Tax Strategies Flashcards

When does the civil assessment period extend to six years instead of three?

Answer: When the taxpayer omits more than 25% of the gross income stated on the return

Under 26 U.S.C. § 6501(e), omitting more than 25% of gross income extends the assessment period to six years.

How long does the IRS have to assess tax when it proves a return was false or fraudulent with intent to evade tax?

Answer: There is no time limit

Under § 6501(c), tax on a fraudulent return can be assessed at any time.

In a financial investigation, what is a 'lifestyle analysis' mainly used to identify?

Answer: Gaps between a subject's visible spending and the income they report

Lifestyle analysis compares visible spending on homes, vehicles, and travel with legitimate income to flag hidden income or assets.

A subject's assets are titled in a girlfriend's name, but the subject controls and benefits from them. What is the girlfriend called?

Answer: A nominee

A nominee holds bare legal title for the true owner, a common way to hide assets from creditors and the IRS.

Which tax form question can show that a taxpayer has a financial interest in, or signature authority over, a foreign account?

Answer: Schedule B, Part III

Schedule B Part III asks about foreign accounts and trusts, and a 'yes' answer can lead to FBAR records.

Which IRS form may a U.S. person with an ownership interest in a foreign corporation have to file, revealing offshore holdings?

Answer: Form 5471

Form 5471 is the information return for U.S. persons with certain interests in foreign corporations.

Does the federally authorized tax practitioner privilege under 26 U.S.C. § 7525 protect communications in a criminal tax prosecution?

Answer: No, it applies only in noncriminal tax matters before the IRS or federal courts

Section 7525 privilege covers only noncriminal tax matters, which is why Kovel arrangements matter in criminal cases.