R5 Professional Resp 3 (W)

Question 1

Covered Opinion

Answer 1

Any written or electronic advice by a practitioner concerning one or more federal tax issues arising from
a listed transaction
any arrangement the principal purpose of which is federal tax avoidance or evasion
if the written advice is a reliance or marketed opinion

Question 2

Reliance Opinion

Answer 2

Written advice concluding at a confidence level of at least more likely than not (greater than 50%) likelihood that the significant federal tax issue would be resolved in the taxpayer’s favor

Question 3

Marketed Opinion

Answer 3

Advice that will be used to promote, market, or sell a partnership, investment plan, or arrangement. Does not included written advice that is not about
listed transactions
any arrangement the principal purpose of which is federal tax avoidance or evasion

Question 4

Requirements of a Covered Opinion

Answer 4

The practitioner’s opinion cannot be based upon unreasonable factual assumptions and/or factual representations
The opinion must related applicable laws to the facts
The opinion must set forth the likelihood that the taxpayer will prevail on the merits with respect to each significant federal tax issue.

Question 5

Covered Opinion Cannot Take into Account

Answer 5

The possibility that
a tax return will not be audited
an issue will not be raised on audit
an issue, if raised, will be resolved through settlement
If the opinion cannot be reached, it must state so

Question 6

Limited Scope Opinions

Answer 6

The opinion may consider less than all the significant federal tax issues if the practitioner and taxpayer agree that both the scope of the opinion and the taxpayer’s reliance on the opinion (for purposes of avoiding penalties) are limited to the issues addressed in the opinion

Question 7

Competence to Provide Opinion and Reliance on Opinions of Others

Answer 7

The practitioner must be knowledgeable in all aspects of federal tax law relevant to the opinion being rendered. The practitioner may reasonably rely on the opinion of another practitioner

Question 8

Requirements for Written Advice

Answer 8

A practitioner must not
bases the advice on unreasonable factual or legal assumptions
unreasonably relies upon statements or findings of others
does not consider all relevant facts
takes into account the possibility that a tax return will not be audited

Question 9

Sanctions of Circular 230

Answer 9

The Secretary of Treasury or their delegate, after conducting a preceding, may censure, suspend, or disbar any practitioner from practice before the IRS if the practitioner
is shown to be incompetent or disreputable
fails to comply with circular 230
with the intent to defraud, willing and knowingly mislead or threatens a client

Question 10

Incompetence and Disreputable Conduct

Answer 10

Being convicted of criminal offense

Not acting in good faith

Question 11

Role of State Board of Accountancy

Answer 11

Sole power to license

Disciplinary power

Question 12

Disciplinary Power of State Boards

Answer 12

Misconduct while performing accounting services (negligence, fraud, dishonesty)
Misconduct outside the scope of accounting services (intoxication, drugs) that significantly impairs the accountant's ability to perform accounting services
Criminal conviction (felony)

Question 13

Formal Disciplinary Hearing for State Board

Answer 13

After investigation of professional misconduct
The board must find it was more likely than not the accountant’s actions constituted professional misconduct. Proof beyond a reasonable doubt is not required
The accountant is entitled to due process of law
The adverse state board decisions are subject to judicial review

Question 14

Penalties from State Board

Answer 14

Suspension or revocation of license
Monetary fine
A reprimand or censure
Probation
CPE courses

Question 15

Joint Ethics Enforcement Program (JEEP)

Answer 15

Enforcement of codes of conduct by a means of a single investigation and action between the AICPA and 49 state societies