R5 Professional Resp 1 (W)

Question 1

Primary Authoritative Sources for Determining Tax Treatment of an Item

Answer 1

Internal revenue code and other statutory provisions
Regulations
Revenue rulings and U.S. Treasury Department
Court Cases

Question 2

Listed Transaction

Answer 2

A reportable transaction; a transaction specifically identified by the Secretary of the U.S. Treasury Department as a tax avoidance transaction

Question 3

More Likely Than Not

Answer 3

There is a greater than 50% likelihood of a tax position being upheld by the courts. This standard is more stringent than substantial authority

Question 4

Negligence

Answer 4

Includes any failure to make a reasonable attempt to comply with the provisions of the internal revenue laws or to exercise ordinary and reasonable care in the preparation of a tax return
Includes any failure by the taxpayer to keep adequate books and records or to substantiate items properly

Question 5

Reasonable Basis

Answer 5

Greater than 20% likelihood tax position will be upheld

Question 6

Reportable Transaction

Answer 6

Any transaction with respect to which information is required to be included with a return or statement because such a transaction is of type which the Secretary of the U.S. Treasury Department has determined for having a potential for either tax avoidance (the legal use and application of tax laws and cases in order to reduce the amount of tax due) or tax evasion

Question 7

Substantial Authority

Answer 7

A 33% to 50% likelihood a tax position will be upheld
An objective standard involving an analysis of the law and application of the law to relevant facts. It is less stringent than the more-likely-than-not standard

Question 8

Tax Return Preparer

Answer 8

Any person who prepares for compensation, or who employs one or more persons for compensation, any tax return required under the IRC or any claim for refund of tax imposed by the IRC

Question 9

Tax Practitioner

Answer 9

An attorney, CPA, enrolled agent, enrolled actuary, or enrolled retirement plan agent who practices before the IRS

Question 10

Tax Shelter

Answer 10

Any partnership or other entity, investment plan or arrangement, or other plan or arrangement if a significant purpose of such partnership, entity, plan, or arrangement is the avoidance or evasion of federal income tax

Question 11

Unreasonable Position

Answer 11

A position is deemed unreasonable unless
there is a substantial authority for the position
The position is disclosed and there is a reasonable basis for the position
With respect to a tax shelter transaction, it is reasonable to believe that the position would more likely than not be sustained on its merits

Question 12

Penalty for Understatement of Taxpayer Liability

Answer 12

A penalty equal to the greater of $1,000 or 50% of the income the preparer received for tax preparation services may be imposed on the preparer if
unreasonable position
Preparer had knowledge or should have known about the unreasonable position
Lacks reasonable basis

Question 13

Willful or Reckless Conduct

Answer 13

A willful attempt to understate the tax liability or

A reckless or intentional disregard for tax rules and regulations

Question 14

Penalty for Willful or Reckless Conduct

Answer 14

The preparer must pay a penalty equal to the greater of $5,000 or 50% of the income the preparer derived with respect to the tax return or refund claim

Question 15

Failure to Provide a Completed Copy of Tax Return

Answer 15

A tax preparer is required to provide the taxpayer (client) a copy of the tax return
$50 per failure

Question 16

Failure to Sign Tax Return or Refund Claim

Answer 16

$50 per failure

Question 17

Failure to Furnish the Tax Identification Number of the Tax Return Preparer

Answer 17

$50 for each failure

Question 18

Failure to Retain Records Properly

Answer 18

The tax preparer is required to keep, for the three years following the last day of the return period, either a copy of the return or claim or listing of the name and ID of each taxpayer