Tax Strategies Flashcards

An investigator totals every deposit into all of the subject's accounts, subtracts transfers and nontaxable sources, and compares the result with reported income. Which method is this?

Answer: Bank deposits method

The bank deposits method treats unexplained deposits, after adjustments, as evidence of unreported income.

A U.S. person's foreign financial accounts have a combined value above which threshold that triggers an FBAR filing (FinCEN Form 114)?

Answer: $10,000 at any time during the year

An FBAR is required when the combined maximum value of foreign accounts exceeds $10,000 at any point in the calendar year.

A subject keeps making cash deposits of $9,500 to avoid bank reporting. What crime may this be, even if the cash came from a lawful source?

Answer: Structuring under 31 U.S.C. § 5324

Breaking up cash transactions to evade Currency Transaction Report requirements is structuring, a crime regardless of where the money came from.

Which tax schedule is most likely to show that a subject owns rental real estate or receives royalties?

Answer: Schedule E

Schedule E reports supplemental income, including rental real estate, royalties, partnerships, and S corporations.

In a divorce case, the investigator suspects the spouse holds an interest in a partnership. Which tax document would most directly show it?

Answer: Schedule K-1

A Schedule K-1 reports each partner's share of the partnership's income, deductions, and credits.

Which Supreme Court case listed affirmative acts, such as keeping a double set of books, that can establish willful tax evasion?

Answer: Spies v. United States (1943)

Spies listed 'badges of fraud' such as double books, false entries, and hiding assets as evidence of an affirmative act of evasion.

How long is the general statute of limitations for prosecuting criminal tax evasion under 26 U.S.C. § 7201?

Answer: Six years

26 U.S.C. § 6531 sets a six-year limitation period for most criminal tax offenses, including evasion.