Nova Southeastern University IRS Practice and Procedure Final Exam

QUESTION

Nova Southeastern University IRS Practice and Procedure
Final Exam John Gray
Please submit to me via internal course email by noon ET on
Monday, December 14

Use a Nova
coversheet.
Question One is a
Short Answer Question. Each part of this question can be answered in a
sentence. The other questions generally require longer answers.
1. C-Ment Industries, Inc. is
in the business of designing, manufacturing and selling concrete equipment
vehicles. In 2013, C-Ment designed and manufactured a line of concrete pumping
vehicles to transfer concrete from cement mixers to specific points within a
construction site. The pumping equipment is mounted on a specially modified
truck chassis.

C-Ment wishes to ensure that the concrete pumping vehicles are not
subject to excise tax under
Internal Revenue Code Section 4051.

1. With whatlevelof the IRS will Wheeler have to
deal?

(2) With which office?

1. Before going ahead with its
plans, what type of ruling should C-Ment seek from the IRS?

2. You prepared Henry Helpless tax return for 2013 and
Helpless has been called in by a Revenue Agent. He asks you to attend the
meeting.
(A) Assume that you are Friendly Frank, Helpless neighbor, who
has prepared the returnwithout
compensation. What document(s), if any,
must you file with the IRSto accompany the taxpayerand act in the capacities
described below?

(1) To receive or inspect confidential tax information.

(2) To act as an advocate on behalf of Helpless and perform acts
as described in Reg. § 601.504(a).

(B) Assume the same facts in (A), except that Helplessis not presentat the meeting. What
document(s), if any, must you file in the following capacities:

(1) To receive or inspect confidential tax information.

(2) To act as an advocate on behalf of Helpless and perform acts
as described in Reg. § 601.504(a).

(C) Assume that Henry Helpless compensates you for preparing his
return. Would your answers to the questions in (A) and (B), above, differ? Why
or why not?

3. You work for Modmfg as an internal accountant. Modmfg is a very
successful sole proprietorship. During the year, Peter Proprietor sells his
business, Modmfg, to Newton Owner. Owner asks you to stay on as internal
accountant and you agree. At the same time, Proprietor wishes you to continue
to prepare his personal tax returns, something you have done for fifteen years.
When it comes time to prepare Peter Proprietors personal return,
you review the contract for the sale of the business. You notice for the first
time that the contract drafted by Owners attorney has allocated 100% of the
purchase price to the tangible assets of the business, with no amount allocated
to good will at all. You believe that this is an unreasonable allocation, so in
reporting the gain on Proprietors return, you allocate 50% of the purchase
price to good will. You are not involved in the preparation of the personal
return for Newton Owner, since that task is handled by the outside accountant
who worked with Owners attorney in drafting the contract for the purchase of
the business.

Approximately a year later, Proprietor receives a notice that he
has been called in for an office examination for a review of the sale of the
business. Proprietor asks you to represent him before the IRS in connection
with this audit. At the same time, your responsibilities at Modmfg have been
growing and Newton Owner has just asked you to be its senior representative in
dealing with the IRS in connection with a field audit that is about to be
conducted of the operations of Modmfg. You realize that Proprietors and
Owners interests are adverse as to the allocation of the purchase price and
that you may have a potential conflict of interest in seeking to represent both
of them.

A. Under Circular 230, can you
represent both of them?

(B) What could you do if you wish to represent them both? Can you do
anything?

(C)Can they agree on an allocation of the purchase price between
themselves prior to the time that the audits are scheduled?

(D) If they agree on an allocation of the purchase price
between themselves prior to when the audits are scheduled, is the IRS bound by
their agreement/allocation?

4. At the conclusion of his corporate audit, the Revenue
Agent questions the reasonableness of the
corporations accumulated earnings. For the current year, the
corporation has total additions to accumulated earnings of $300,000. The
balance at the beginning of the year was $750,000, and there is a plethora of
liquid assets reflected on the corporate balance sheet. The corporation
manufactures computer parts and has two shareholders, Mr. Greed and Mr. Glutt.
Dividends have not been declared in the last 10 years.

However, the corporate minutes reflect various anticipated needs
of the business as reasons for the
accumulation of earnings, including an acquisition of or an
expansion into other businesses.

(A) Should you discuss with the
agent the grounds on which the corporation relies to establish the reasonableness
of its accumulated earnings?

A. Should you wait to discuss the
issue with the Appeals Office? See Code Sec. 534.

5. Ray is the Vice-President of tax for BigCo Inc., a new
client of your CPA firm during tax season in the spring of 2011. Ray tells you
about an investment of BigCo during 2010. When you tell Ray that the investment
is a listed transaction, he is not happy about BigCo disclosing it to the IRS.
What are Rays consequences of failing to disclose the listed transaction to
the IRS?

Ray further tells you that BigCo is considering entering a
transaction with a group that guarantees a refund of any fees if BigCo does not
achieve the desired tax losses. What should you advise Ray regarding this
potential transaction?
6. Constance C. Enshus, the limited partner in Bilda
Brickhouse, a real estate partnership, received a copy of financial information
prepared by the general partners of the partnership. In reviewing the
information,Connie finds what she believes should be an additional deduction
for the partnership for the preceding year. Connie writes to the general
partner (who is also the TMP) asking that he prepare an amended return. The
general partner disagrees with Connie and informs her of his decision. Connie
still believes she is right and proceeds to file a Request for Administrative
Adjustment (RAA) seeking a refund of $4,050, her proportionate share of the
refund due as a result of the adjustment at the partnership level. Connie is
notified by the IRS on September 16, 2009, that her RAA has been treated as
requesting a refund for a nonpartnership item.

(A) Assuming the IRS decides the TMP was correct and no refund is
allowable, what is the last day that Connie can commence an action in federal
court to litigate the matter?

(B) What action, if any, is required as a condition precedent to
Connies commencing legal action?

(C) Does it matter that the partnership has elected to be governed
by the large partnership rules?

End of final exam, please submit to me via internal course email
by noon, Eastern Time, Monday, December 14, 2015.

ANSWER

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