REG Module 1 (TAX) Exam Questions
with Complete Solutions
Under which of the following scenarios will Jenny be in trouble under Section 6713's
confidentiality provisions? - Answer-When she sells a celebrity client's confidential
tax information to a tabloid newspaper.
CPA Monrew induced several rich tax clients to invest in a domesticated beaver tax
shelter device. When the IRS sought to audit one of Monrew's clients, he realized
that among other difficulties, he had not had the client sign proper documentation.
While an IRS agent sat in the waiting room of one of his clients, Monrew slipped in a
back door and had the client sign a backdated document. When the government
discovered all this, Monrew was indicted for tax fraud in violation of Section 7206.
Which of the following is true? - Answer-Monrew is probably guilty.
Louis, the volunteer treasurer of a nonprofit organization and a member of its board
of directors, compiles the data and fills out its annual Form 990, Return of
Organization Exempt from Income Tax. Under the Internal Revenue Code, Louis is
not considered a tax return preparer because: - Answer-He is not compensated.
Tax return preparers can be subject to penalties under the Internal Revenue Code
for failure to do any of the following except - Answer-Disclose a conflict of interest.
Which of the following statements is correct concerning a penalty for a tax return
preparer who understates a taxpayer's liability? - Answer-No penalty is imposed if it
is shown that there is reasonable cause for the understatement and the tax return
preparer acted in good faith.
Which agency is responsible for determining the continuing professional education
requirements for licensed CPAs? - Answer-The board of accountancy for the state in
which the licensed CPA practices
To whom must a CPA pay license fees in order to maintain a CPA license? -
Answer-The state board of accountancy of the CPA's state of licensure
When an ethics complaint carrying national implications arises, which entity typically
handles it? - Answer-AICPA.
What is JEEP? - Answer-Joint Ethics Enforcement Program
CPA Smithers has had some professional difficulties. Which of the following is true?
- Answer-If the state board of accountancy revokes Smithers' CPA license, s/he will
be automatically expulsed from the AICPA.
Which of the following can grant a CPA license? - Answer-Which of the following can
grant a CPA license?
, Cherokee wants to know which of the following is a requirement to earn a CPA
license: - Answer-All of the above
Iola has had a few serious professional problems. Which of the following will
probably cause a state board of accountancy to revoke her license or order a lesser
punishment? - Answer-All of the above.
Failing to complete required continuing professional education.
Failing to pay her own income tax.
Violating professional standards.
Which of the following bodies ordinarily would have the authority to suspend or
revoke a CPA's license to practice public accounting? - Answer-A state board of
accountancy.
Regarding the standards for substantiation of tax positions, in which of the following
answers is the proper standard matched with the appropriate numerical value? -
Answer-Substantial authority = 40%.
For taxpayers who are trying to get things right when facing difficult tax questions,
what two key words should they keep in mind? - Answer-Reasonable cause and
good faith
Which of the following is an accurate statement regarding the rules for substantiation
of federal income tax positions? - Answer-Failure to keep adequate books and
records can lead to accuracy-related penalties.
Taxpayer Clegg would certainly like to take a particular deduction that is barred by
an IRS regulation. However, after considerable research Clegg's tax attorney
believes that there is a one-third chance that a court would overturn the regulation as
invalidly promulgated by the IRS. What should Clegg do? - Answer-Take the
deduction, but disclose it.
Fitely hired a tax accountant whom his attorney recommended. The accountant,
Tilder, recommended that Fitely take a particular tax position that resulted in an
understatement of taxes and the IRS is now seeking to penalize Fitely. In order to
establish a good faith defense against the 20% understatement penalty, which of the
following does Fitely need to establish: - Answer-All of the above.
That Tilder was a competent professional.
That Fitely gave Tilder all necessary and accurate information.
That Fitely actually relied in good faith on Tilder's judgment.
Which of the following burdens of proof must be met when a disclosed position
regarding a particular individual deduction is evaluated to determine whether it was
taken in good faith. - Answer-≥ 20% chance of being sustained
The disclosure of a tax return position will reduce or eliminate an accuracy-related
penalty on the taxpayer in which of the following circumstances? - Answer-The
position does not concern a tax shelter and has a reasonable basis
with Complete Solutions
Under which of the following scenarios will Jenny be in trouble under Section 6713's
confidentiality provisions? - Answer-When she sells a celebrity client's confidential
tax information to a tabloid newspaper.
CPA Monrew induced several rich tax clients to invest in a domesticated beaver tax
shelter device. When the IRS sought to audit one of Monrew's clients, he realized
that among other difficulties, he had not had the client sign proper documentation.
While an IRS agent sat in the waiting room of one of his clients, Monrew slipped in a
back door and had the client sign a backdated document. When the government
discovered all this, Monrew was indicted for tax fraud in violation of Section 7206.
Which of the following is true? - Answer-Monrew is probably guilty.
Louis, the volunteer treasurer of a nonprofit organization and a member of its board
of directors, compiles the data and fills out its annual Form 990, Return of
Organization Exempt from Income Tax. Under the Internal Revenue Code, Louis is
not considered a tax return preparer because: - Answer-He is not compensated.
Tax return preparers can be subject to penalties under the Internal Revenue Code
for failure to do any of the following except - Answer-Disclose a conflict of interest.
Which of the following statements is correct concerning a penalty for a tax return
preparer who understates a taxpayer's liability? - Answer-No penalty is imposed if it
is shown that there is reasonable cause for the understatement and the tax return
preparer acted in good faith.
Which agency is responsible for determining the continuing professional education
requirements for licensed CPAs? - Answer-The board of accountancy for the state in
which the licensed CPA practices
To whom must a CPA pay license fees in order to maintain a CPA license? -
Answer-The state board of accountancy of the CPA's state of licensure
When an ethics complaint carrying national implications arises, which entity typically
handles it? - Answer-AICPA.
What is JEEP? - Answer-Joint Ethics Enforcement Program
CPA Smithers has had some professional difficulties. Which of the following is true?
- Answer-If the state board of accountancy revokes Smithers' CPA license, s/he will
be automatically expulsed from the AICPA.
Which of the following can grant a CPA license? - Answer-Which of the following can
grant a CPA license?
, Cherokee wants to know which of the following is a requirement to earn a CPA
license: - Answer-All of the above
Iola has had a few serious professional problems. Which of the following will
probably cause a state board of accountancy to revoke her license or order a lesser
punishment? - Answer-All of the above.
Failing to complete required continuing professional education.
Failing to pay her own income tax.
Violating professional standards.
Which of the following bodies ordinarily would have the authority to suspend or
revoke a CPA's license to practice public accounting? - Answer-A state board of
accountancy.
Regarding the standards for substantiation of tax positions, in which of the following
answers is the proper standard matched with the appropriate numerical value? -
Answer-Substantial authority = 40%.
For taxpayers who are trying to get things right when facing difficult tax questions,
what two key words should they keep in mind? - Answer-Reasonable cause and
good faith
Which of the following is an accurate statement regarding the rules for substantiation
of federal income tax positions? - Answer-Failure to keep adequate books and
records can lead to accuracy-related penalties.
Taxpayer Clegg would certainly like to take a particular deduction that is barred by
an IRS regulation. However, after considerable research Clegg's tax attorney
believes that there is a one-third chance that a court would overturn the regulation as
invalidly promulgated by the IRS. What should Clegg do? - Answer-Take the
deduction, but disclose it.
Fitely hired a tax accountant whom his attorney recommended. The accountant,
Tilder, recommended that Fitely take a particular tax position that resulted in an
understatement of taxes and the IRS is now seeking to penalize Fitely. In order to
establish a good faith defense against the 20% understatement penalty, which of the
following does Fitely need to establish: - Answer-All of the above.
That Tilder was a competent professional.
That Fitely gave Tilder all necessary and accurate information.
That Fitely actually relied in good faith on Tilder's judgment.
Which of the following burdens of proof must be met when a disclosed position
regarding a particular individual deduction is evaluated to determine whether it was
taken in good faith. - Answer-≥ 20% chance of being sustained
The disclosure of a tax return position will reduce or eliminate an accuracy-related
penalty on the taxpayer in which of the following circumstances? - Answer-The
position does not concern a tax shelter and has a reasonable basis
