REG 3: Federal Tax Procedures

Question 1

What are the three federal trial courts that have original jurisdiction to hear tax disputes?

Answer 1

1. U.S. Tax Court
2. U.S. District Courts
3. U.S. Court of Federal Claims

Question 2

What probability of success would a tax shelter transaction have in order to not be subject to tax preparer penalties

Answer 2

Reportable transactions must have a more likely than not (>50%) chance of being sustained, and the activity must be disclosed.

Question 3

Every tax position is unreasonable unless:

Answer 3

1. There is substantial authority (≈40%) that the position will be sustained, OR
2. The position is disclosed and there is reasonable basis (≈20%) for the position

Question 4

Accuracy-related penalties are:

Answer 4

A 20% penalty for any tax underpayment relating to:
1. Negligence or disregard for tax rules or regulations
2. Any substantial understatement of income tax
3. Any substantial valuation misstatement for calculating taxes
4. Any substantial overstatement of pension liabilities
5. Any substantial estate or gift tax valuation understatement