suspend or revoke a CPA’s license?
The state board of accountancy
When would a tax preparer need to verify information from a client?
They wouldn’t unless they have reason to believe the information is incorrect
What is the Participation Exemption?
A 100% (DRD) that is generally available for the foreign-source portion of dividends received. Holding period >365.
What is the definition of negligence?
The absence of due professional care
3 courts with original jurisdictions
Tax Court, US District Court, and Court of Federal Claims
Do you have to be in privity to use under the 33 or 34 Act?
No
