Multiple Choice Questions

1. Which of the following applies to a taxpayer who, in an act of charity to the federal government, does not take material deductions that she is entitled to take on her federal income tax?

a. Is acting as a good citizen.

b. Is subject to a civil penalty that depends on the amount of taxes overpaid.

The taxpayer might be subject to civil penalty but the penalty wouldn’t be based on the amount of taxes overpaid.

c. Is subject to criminal prosecution.

d. None of these.

2. Which of the following states that any person who aids, assists, procures, counsels, or advises the preparation or presentation of any matter arising under the internal revenue laws related to a return, affidavit, claim, or other document that is fraudulent or false as to any material matter can be fined not more than $100,000 (now $250,000 per 18 USC § 3571) in the case of individuals ($500,000 in the case of a corporation), imprisonment of not more than three years, or both, as well as the costs of prosecution?

a. IRC § 7206(1).

b. IRC § 7206(2).

c. IRC § 7206(3).

d. None of these.

3. What is the maximum penalty for a taxpayer and paid tax preparer who work together to falsely claim a refund on the taxpayer’s federal tax return?

a. Up to 1 year in prison for each person plus fines.

b. Up to 5 years in prison for each person plus fines.

c. At least 10 years in prison for each person plus fines.

d. None of these.

4. Failure to file a return is prima facie evidence of which of the following?

a. Negligence.

b. Consciousness of guilt.

c. Criminal intent when it happens two years in a row.

d. None of these.

5. What is the statute of limitation applying to civil fraud and tax returns?

a. 1 year.

b. 3 years.

c. 6 years.

d. There is none.