Tax Research 12th Edition Questions &
Answers with rationales (Chapter 1-13)
|2025
_____________________________________________________________________________________
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
a fraudulent act involving illegal nonpayment of taxes
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
settling tax-related disputes in a court of law
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.
The practitioner can fix the problem by amending the client's tax return
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.
Circular 230 is a set of Treasury Department ethical and legal standards for those engaging in practice
before
the IRS.
,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 these are correct
e. both a CPA and an attorney
all of these are correct
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. more limited as compared to an open transaction and limited to presenting the taxpayer's facts to
the
government in the most favorable, legal manner
more limited as compared to an open transaction and limited to presenting the taxpayer's facts to the
government in the most favorable, legal manner
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
compliance with state ethical requirements
Statements on Standards for Tax Services (SSTS) contain advisory guidelines for:
a. members of the AICPA
b. enrolled agents
c. attorneys
d. IRS authorities
e. all of these are correct
members of the AICPA
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
3-year cycle
Under Section 10.3, Subpart A, of Circular 230, the following individuals may practice before the IRS
EXCEPT:
a. unenrolled agents
b. enrolled agents
,c. enrolled actuaries
d. enrolled retirement plan agents
unenrolled agents
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
should use reasonable effort to comply with the tax laws
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 these are correct
a fee based on a percentage of a taxpayer's refund on a tax return
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
aspirational, to act as goals for tax practitioners
The six principles of professional conduct under the AICPA Code include:
a. responsibilities
b. public interest
c. integrity
d. All of these are correct
all of these are correct
Under the AICPA Code of Professional Conduct, 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. implying that the CPA had the ability to influence an IRS official and promising a favorable result
without justification
implying that the CPA had the ability to influence an IRS official and promising a favorable result without
justification
, 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
independently confirm the accuracy of the taxpayer's information
Which of the following is CORRECT about a CPA's responsibility with regard to tax return positions
under
Statements on Standards for Tax Services No. 1 (SSTS No. 1)?
a A CPA may not base his or her position on authority that is not approved by the IRS under Section
6662
(accuracy-related penalty).
b. A CPA may sign a return which has a tax position that has a realistic possibility of being sustained
on the
merits.
c. A CPA may not sign a return which has any tax position that is not fully disclosed.
d. All of these are correct
A CPA may sign a return which has a tax position that has a realistic possibility of being sustained on the
merits.
The Statements on Standards for Tax Services (SSTS) are issued by:
a the Internal Revenue Service
b. the FASB
c. the AICPA
d. the American Bar Association
e. the AICPA and the American Bar Association jointly
the AICPA
The Statements on Standards for Tax Services are:
a part of the ABA Code of Professional Responsibility
b. intended to replace Circular 230
c. intended to supplement the AICPA Code of Professional Conduct and Circular 230
d. none of these are correct
intended to supplement the AICPA Code of Professional Conduct and Circular 230
Which of the following statements best explains the need for tax practitioners to understand
nonregulatory ethical
models of behavior?
a Competing ethical solutions must be resolved by the courts.
b. There is more to ethical behavior than just following the rules of professional organizations.
Answers with rationales (Chapter 1-13)
|2025
_____________________________________________________________________________________
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
a fraudulent act involving illegal nonpayment of taxes
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
settling tax-related disputes in a court of law
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.
The practitioner can fix the problem by amending the client's tax return
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.
Circular 230 is a set of Treasury Department ethical and legal standards for those engaging in practice
before
the IRS.
,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 these are correct
e. both a CPA and an attorney
all of these are correct
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. more limited as compared to an open transaction and limited to presenting the taxpayer's facts to
the
government in the most favorable, legal manner
more limited as compared to an open transaction and limited to presenting the taxpayer's facts to the
government in the most favorable, legal manner
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
compliance with state ethical requirements
Statements on Standards for Tax Services (SSTS) contain advisory guidelines for:
a. members of the AICPA
b. enrolled agents
c. attorneys
d. IRS authorities
e. all of these are correct
members of the AICPA
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
3-year cycle
Under Section 10.3, Subpart A, of Circular 230, the following individuals may practice before the IRS
EXCEPT:
a. unenrolled agents
b. enrolled agents
,c. enrolled actuaries
d. enrolled retirement plan agents
unenrolled agents
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
should use reasonable effort to comply with the tax laws
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 these are correct
a fee based on a percentage of a taxpayer's refund on a tax return
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
aspirational, to act as goals for tax practitioners
The six principles of professional conduct under the AICPA Code include:
a. responsibilities
b. public interest
c. integrity
d. All of these are correct
all of these are correct
Under the AICPA Code of Professional Conduct, 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. implying that the CPA had the ability to influence an IRS official and promising a favorable result
without justification
implying that the CPA had the ability to influence an IRS official and promising a favorable result without
justification
, 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
independently confirm the accuracy of the taxpayer's information
Which of the following is CORRECT about a CPA's responsibility with regard to tax return positions
under
Statements on Standards for Tax Services No. 1 (SSTS No. 1)?
a A CPA may not base his or her position on authority that is not approved by the IRS under Section
6662
(accuracy-related penalty).
b. A CPA may sign a return which has a tax position that has a realistic possibility of being sustained
on the
merits.
c. A CPA may not sign a return which has any tax position that is not fully disclosed.
d. All of these are correct
A CPA may sign a return which has a tax position that has a realistic possibility of being sustained on the
merits.
The Statements on Standards for Tax Services (SSTS) are issued by:
a the Internal Revenue Service
b. the FASB
c. the AICPA
d. the American Bar Association
e. the AICPA and the American Bar Association jointly
the AICPA
The Statements on Standards for Tax Services are:
a part of the ABA Code of Professional Responsibility
b. intended to replace Circular 230
c. intended to supplement the AICPA Code of Professional Conduct and Circular 230
d. none of these are correct
intended to supplement the AICPA Code of Professional Conduct and Circular 230
Which of the following statements best explains the need for tax practitioners to understand
nonregulatory ethical
models of behavior?
a Competing ethical solutions must be resolved by the courts.
b. There is more to ethical behavior than just following the rules of professional organizations.
