CTP Ethical Standards & Professional Conduct 5

Question 1

Under IRC §6694, a return preparer faces a penalty for an 'unreasonable position' unless the preparer:

Accepted Answer

Had reasonable cause and acted in good faith, or the position met the applicable standard and was adequately disclosed

Answer

IRC §6694 penalties do not apply if the preparer had reasonable cause and good faith, or if the position met the applicable standard (substantial authority or reasonable basis with disclosure).

Question 2

A tax practitioner who promotes an abusive tax shelter may face which penalty under the Internal Revenue Code?

Accepted Answer

A civil penalty under IRC §6700 for promoting abusive tax shelters

Answer

IRC §6700 imposes civil penalties on persons who organize or sell abusive tax shelters, separate from any Circular 230 sanctions.

Question 3

When a new client presents documents showing a very large charitable deduction, the practitioner notices the documentation appears inconsistent. Under professional standards, the practitioner should:

Accepted Answer

Ask probing questions to resolve the inconsistency before claiming the deduction

Answer

Practitioners must make reasonable inquiries when information appears inconsistent, per Circular 230 §10.22 due diligence requirements.

Question 4

A practitioner who wishes to represent a client before the IRS but is not a CPA, attorney, or enrolled agent may do so by:

Accepted Answer

Qualifying as an enrolled retirement plan agent or enrolled actuary for limited matters, or passing the SEE to become an enrolled agent

Answer

To gain full practice rights before the IRS, a non-CPA/non-attorney must pass the Special Enrollment Examination (SEE) to become an enrolled agent.

Question 5

The 'more likely than not' standard for tax return positions means:

Accepted Answer

The position has greater than a 50% likelihood of being sustained on the merits

Answer

The 'more likely than not' standard requires that the position has a greater than 50% probability of being sustained if challenged.

(CTP) Certified Tax Professional Practice Test

(CTP) Certified Tax Professional Practice Test

CTP Ethical Standards & Professional Conduct 5