QUESTION 25

1. The IRM contains a mandatory process that LB&I RAs must follow when requesting documents or information from taxpayers. First, the RA must issue the taxpayer a draft IDR, after which the RA must discuss the draft IDR with the taxpayer within in nine days of it being issued. During this period, the taxpayer is free to raise objections or concerns with respect to the questions asked or seek clarification concerning the items requested by the LB&I. The RA must give due consideration to the taxpayers objections or concerns and clarify any ambiguous requests contained in the draft IDR. The RA must then issue the final IDR. If the taxpayer has no objections or concerns draft IDR" becomes final in 15 days. If the taxpayer does not respond to the final IDR within 30 days, the RA is required to send a pre-summons letter to the taxpayers CEO. This pre-summons letter advisies the CEO of the taxpayers non-compliance in responding to the IRS and warns that a summons will be issued in 20 days if the taxpayer does not fully comply with the final IDR. If, and only if, the taxpayer does not fully comply with the final IDR within 20 days of the pre-summons letter, is the RA permitted to issue a summons to the taxpayer.

   Hotshot is a second level manager in LB&I. She oversees 10 audit groups. She has determined that Big Corp continues not to cooperate with the LB&I audit team. She orders the RA on the Big Corp audit to ignore the IRM procedures and issue summonses to Big Corp and third parties, if needed, and not to issue IDRs. She also orders the RA to ask local LB&I counsel to review any summons issued to ensure that there are no ambiguities with respect the documents and testimony requested.

   RA serves several summonses on Big Corp, without first issuing IDRs. Big Corp refuses to comply with the summonses. The Office of Chief Counsel refers the summonses to the Department of Justice ("DOJ") for enforcement. DOJ sues Big Corp in District Court to enforce the summonses.

   Big Corp's counsel argues that LB&Is purposeful disregard of the IRM should prevent the summonses from being enforced. Question: does LB&Is purposeful disregard of the IRM provisions render the summonses unenforceable?

   	a.	Yes, the IRM generally gives taxpayers substantive rights and provides a defense for Big Corp.
   	b.	Yes, second level managers should have no input into examination decisions.
   	c.	No, the IRM provides guidance for IRS employees. Taxpayers cannot rely on the IRM.
   	d.	Yes, unlike most IRM provisions, the violation of mandatory IRM provisions provides taxpayers with a defense to overreaching by IRS employees.
   	e.	None of the above.

3.4 points

QUESTION 26

1. You are an IRS official responsible for assigning cases. Michael Dawson owns a successful pizzeria in downtown Brooklyn called MD Pizza. Each year, he reports the tax attributes (e.g., income, deductions, credits et al) from MD Pizza on Schedule C of a Form 1040, U.S. Individual Income Tax Return. Michael Dawson owns a house, a bank account, and a brokerage account. The IRS will open an audit of Michael Dawson. The audit will solely focus on the income and deductions of MD Pizza. MD Pizza has assets of approximately $20,000,000. Question: what operating division would most likely audit Michael Dawson Form 1040 and the books and records of MD Pizza?

   	a.	There is not enough information to answer the question.
   	b.	TEGE.
   	c.	LB&I.
   	d.	SBSE.
   	e.	LMSB.

3.4 points

QUESTION 27

1. During the audit of Corp, the audit team received a Technical Advice Memorandum (TAM) authored by John Jones. At all relevant times, John Jones was an attorney in the National Office of IRSs the Office of Chief Counsel, Financial Products and Institutions (FIP). His primary job was to draft regulations and revenue rulings. However, at times he was involved in issuing TAMs and private letter rulings.

   John Jones TAM provided FIPs opinion on the deductibility of expenses arising from transactions entered by Corp. Based upon the TAM, RA Jim Smith disallowed 90% of the losses that Corp claimed from the transactions. Corp filed a timely protest in response to the 30-day letter issued by RA Jim Smith. The matter is now in the Independent Office of Appeals and assigned AO Mike for consideration of settlement. While considering the case, AO Mike contacted John Jones and the two had an extensive conversation concerning the legal basis for RA Smiths adjustments and certain points in the TAM. Later that day, AO Mike had a conversation with RA Smith about the factual basis for his proposed adjustments. The taxpayer did not participate in either of these conversations and was never notified or apprised of these conversations. Question: who violated the prohibition against ex parte communications with Appeals?

   	a.	AO Mike only.
   	b.	AO Mike and RA Smith only.
   	c.	AO Mike and John Jones and RA Smith.
   	d.	RA Smith and John Jones only.
   	e.	None of the above because there is no prohibition against ex parte communications with Appeals.

3.4 points

QUESTION 28

1. In 2011, a Nevada jury convicted Van of assault. However, he got out of jail in 2012 when an Appeals court overturned his conviction on a technicality. On January 1, 2020, the FBI arrested Van for narcotics and arms trafficking. He is now out on bail. His criminal trial is set for November 15, 2021. Law enforcement officials consider Van very dangerous. Van never filed tax returns. Your manager assigns you to audit Van's 2010, 2011 and 2012 taxable years.

   Your investigation shows that Vanna was Vans bookkeeper. Vanna has records concerning Vans income during 2010, 2011 and 2012. You want to contact Vanna to determine how much money Van received during the years under audit. Vanna is the only person you will contact during your audit. You did not send a third-party contact letter to Van.

   Vanna does not respond to any of your requests for documents or information. After consulting with your manager, you decide to serve a third-party summons on Vanna. The summons will require Vanna to produce Vans relevant financial records that are not in the IRSs possession. Because of reasonable concerns for Vannas safety, you intend on not sending a copy of the summons to Van. You never issued a summons before, so you decide to discuss the matter with your manager, Jay Gould. Question: what should Jay advise you?

   	a.	Do not issue the summons because the IRS did not issue a third-party contact letter to Van.
   	b.	Do not send a copy of the summons to Van because the third-party notification rules only apply in collection cases.
   	c.	Do not send a copy of the summons to Van because doing so would jeopardize Vannas safety.
   	d.	Contact the Chief Counsels office and request that they get the Department of Justice to obtain a court order that would allow the IRS to issue the summons without notifying Van.
   	e.	Send Van a copy of the summons because to do otherwise would violate Vans rights.