CLI Tax Strategies 5

Question 1

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

Accepted Answer

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

Answer

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

Question 2

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

Accepted Answer

There is no time limit

Answer

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

Question 3

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

Accepted Answer

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

Answer

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

Question 4

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

Accepted Answer

A nominee

Answer

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

Question 5

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

Accepted Answer

Schedule B, Part III

Answer

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

CLI - Certified Legal Investigator Practice Test