Imagine a situation in which a client under audit by the IRS omitted $100,000 in income. From the e-Activity, examine the major factors relative to the omission by the client that would result in a criminal investigation rather than a civil fraud proposal by the IRS.

Questions

1. Imagine a situation in which a client under audit by the IRS omitted $100,000 in income. From the e-Activity, examine the major factors relative to the omission by the client that would result in a criminal investigation rather than a civil fraud proposal by the IRS. Based on the guidance in Circular 230, speculate as to which provision the CPA violated and the extent of any sanctions for CPA for not detecting the omission.

e-Activity: Go to the Tax Almanac Website, located at http://www.taxalmanac.org/index.php/Tax_Research_Resources.html , or use the Internet to research civil fraud tax cases and criminal fraud prosecutions by the IRS.

2. Based on the information contained in the textbook, a U.S. parent company does not include the income of a foreign subsidiary until the income is repatriated as dividends. Defend the creation of foreign subsidiaries as a mechanism to defer income of major U.S. companies. Propose a new tax law that will benefit the U.S. Treasury by accelerating income from foreign subsidiaries. Suggest potential tax saving strategies for the U.S. parent company to mitigate the impact to subsequent tax increases.

3. Assume you have the power to make reforms to the way tax research and planning is currently conducted. Propose the reforms you would make. Justify your response.

4. Speculate on the most significant changes you anticipate in the tax code over the next five (5) years. Explain your reasoning.