Income Tax Compliance, Management And Procedure

Front 1

Explain the sources of tax law and authority

Back 1

Treasury dept reg=interpretations of the irc
Internal Revenue Bulletin=announces official rulings and producures of the irs
Revenue Rulings=Issued by irs to deal with problems not in tax code
Private letter ruling (PLR)=done at request of tp

Front 2

What are the five tax doctrines?

Back 2

1)BUSINESS PURPOSE=a xaction willll not be effective for tax purposes unless it is intended to achieve a genuine business purpose other than tax avoidance
2)SUBSTANCE OVER FORM=allows irs to look through the legal formalities to itsa actual economic substance
3)STEP TRANSACTION=allows IRS to collapse a series of apparently unrelated transactions into only one transaction to determine the tax consequences
4)ASSIGNMENT OF INCOME DOCTRINE-fruit of the tree--the tp who actually earns the income will be taxed on that income
5)TAX BENEFIT RULE=results in taxability of subsequent receipts, because of the tax benefit) that would otherwise nontaxable. Ex med benefits deducted in one year with receipts coming in subsequent year

Front 3

What are the three factors used to determine whether an income tax is required to be filed:

Back 3

Age, gross income and filing status

Front 4

Explain the most common IRS penalties

Back 4

Failure to file at 5% per month up to 25% Minimum is $135
The failure to pay is .5% per month up to 25% max. If both FTF and FTP are assessed, the FTF penalty is reduced by the FTP

Front 5

Explain other IRS penalties

Back 5

Criminal fraud=court determined fines or prison
Civil fraud=75% of tax underpayment attributable to fraud
Negligence=20%
Frivolous=$5K

Front 6

What are the three tests for innocent spouse relief?

Back 6

1) tp must have filed a joint return;; 2)tp did not know and had no reason to know that return underreported; 3)electing spouse received any substantial benefit or later was divorced, separated or desserted by other spouse

Front 7

What is DIF (discriminant Inventory Function

Back 7

A computerized system that scores individual tax returns. Returns with high scores are more likely to have significant understatements of tax liability.

Front 8

What is an Revenue procedures

Back 8

explains internal management practices and procedures of IRS

Front 9

What are the 3 types of letter rulings?

Back 9

Private-for tp; Determination letter-issued by area district director in response to a tp request; technical advice memo-a ruling from the irs national office usually prompted by a request from an agent performing an audit

Front 10

What case are handled by us tax court

Back 10

No jury trials. tp does not have to pay the deficiency b4 trial. The small case division of the us tax court decides cased in which amount in dispute does not exceed $50K and there is no appeal

Front 11

What cases does appellate courts handle

Back 11

11 geographical courts. Not required to follow the decision of a court of appeals in another jurisdiction. all courts must follow decisions of the supreme court. Infrequently hears tax cases. Major cases are usually settled in appellate or lower courts

Front 12

What are research sources of tax law

Back 12

Research Institute of America, Commerce Clearing House, Bureau of National Affairs,

Front 13

What is constructive receipt

Back 13

A tax doctrine or rule wherein if there is no substantial limitation on tps right to bring the funds under personal control, the income is taxed to tp as though it had actually been received.

Front 14

What is the best source for fresh off the press changes in tax law

Back 14

Congressional committee reports

Front 15

If the basis of the building is zero and the property cost includes land, how is the basis computed

Back 15

Add back the land

Front 16

Is depreciation on loss property recaptured

Back 16

No usually treated as section 1231 loss( if business b4AGI other from AGI)