QUESTION 9

1. On April 15, 2018, the taxpayer filed its Form 1120, U.S. Corporation Income Tax Return, for the 2017 taxable year. On this Form 1120, the taxpayer reported gross income of $1,000,000 but did not report $400,000 it received from its foreign affiliate. However, on the Form 1120 it disclosed the omitted income and explained that the $400,000 was a return of capital and not gross income. When does the statute of limitations for examining taxpayers 2017 taxable year?

   	a.	April 15, 2021.
   	b.	April 15, 2024.
   	c.	April 15, 2023.
   	d.	April 15, 2022.
   	e.	None of the above.

3.4 points

QUESTION 10

1. You are a RO in SBSE. On the office printer you found a draft letter dated February 25, 2021 from your boss, Mr. Bond, to Mr. Zen stating, "thanks for the money, let's do it again sometime." For the past two years, you have attempted to collect Mr. Zen's outstanding tax liability. On March 1, 2021, Mr. Bond ordered you to close Mr. Zen's case and prohibited you from taking any collection action against Mr. Zen. You believe that Mr. Bond is taking bribes from Mr. Zen. Question: who should you contact to report your suspicions?

   	a.	TIGTA.
   	b.	The Whistle Blower office.
   	c.	A Special Agent in CI.
   	d.	SBSE upper management.
   	e.	The local police.

3.4 points

QUESTION 11

1. LB&I has been auditing Big Corps 20XX and 20YY taxable years. Big Corp wants to resolve all the outstanding issues its 20XX and 20YY taxable years with the IRS as soon as possible. The audit of Big Corps 20XX and 20YY taxable years is almost complete. The LB&I audit team understands that Big Corp has good arguments in response to some of the adjustments LB&I will propose but believes Big Corp has greater risks if the case went to court. LB&I is reluctant to settle the outstanding audit issues because of a view that the audit function should not settle issues based upon an audit teams view of the hazard of litigation. What process would you suggest Big Corp and LB&I engage in to resolve the unagreed issues resulting from the audit of Big Corps 20XX and 20YY taxable years?

   	a.	You would suggest Big Corp and LB&I engage in fast-track mediation before the subject matter experts in the Office of Chief Counsels National Office.
   	b.	You would suggest that Big Corp and LB&I engage in fast track mediation before the Independent Office of Appeals.
   	c.	You would suggest the Big Corp apply for LB&Is pre-filing program.
   	d.	There is no process. You would suggest LB&I propose adjustments and let Big Corp take any action it sees fit.
   	e.	You would suggest LB&I attempt settle any unagreed issues and find a high-level IRS executive who will execute a closing agreement to finalize any settlement.

3.4 points

QUESTION 12

1. Revenue Ruling 1966-61A addresses the treatment of certain expenses related to foreign sales of electrical equipment. IRS attorney Roy is assigned to the Tax Court case entitled Computer Equipment Inc. v. Commissioner. The only issue in the case involves the disallowance of $500,000 in deductions related to Computer Equipment Inc.'s foreign sales of electrical equipment. Under Revenue Ruling 1966-61A, Computer Equipment Inc. is allowed to claim the deductions at issue. Attorney Roy acknowledges that the deductions are allowable under the revenue ruling but believes that Revenue Ruling 1966-61A is clearly incorrect. Attorney Roy is likely correct that Revenue Ruling 1966-61A is wrong, and most tax commentators have urged the IRS to revoke the revenue ruling. However, the IRS has taken no action, and Revenue Ruling 1966-61A is still in effect. Question: will the Tax Court permit IRS to argue that Revenue Ruling 1966-61A is incorrect and therefore, is not authority to support Computer Equipment Inc.'s entitlement to the deductions at issue?

   	a.	Yes, the Tax Court will never allow a taxpayer to get a deduction pursuant to an incorrectly decided Revenue Ruling.
   	b.	There is not enough information to answer the question.
   	c.	No, the Tax Court is bound by all Revenue Ruling correct or not.
   	d.	No, Computer Equipment Inc. can rely on the fact that the IRM prohibits the IRS from arguing against a Revenue Ruling.
   	e.	No, the Tax Court will not allow the IRS to argue against a Revenue Ruling.

3.4 points

QUESTION 13

1. The following events occurred in connection with XYZ Corp:

   • XYZ Corp timely filed its Form 1120, U.S. Corporation Income Tax Return, for the 20XX taxable year. On this Form 1120, XYZ Corp reported an income tax liability of $10,300,000, which the IRS assessed.
   • XYZ Corp filed a claim for refund for the 20XX taxable year in the amount of $600,000 on a Form 1120X, Amended U.S. Corporation Income Tax Return. The IRS allowed $400,000 of the $600,000 refund claimed, and the Department of Treasury electronically deposited the $400,000 in XYZ Corps bank account.
   • XYZ Corp agreed to a $1,600,000 deficiency assessment of income tax for the 20XX taxable year by executing a Form 870, Waiver of Restrictions on Assessment and Collection of Deficiency in Tax and Acceptance of Overassessment. The IRS assessed the additional $1,600,000.
   • The IRS caused the Department of Treasury to issue an erroneous $200,000 refund to XYZ Corp. This refund resulted from an IRS employee inputting the incorrect taxpayer identification number ("TIN") into the payment system. The refund should have been issued to an unrelated corporation having a similar TIN and name to that of XYZ Corp.

   In a subsequent audit, the IRS determined that XYZ Corps correct income tax liability for the 20XX is $17,000,000. Based upon this determination the IRS will issue an SND to XYZ Corp for the 20XX taxable year. Question: what will be the deficiency in XYZ Corp's 20XX income tax as determined in the SND?

   	a.	$5,800,000.
   	b.	$5,500,000.
   	c.	$5,700,000.
   	d.	$6,100,000.
   	e.	None of the above.

3.4 points

QUESTION 14

1. Lori filed her Form 1040, U.S. Individual Income Tax Return, for the 2018 taxable year on April 15, 2019. Although there were mistakes on the return, there was no fraud or omission of any income. One mistake on the Form 1040 was that Lori overstated her claimed deductions by over 30 percent. The RA assigned to Lori's case considers this a substantial overstatement of deductions. Lori did not disclose these overstated deductions. On April 17, 2021, the IRS commenced an audit of Loris 2018 taxable year. On May 6, 2022, Lori and the IRS executed a Form 872, in which she agreed to extend the statute of limitations on the assessment of her 2018 income tax until January 10, 2024. Lori did not sign any other documents related to her 2018 taxable year. Question: if the IRS does not issue a SND, when does the statute of limitations on assessment of Lori's 2018 income tax liability expire?

   	a.	April 15, 2022.
   	b.	January 10, 2024.
   	c.	May 6, 2022.
   	d.	April 15, 2024. The six-year statute of limitations applies, and the Form 872 cannot shorten the existing statute of limitations on assessment.
   	e.	Six months after May 6, 2022.

3.4 points

QUESTION 15

1. RA Mike determines that XYZ, Inc. is potentially liable for the negligence penalty for tax benefits it claimed from an abusive listed transaction that has become known as the Son of Hog transaction. Attorney Big advised XYZ, Inc. on all aspects of the Son of Hog transaction. RA Mike discusses the Son of Hog transaction with XYZ Inc.s Tax Director, Mr. VP. During the conversation, RA Mike raises the prospect of asserting the negligence penalty against XYZ, Inc. In response, Mr. VP advises RA Mike that XYZ, Inc. is not providing any more documents to the IRS.

   RA Mike serves a third-party summons on Attorney Big. Besides Attorney Big, the only other person or entity named in the summons is XYZ Inc. The summons requests that Attorney Big provide the transactional documents and any legal opinion related to XYZ Inc.s participation in the Son of Hog transaction. RA Mike does not provide any notice about this summons to XYZ, Inc. RA Mike is hoping that Mr. VP will never find out about the summons. No privilege applies to the summonsed material by application of the crime-fraud exception to the attorney-client privilege. Question: should the Office of Chief Counsel refer the summons issued to Attorney Big to the Department of Justice for enforcement?

   	a.	Yes, because the I.R.C.s notice requirements do not apply when a taxpayer has invested in a listed transaction.
   	b.	No, RAs cannot issue third party summons during civil audits. Third-party summonses are only used by ROs in collection investigations.
   	c.	Yes, the summons meets all four prongs of the Powell test.
   	d.	No, the summons fails one of the prongs of the Powell test.
   	e.	None of the above.

3.4 points

QUESTION 16

1. On October 11, 2014, Roland mailed his Form 1040, U.S. Individual Income Tax Return, for the 2013 taxable year to the IRS. The USPS affixed an October 13, 2014 postmark on the envelope containing Roland's 2013 Form 1040. The IRS received Roland's 2013 Form 1040 on October 17, 2014. On his Form 1040 for the 2013 taxable year Roland reported the following items:

   Wages $90,000

   Dividends $ 4,000

   Interest $ 1,000

   Schedule A expenses ($50,000)

   Fees from consulting business $ 25,000

   Expenses from consulting business ($28,000)

   The IRS commenced an audit of Rolands 2013 Form 1040. Because Roland overstated his claimed Schedule A deductions by only 15 percent, the RA assigned to the case determined that Roland did not substantially overstate his claimed Schedule A deductions. Furthermore, the RA tentatively determined that Roland did not substantially overstate his claimed consulting business expenses. On his 2013 Form 1040, Roland forgot to include the $40,000 of gross income he received from XYZ during 2013. There was no fraud on Roland's part. He does not recall receiving a Form 1099 from XYZ and he did not make any disclosures with respect to the unreported income on his 2013 Form 1040.

   Roland and the IRS executed a Form 872, Consent to Extend the Time to Assess Tax, in which Roland agreed to extend the statute of limitations on the assessment of his 2013 income tax liability to October 8, 2018. On August 7, 2020, the IRS issued a SND (for the 2013 taxable year) to Roland's last known address in Austin, Texas. Roland did not file a Tax Court Petition in response to the SND. Question: when did the statute of limitations on the assessment of a deficiency in Rolands 2013 income tax liability expire?

   	a.	October 8, 2018.
   	b.	October 13, 2020.
   	c.	March 16, 2021.
   	d.	March 12, 2021.