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To establish the official record that will be used in Tax Court if the case is not settled

To frame the issues in dispute and provide the basis for settlement discussions with Appeals

To shift the burden of proof from the taxpayer to the IRS for all contested items

To request that the IRS suspend all collection activities until the appeal is resolved

$18,500, because her combined net profit from both businesses ($80,000) exceeds the premiums

$15,000, limited to the net profit of Business A where the plan was established

$65,000, limited to the net profit of Business B, the larger business

$80,000, the combined net profit from both businesses

A) Yes, because the POA authorizes all acts the taxpayer can perform

B) Yes, as long as Lisa includes her PTIN when signing

C) No, because a POA does not authorize return signing unless specific authority is granted and a qualifying reason exists

D) No, because only attorneys can sign returns on behalf of taxpayers

Maria has unlimited practice rights and can represent John in any IRS proceeding

Maria cannot represent John at all since she is not an EA, CPA, or attorney

Maria can represent John before revenue agents and examination officers for the return she prepared, but cannot represent him before Appeals, Collection, or other IRS offices

Maria can only represent John if she obtains special permission from the IRS for each case

Both the dental work and the toothpaste are qualified medical expenses

Only the dental work is a qualified medical expense; the toothpaste is not deductible

Neither expense qualifies because dental care is considered cosmetic

Only the toothpaste qualifies because it was recommended by her dentist

Karen qualifies for HOH because she is unmarried, paid the largest share of household costs, and has a qualifying person who lived with her for more than half the year

Karen does not qualify for HOH because she did not pay at least 75% of the cost of maintaining the home

Karen qualifies for HOH simply because she is unmarried and has a child

Karen does not qualify for HOH because Tyler must be under age 10

The full $4,000 is includible as a medical expense because her premiums are below the age-based cap

Only the difference between the $4,810 limit and her $4,000 in premiums ($810) is includible as a medical expense

None of the premiums are includible because LTC insurance does not qualify as a medical expense

The full $4,000 is a direct above-the-line deduction available to all taxpayers

50% of W-2 wages produces a higher limit than the combined W-2 plus UBIA calculation

25% of W-2 wages plus 2.5% of UBIA produces a higher limit than 50% of W-2 wages

Both formulas produce the same result, so either can be used

Neither limitation applies because manufacturing is not an SSTB

A) They are the same document with different names

B) Phil's letter is an informal proposal; Sarah's is a formal statutory notice required before the IRS can assess additional tax

C) Phil's letter is more serious because it has a shorter deadline

D) Sarah's notice is optional — the IRS can assess tax without it

Office audit

Field audit

Correspondence audit

Criminal investigation

The practitioner must prove innocence by preponderance of the evidence

The government must prove allegations by clear and convincing evidence

The government must prove allegations beyond a reasonable doubt

The practitioner must prove good faith by clear and convincing evidence

Natalie needed withholding and estimated payments totaling at least $30,800 (110% of $28,000) to meet the prior year safe harbor

Even though Natalie's withholding covers more than 90% of her 2024 tax, her 2024 AGI exceeding $150,000 means the applicable safe harbor is 110% of prior year tax

Natalie could potentially reduce or eliminate the penalty by using the annualized income installment method if her income was earned unevenly throughout the year

Natalie owes no estimated tax penalty because her withholding of $26,000 exceeds 100% of her prior year tax liability

Both must pass the Special Enrollment Examination

Maria can apply based on her IRS experience; Carlos must pass the Special Enrollment Examination

Carlos can apply based on his accounting background; Maria must pass the Special Enrollment Examination

Both can apply based on their professional credentials without examination

A) Used property never qualifies for bonus depreciation under any circumstances

B) The backhoe qualifies for bonus depreciation because it was acquired from an unrelated party and is new to the taxpayer

C) Only the original owner of the backhoe can claim bonus depreciation

D) Used property qualifies only if it has a recovery period of more than 20 years

Yes, because the LLC is a new entity and has never used the mower before the transfer

Yes, because the transfer to a disregarded entity resets the placed-in-service date and qualifies as a new acquisition

No, because Carlos previously used the mower, and the transfer to his own disregarded entity does not constitute an acquisition from an unrelated party

No, because used property can never qualify for bonus depreciation regardless of prior use or relationship

Long-term capital gain, because he held the stock for 12 full months

Short-term capital gain, because the holding period is exactly one year and does not exceed one year

Long-term capital gain, because he held the stock across two tax years

Ordinary income, because stock gains are always taxed as ordinary income

The transfer to the grandchildren's trust is subject to the generation-skipping transfer tax because the grandchildren are skip persons (two or more generations below Eleanor)

The GSTT is imposed at a flat rate of 40%, the same rate as the estate tax

The GSTT exemption can shelter a portion of the transfer, and any amount exceeding the exemption is subject to the 40% GSTT in addition to any estate tax owed

The GSTT replaces the estate tax on this transfer, so the estate owes only the 40% GSTT and no additional estate tax

$25,000—the entire §1231 gain is treated as long-term capital gain

$10,000—the 5-year lookback converts $15,000 to ordinary income

$13,000—the 5-year lookback converts $12,000 to ordinary income

$0—all §1231 gain is recharacterized as ordinary income due to prior losses

Federal tax liens release automatically after 5 years unless the taxpayer requests an extension

The IRS must manually review all liens every 7 years and release those no longer collectible

Federal tax liens self-release when the collection statute expiration date (CSED) expires, plus any extensions from agreements or proceedings

Liens remain indefinitely until the taxpayer files Form 12277 requesting release

Yes, all tax preparation is practice before the IRS

No, preparing a tax return is specifically excluded from the definition of practice before the IRS

Only if the return is for a business entity

Only if the CPA signs the return as a paid preparer

Elena: $4,800; Daniel: $2,400

Elena: $9,000; Daniel: $2,400

Elena: $9,000; Daniel: $4,800

Elena: $12,000; Daniel: $4,800

Linda meets the support test because she provides the largest single share of Rose's support

Linda meets the support test because she provides more than half of Rose's total support

Linda does not meet the support test because she provides exactly half of Rose's support

Linda does not meet the support test because she provides less than the required share of Rose's total support

Report $2,000 as rental income in January when received

Report $500 as rental income in December when he kept that portion

Report $1,500 as a rental expense and $500 as rental income

Security deposits are never taxable, so Marcus reports nothing

The accountant is correct; the entity cannot change classification until January 1, 2028 regardless of ownership changes

The entity can file Form 8832 because Carlos's acquisition of a 60% interest constitutes a more-than-50% ownership change by a new owner, triggering the exception to the 60-month rule

The entity must wait until Carlos acquires more than 80% total ownership before the Commissioner will consider a waiver of the 60-month rule

The entity can change classification only if both Adam and Carlos were entirely new owners who were not present when the original election was made

A positive adjustment of $93,000 spread evenly over four years (2025-2028)

A positive adjustment of $57,000 taken entirely in 2025

A positive adjustment of $57,000 spread evenly over four years (2025-2028)

A negative adjustment of $57,000 taken entirely in 2025