Question 1. The Treasury issues “private letter rulings” and other

1. The Treasury issues “private letter rulings” and other determinations, usually in response to a taxpayer request.

What is the purpose of the rulings program? Answer from both the taxpayer and the government points of view.

2. Describe the following written determinations that are issued by the IRS.

a. Determination letter.

b. Technical advice memorandum.

c. Letter ruling.

3. Specific factors that are used in selecting tax returns for audit, and the weights for such factors, are not released to the public. Summarize the public information about tax audit selection; how might a tax return’s chances of audit increase above national norms?

4. Describe the potential outcomes to a party who provides information to the IRS under the informant or whistleblower program.

5. Evaluate this statement: the audited taxpayer has more freedom to “trade issues” with the IRS when the dispute

progresses to an Appeals conference. Hint: What are the “hazards of litigation?”

6. When a tax dispute is resolved, interest is paid by or to the government. How are IRS interest amounts determined? To which tax amounts do they apply?

7. In connection with the taxpayer penalty for substantial understatement of tax liability, what defenses (if any) are available?

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8. A taxpayer penalty may be waived if there is shown to be reasonable causefor the misstatement on the tax return. The courts have applied this standard strictly. List three or more assertions for a waiver of a taxpayer penalty that courts have found notto constitute reasonable cause. Example: Ignorance of the tax law.