Federal Tax Research, Ninth Edition
AN INTRODUCTION TO TAX PRACTICE AND ETHICS
TEST BANK, Chapter 1
Multiple Choice
Choose the best answer for each of the following questions:
1. Tax compliance is the process of:
a. filing necessary tax returns
b. gathering the financial information necessary to report
taxable income
c. representing a taxpayer at an IRS audit
d. all of the above
2. Tax evasion is:
a. a fraudulent act involving illegal nonpayment of taxes
b. one of the objectives of tax planning
c. an act of deferring tax payments to future periods
d. the same as tax avoidance as both of them result in
nonpayment of taxes
3. Tax litigation is a process of:
a. participating in an administrative audit
b. settling tax-related disputes in a court of law
c. filing amended tax returns as prescribed by tax laws
d. arranging a taxpayer’s affairs to minimize tax liabilities
4. Regarding open transactions, which of the following statements is
INCORRECT?
a. the transaction is not yet completed
b. the practitioner can suggest changes to achieve a better tax
result
c. a tax practitioner has some degree of control over the
client’s tax liability
d. the practitioner can fix the problem by amending the
client’s tax return
,5. Which of the following statements best describes Circular 230?
a. Circular 230 has been adopted by the AICPA as its set of
rules of practice for CPAs.
b. Circular 230 is a set of Treasury Department ethical and
legal standards for those engaging in practice before the
IRS.
c. Circular 230 is a set of internal rules at the IRS designed
to protect tax practitioners from unfair discipline by the
IRS.
d. Circular 230 is a set of ethical rules for taxpayers.
6. Who can represent a taxpayer before the IRS Appeals Office under
Circular 230?
a. A CPA
b. An officer of a corporation may represent the corporation
c. An attorney
d. All of the above
e. Only a and c
7. In a closed transaction, the scope of tax planning is:
a. more limited as compared to an open transaction
b. limited by the IRS rules of practice
c. limited to presenting the taxpayer’s facts to the government
in the most favorable, legal manner
d. Only a and c
8. Circular 230 includes rules on all of the following topics EXCEPT:
a. who is authorized to practice before the IRS
b. standards for “covered opinions”
c. compliance with state ethical requirements
d. a set of best practices to guide practitioners
,9. Standards for Tax Services (SSTS) contain advisory guidelines for:
a. CPAs
b. enrolled agents
c. attorneys
d. IRS authorities
e. All of the above
10. An EA must renew his or her enrollment card on a:
a. 5-year cycle
b. 3-year cycle
c. 2-year cycle
d. Renewal is not required once an EA gets a card
11. An unenrolled tax return preparer can make an appearance as the
taxpayer’s representative only before the:
a. Examination Division of the IRS
b. Appeals and Collection Division of the IRS
c. SB/SE Division of the IRS
d. Criminal Investigation Division of the IRS
12. Due diligence, in essence, means a tax practitioner:
a. must be efficient in performing his duties
b. must give due respect to IRS officials
c. should use reasonable effort to comply with the tax laws
d. should charge reasonable fees for work performed for a
client
13. A contingent fee is:
a. always allowed by Circular 230
b. a fee that is out of line with the value of the service
provided
c. a fee based on a percentage of a taxpayer’s refund on a
tax return
d. all of the above
, 14. According to Circular 230, the “best practices” rules are:
a. mandatory for all tax practitioners
b. restricted only to attorneys and CPAs
c. aspirational, to act as goals for tax practitioners
d. enforced by disbarment from practice before the IRS
15. According to Rule 101 of the AICPA Rules of Professional
Conduct, a CPA in public practice must:
a. comply with Circular 230
b. disclose any conflict of interest with another client
c. keep client information confidential
d. be independent of his or her clients
16. Under AICPA Rule 502, which of the following actions would
constitute deceptive advertising?
a. advertising too frequently
b. implying that the CPA had the ability to influence an
IRS official
c. promising a favorable result without justification
d. Only b and c
17.
Under Statements on Standards for Tax Services No. 3, (SSTS No.
3) a CPA preparing a tax return should perform all of the actions
EXCEPT:
a. independently confirm the accuracy of the taxpayer’s
information
b. obtain additional information if the taxpayer’s information
appears to be incorrect or incomplete
c. review the prior year’s return when feasible
d. determine when conditions for a deduction have been met
AN INTRODUCTION TO TAX PRACTICE AND ETHICS
TEST BANK, Chapter 1
Multiple Choice
Choose the best answer for each of the following questions:
1. Tax compliance is the process of:
a. filing necessary tax returns
b. gathering the financial information necessary to report
taxable income
c. representing a taxpayer at an IRS audit
d. all of the above
2. Tax evasion is:
a. a fraudulent act involving illegal nonpayment of taxes
b. one of the objectives of tax planning
c. an act of deferring tax payments to future periods
d. the same as tax avoidance as both of them result in
nonpayment of taxes
3. Tax litigation is a process of:
a. participating in an administrative audit
b. settling tax-related disputes in a court of law
c. filing amended tax returns as prescribed by tax laws
d. arranging a taxpayer’s affairs to minimize tax liabilities
4. Regarding open transactions, which of the following statements is
INCORRECT?
a. the transaction is not yet completed
b. the practitioner can suggest changes to achieve a better tax
result
c. a tax practitioner has some degree of control over the
client’s tax liability
d. the practitioner can fix the problem by amending the
client’s tax return
,5. Which of the following statements best describes Circular 230?
a. Circular 230 has been adopted by the AICPA as its set of
rules of practice for CPAs.
b. Circular 230 is a set of Treasury Department ethical and
legal standards for those engaging in practice before the
IRS.
c. Circular 230 is a set of internal rules at the IRS designed
to protect tax practitioners from unfair discipline by the
IRS.
d. Circular 230 is a set of ethical rules for taxpayers.
6. Who can represent a taxpayer before the IRS Appeals Office under
Circular 230?
a. A CPA
b. An officer of a corporation may represent the corporation
c. An attorney
d. All of the above
e. Only a and c
7. In a closed transaction, the scope of tax planning is:
a. more limited as compared to an open transaction
b. limited by the IRS rules of practice
c. limited to presenting the taxpayer’s facts to the government
in the most favorable, legal manner
d. Only a and c
8. Circular 230 includes rules on all of the following topics EXCEPT:
a. who is authorized to practice before the IRS
b. standards for “covered opinions”
c. compliance with state ethical requirements
d. a set of best practices to guide practitioners
,9. Standards for Tax Services (SSTS) contain advisory guidelines for:
a. CPAs
b. enrolled agents
c. attorneys
d. IRS authorities
e. All of the above
10. An EA must renew his or her enrollment card on a:
a. 5-year cycle
b. 3-year cycle
c. 2-year cycle
d. Renewal is not required once an EA gets a card
11. An unenrolled tax return preparer can make an appearance as the
taxpayer’s representative only before the:
a. Examination Division of the IRS
b. Appeals and Collection Division of the IRS
c. SB/SE Division of the IRS
d. Criminal Investigation Division of the IRS
12. Due diligence, in essence, means a tax practitioner:
a. must be efficient in performing his duties
b. must give due respect to IRS officials
c. should use reasonable effort to comply with the tax laws
d. should charge reasonable fees for work performed for a
client
13. A contingent fee is:
a. always allowed by Circular 230
b. a fee that is out of line with the value of the service
provided
c. a fee based on a percentage of a taxpayer’s refund on a
tax return
d. all of the above
, 14. According to Circular 230, the “best practices” rules are:
a. mandatory for all tax practitioners
b. restricted only to attorneys and CPAs
c. aspirational, to act as goals for tax practitioners
d. enforced by disbarment from practice before the IRS
15. According to Rule 101 of the AICPA Rules of Professional
Conduct, a CPA in public practice must:
a. comply with Circular 230
b. disclose any conflict of interest with another client
c. keep client information confidential
d. be independent of his or her clients
16. Under AICPA Rule 502, which of the following actions would
constitute deceptive advertising?
a. advertising too frequently
b. implying that the CPA had the ability to influence an
IRS official
c. promising a favorable result without justification
d. Only b and c
17.
Under Statements on Standards for Tax Services No. 3, (SSTS No.
3) a CPA preparing a tax return should perform all of the actions
EXCEPT:
a. independently confirm the accuracy of the taxpayer’s
information
b. obtain additional information if the taxpayer’s information
appears to be incorrect or incomplete
c. review the prior year’s return when feasible
d. determine when conditions for a deduction have been met
