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REG 2.0 > R6 - Other Entity Taxation, Professional Responsibilities, and Federal Tax Procedures > Flashcards

R6 - Other Entity Taxation, Professional Responsibilities, and Federal Tax Procedures Flashcards

1
Q

What are the unlimited exclusions to Gift Tax?

A
  1. Tuition pmts made directly to an ed institution.
  2. Med exp pmts made directly to an health care provider.
  3. Marital Deduction.
  4. Charity.
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2
Q

What are examples of future gifts?

A
  1. Reversions.
  2. Remainders.
  3. Accumulated trust income (complex trust).
  4. Present interest wo RAV.
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3
Q

What are examples of present gifts?

A
  1. Cash or property.
  2. Annual trust income (simple trust).
  3. Life estates (Lost Springs Ranch).
  4. Certain term estates.
  5. Unrestricted transfer of life insurance policies.
  6. Bonds or notes.
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4
Q

What in a incomplete gift?

A

When the gift can be revocable or conditional.

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5
Q

What is UBI?

A

Income that from an activity that constitutes trade or business, regularly carried, and not substantially related to the organization’s exempt purpose.

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6
Q

What are the 15 duties and restrictions to practice before the IRS?

A
  1. Provide info to the IRS.
  2. Advise clients of error or omissions.
  3. Prompt Disposition.
  4. Avoid conflict of interest with ex-IRS ppl.
  5. Return your clients records no matter what.
  6. Avoid conflict of interest OVERALL.
  7. Be competent.
  8. Use best practices.
  9. Due diligence.
  10. Don’t accept help from disbarred ppl.
  11. Don’t be your own client notary.
  12. Don’t charge crazy fees or contingent fees (contingent valid in certain situations).
  13. Don’t false advertise.
  14. Don’t endorse client’s refunds.
  15. Don’t practice law unless you’re a lawyer.
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7
Q

What is considered as best practices?

A
  1. Be clear about the engagement.
  2. Establish the facts and arrive at a conclusion.
  3. Explain the conclusion.
  4. Be fair and galleta integral.
  5. Make sure everyone is fair and galleta integral.
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8
Q

What are client records?

A

Things that were given to me or prepared by someone else.

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9
Q

What is negligence?

A
  • Not applying reasonable care.
  • Failing to keep good books and records or to substantiate items properly.
  • Not making reasonable inquiries if info seems incomplete.
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10
Q

What are the 2 TRP compliance penalties?

A
  1. Understatement of Tax Liability Due to a Unreasonable Position.
  2. Understatement of Tax Liability Due to Willful or Reckless Conduct.
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11
Q

What is the penalty of understatement of tax due to an unreasonable position?

A

Greater of $1,000 or 50% of CPA fee.

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12
Q

What is an unreasonable position?

A

A position that:

  • Does not have substantial authority
  • Does not have reasonable basis (if disclosed)
  • Involves a tax shelter or a reportable transaction.
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13
Q

When can the the penalty of understatement of tax due to an unreasonable position be imposed?

A
  1. No reasonable belief that the position would be sustainable on its own.
  2. TRP knew of the unreasonable position and filed return anyways.
  3. No disclosure of position.
  4. No reasonable basis.
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14
Q

What is the penalty of understatement of tax due to an willful or reckless conduct (negligence)?

A

Greater of $5,000 or 75% of CPA fee

(-) Unreasonable position penalty.

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15
Q

What is willful or reckless conduct?

A
  • Willful attempt to understate tax liability.
  • Reckless or intentional disregard of rules.
  • Negligence
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16
Q

What are the 7 TRP unethical behavior penalties?

A
  1. Not giving TP copies of their returns.
  2. Not signing returns.
  3. Not adding your PTIN.
  4. Not retain records.
  5. Not file correct information returns.
  6. Cash an IRS refund check that is not yours.
  7. Not perform due diligence on EIC eligibility.
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17
Q

What are the TRP penalties for Unethical behavior that equal $50 per instance to a max of $27K per year?

A
  1. Not giving TP copies of their returns.
  2. Not signing returns.
  3. Not adding your PTIN.
  4. Not retain records.
  5. Not file correct information returns.
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18
Q

What are the TRP penalties for Unethical behavior that equal $545 per instance?

A
  1. Cash an IRS refund check that is not yours.

7. Not perform due diligence on EIC eligibility.

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19
Q

What are other TRP penalties?

A
  1. Aiding and Abetting Understatement of Tax Liability

2. Wrongful Disclosure and/ or Use of Tax Return Information

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20
Q

What are the characteristics of the Aiding and Abetting Understatement of Tax Liability penalty?

A
  • Civil penalty.
  • Applies to any person, not just TRPs.
  • IRS has the burden of proof to establish if you are liable for this penalty.
  • Applies with or without knowledge of understatement.
  • TP would have burden of proof by a preponderance of the evidence if matter is civil.
  • Government has the burden of proof beyond reasonable doubt if matter is criminal.
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21
Q

What is the Aiding and Abetting Understatement of Tax Liability penalty?

A

$1,000 per individual / $10,000 per corporation

22
Q

What are the characteristics of the Wrongful Disclosure and/ or Use of Tax Return Information penalty?

A
  • Using information for everything but for preparing tax returns.
23
Q

What is the Aiding and Wrongful Disclosure and/ or Use of Tax Return Information penalty?

A

$250 per disclosure / Max of $10,000 per year.

24
Q

What are the exceptions to the Wrongful Disclosure and/ or Use of Tax Return Information penalty?

A
  • Court orders.
  • SALT returns.
  • Peer reviews and admin orders.
25
Q

What are the 3 broad categories of misconduct per State Boards?

A
  1. Misconduct while preparing accounting services (negligence).
  2. Misconduct outside the scope of accounting services (don’t drink and drive).
  3. Criminal conviction (felony, not file tax returns).
26
Q

What are the five penalties that the State Board can impose?

A
  1. Suspension or revocation of license.
  2. Monetary fine.
  3. Reprimand or censure.
  4. Probation.
  5. CPE.
27
Q

When can the AICPA and State CPA societies terminate your membership without a hearing?

A
  1. Proof of conviction of a crime punishable by imprisonment for more than one year.
  2. Proof of conviction for willful failure to file any income tax return.
  3. Proof of conviction for filing a false or fraudulent income tax return or aiding in the preparation of a false or fraudulent income tax return of a client.
  4. Suspension or revocation of a member’ s license to practice public accounting as a disciplinary measure by a government authority.
28
Q

What are the 8 taxpayer penalties?

A
  1. EIC penalty.
  2. Not enough 1040ES pmts.
  3. F2F penalty.
  4. F2P penalty.
  5. Negligence penalty.
  6. Substantial understatement penalty.
  7. Substantial valuation penalty.
  8. Fraud penalty.
29
Q

What are the accuracy-related penalties?

A
  1. Negligence penalty.

6. Substantial understatement penalty.

30
Q

What is the TP negligence penalty?

A

Penalty applied for negligence or disregard of the tax rules.
Negligence = Failure to make a reasonable attempt to comply with the IRC.
Disregard = Careless, reckless or intentional disregard.

31
Q

What is the penalty than can be considered either civil or criminal?

A
  1. Fraud penalty.
32
Q

What are the trial courts?

A
  1. U.S Tax Court (UTC) (Pipi)
  2. U.S. District Court (UDC) (Bogota DC)
  3. U.S. Court of Federal Claims (UFC) (Richi, located in Washington DC)
33
Q

Which is the court where you can fight your case and not have to pay in advance?

A
  1. U.S Tax Court (UTC) (Pipi)
34
Q

What is the court where a jury trial is available?

A
  1. U.S. District Court (UDC) (Washington)
35
Q

What are the general avoidance of penalties?

A
  1. Reasonable basis.
  2. Good faith.
  3. Not have willful neglect.
36
Q

What does the 90-day letter say?

A

You have 90 days to file a petition with the US Tax Court (pipi court)

37
Q

What are the characteristics of the small cases division court?

A
  • Part of the pipi court (UTC).
  • Hears cases of less than $50K.
  • Decision is final.
  • Decision can’t be used to support other cases.
38
Q

What are the 4 elements of negligence?

A
  1. Duty of care.
  2. Breach duty of care.
  3. Breach caused injury
  4. Damages
39
Q

What are the 5 elements of fraud (intentional misrepresentation)?

A
  1. Misrepresentation of material fact.
  2. Intent to deceive. (Scienter).
  3. Actual justifiable reliance on the misrepresentation.
  4. Intent to induce plaintiff’s reliance on the misrepresentation.
  5. Damages.
40
Q

What is privity?

A

Related to breach of contracts.

Means only one party can sue.

41
Q

What is the difference between negligence and gross neglicence?

A

Negligence requires breach of duty to exercise due care, and gross negligence is related to constructive fraud.

42
Q

What are the 5 elements of constructive fraud (gross negligence)?

A
  1. Misrepresentation of material fact.
  2. Act recklessly.
  3. Actual justifiable reliance on the misrepresentation.
  4. Intent to induce plaintiff’s reliance on the misrepresentation.
  5. Damages.
43
Q

What are money damages?

A

Compensation for when a contract is breached.

44
Q

What does the Ultramares decision say?

A

Ultramares limits my liability for negligence to:

  1. Parties in privity.
  2. 3rd party beneficiaries.
45
Q

What is the restatement rule?

A

If I am negligent, I am liable to my client and a other ppl relying on the audit.

46
Q

What is the US supreme court?

A
  • Highest court in the US.
  • Located in Washington D.C.
  • Has a panel of 9 judges, no jury.
  • Very rare that a case gets here.
47
Q

What is the UTC (pipi) court?

A
  • Specialized court that only hears federal tax cases.
  • Located nationwide.
  • Covers the small cases division.
  • No payment required to fight case.
  • One judge, no jury.
  • Two decisions: Regular (new, unsual law) or Memorandum (application of existing law).
48
Q

What is the UDC (Bogota) court?

A
  • General courts; receives not only tax cases.
  • Located amongst nation, ea/ assigned a specific area.
  • Payment required to fight case.
  • One judge, no jury. Jury can be requested.
49
Q

What is the UFC (Richi) court?

A
  • Sees claims over money damages to US gov (tax refunds).
  • Located in Washington D.C.
  • Payment required to fight case.
  • 16 judges, no jury.
50
Q

What is the Court of Appeals (Banana court)?

A

Where you appeal UTC (Pipi) and UDC cases (Bogota).

51
Q

What is the US Circuit Court of Appeals (Radio Banana court)?

A

Where you appeal UFC (Richi) cases.

REG 2.0 (11 decks)

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