CPA Tcp Quiz: Apply Statute Of Limitations Rules

What this quiz covers

This quiz focuses on Apply Statute Of Limitations Rules, giving you a quick way to practice the rules, question types, and explanations that matter most for CPA Tcp.

How to use this quiz

Try each quiz question before looking at the correct answer. Use the explanations to review missed ideas, then come back to similar questions until the pattern feels familiar.

Question 1

1. 3 years from the later of the date the return was filed or the return's original due date. (correct answer)
2. 2 years from the date the return was filed.
3. 5 years from the date the tax was paid.
4. 4 years from the end of the taxable year.

Explanation: The general assessment period is 3 years from when the return was filed or its due date, whichever is later. Answer A is correct. 2 years (B) is not the standard assessment period. 5 years from payment (C) is not the general rule. 4 years from year-end (D) is not the standard.

Question 2

1. The taxpayer fails to pay estimated taxes.
2. The taxpayer is under criminal investigation.
3. The taxpayer omits from gross income an amount exceeding 25% of the gross income reported on the return. (correct answer)
4. The taxpayer claims a refund that is later disallowed.

Explanation: Under Section 6501(e), the 6-year limitations period applies when a taxpayer omits more than 25% of gross income from the return. Answer C is correct. Estimated tax failures (A) don't extend the SOL. Criminal investigations (B) have separate rules. Refund disallowance (D) doesn't extend the assessment SOL.

Question 3

1. The taxpayer owes more than $100,000 in back taxes.
2. The taxpayer files a false or fraudulent return with intent to evade tax, or fails to file a return at all. (correct answer)
3. The taxpayer is a foreign national with U.S. source income.
4. The taxpayer has foreign bank accounts that were not disclosed.

Explanation: The statute of limitations is unlimited for fraud (filing a false return with fraudulent intent) or for failure to file a return - the IRS may assess tax at any time. Answer B is correct. Tax amounts (A) don't affect the SOL. Foreign status (C) doesn't create an unlimited period. Foreign accounts (D) may extend reporting obligations but don't create unlimited assessment SOL.

Question 4

1. March 15, 2024, three years from the date of filing.
2. December 31, 2023, three years from the end of the tax year.
3. March 15, 2024 - the IRS has until three years from the filing date since it was filed early.
4. April 15, 2024 - the assessment period runs from the later of the filing date or the due date, so the due date of April 15, 2021 controls. (correct answer)

Explanation: The 3-year period runs from the later of the filing date or the due date. Since the due date (April 15, 2021) is later than the filing date (March 15, 2021), the period expires April 15, 2024. Answer D is correct. The filing date (A, C) is earlier and therefore not controlling. Year-end (B) is not the correct starting point.

Question 5

1. 1 year from the date the return was filed.
2. 3 years from the date the tax was paid.
3. The later of 3 years from the date the return was filed (with a return filed before the due date treated as filed on the due date) or 2 years from the date the tax was paid. (correct answer)
4. 5 years from the end of the taxable year.

Explanation: Under Section 6511(a), the statute of limitations for a refund claim is the later of: (1) 3 years from the date the return was filed (a return filed before its due date is treated as filed on the due date for this purpose), or (2) 2 years from the date the tax was paid. Answer C is correct. 1 year (A) is too short and not the statutory period. 3 years from the payment date alone (B) omits the 'later of' component and the filing-date starting point. 5 years from year-end (D) is not the standard.

Question 6

1. The taxpayer filing an amended return within the limitations period.
2. Executing a written consent on Form 872 (Consent to Extend the Time to Assess Tax), which extends the limitations period for a specific period - this is commonly requested during an audit to allow additional time to resolve issues. (correct answer)
3. The taxpayer's attorney sending a letter to the IRS requesting an extension.
4. The IRS unilaterally extending the limitations period by issuing a formal notice.

Explanation: The SOL can be extended by mutual written consent using Form 872. This is a bilateral agreement. Answer B is correct. Amended returns (A) don't extend the SOL. Attorney letters (C) are not the proper form. The IRS cannot unilaterally extend the SOL (D).

Question 7

1. 10 years from the date of assessment - the IRS has 10 years to collect through levy, seizure, or court proceeding. (correct answer)
2. 3 years from the date of assessment.
3. 6 years from the date of assessment.
4. Unlimited - the IRS may collect assessed taxes at any time.

Explanation: Under Section 6502, the IRS has 10 years from the date of assessment to collect the tax through enforcement actions. Answer A is correct. 3 years (B) is the assessment SOL, not collection. 6 years (C) is not the collection period. Collection is not unlimited (D) - the 10-year period applies.

Question 8

1. $10,000 of unreported income.
2. 10% of gross income reported on the return.
3. 25% of gross income reported on the return - adequate disclosure of an item on the return prevents the 6-year SOL from applying to that item. (correct answer)
4. $50,000 in absolute terms.

Explanation: The 6-year SOL requires an omission of more than 25% of gross income reported on the return. Adequate disclosure on the return prevents the 6-year rule from applying to that item. Answer C is correct. Dollar thresholds (A, D) and 10% (B) are not the standard.

Question 9

1. The taxpayer's filing of a Tax Court petition.
2. The issuance of a statutory notice of deficiency (90-day letter) - the SOL is suspended for the period the taxpayer has to file a Tax Court petition plus 60 days. (correct answer)
3. The taxpayer's request for an installment agreement.
4. The taxpayer's failure to pay the assessed tax liability.

Explanation: Under Section 6503(a), the statute of limitations for assessment is suspended during the period after the IRS mails a statutory notice of deficiency in which the IRS is prohibited from assessing the tax, plus 60 days. Answer B is correct. Filing a Tax Court petition (A) occurs in response to the notice of deficiency and prolongs the prohibition on assessment, but the notice itself is what triggers the tolling. An installment agreement request (C) tolls the collection SOL, not the assessment SOL. Failure to pay (D) does not suspend or toll the assessment statute.

Question 10

1. All 5 unfiled years - the statute of limitations does not begin to run until a return is filed, so unfiled years remain open indefinitely. (correct answer)
2. Only the most recent 3 years - the IRS is barred from assessing tax for older years.
3. Only the current year.
4. The years for which the IRS has records of income - other years are presumed to be zero income.

Explanation: The SOL never begins for unfiled returns - it only starts running once a return is filed. All unfiled years remain open for assessment indefinitely. Answer A is correct. The 3-year bar (B) requires a filed return to start running. Only the current year (C) is incorrect. The SOL is not limited to documented income years (D).

Question 11

1. Yes - the IRS can always review the originating year for foreign tax credit purposes.
2. Generally no - the originating year is closed by the SOL. However, the IRS may challenge the amount being carried forward by auditing the current year return, limiting the carryforward to what would have been allowable in the closed year. (correct answer)
3. Yes - carryforwards re-open the originating year's SOL automatically.
4. No - all carryforwards from closed years are accepted without question.

Explanation: Once a year is closed by the SOL, the IRS cannot assess additional tax for that year. However, the IRS may challenge carryforward amounts by examining the current year - limiting the carryforward to what was actually allowable. Answer B is correct. The IRS cannot freely reopen closed years (A). Carryforwards don't reopen the originating year (C). The IRS may still limit carryforward amounts (D).

Question 12

1. Paying the tax liability before the SOL expires.
2. Filing a superseding return before the original due date.
3. Voluntarily disclosing previously unreported income.
4. Executing Form 872-A (Special Consent to Extend the Time to Assess Tax), which provides an open-ended extension that continues until terminated by either party. (correct answer)

Explanation: Form 872-A is an open-ended consent that extends the SOL indefinitely until terminated - stronger than Form 872's fixed extension. Answer D is correct. Paying taxes (A) doesn't affect the SOL. Superseding returns (B) replace the original but don't generally extend the SOL. Voluntary disclosure (C) may affect penalties but doesn't restart the SOL.

Question 13

1. 3 years from the filing date of Form 706 or its due date (whichever is later) - with extensions to 6 years for omission of more than 25% of the gross estate. (correct answer)
2. 5 years from the decedent's date of death.
3. 10 years from the filing of the estate tax return.
4. Unlimited for all estate tax returns.

Explanation: Estate tax follows the same 3-year general SOL (from Form 706 filing or due date) and 6-year extended SOL for omissions exceeding 25% of the gross estate. Answer A is correct. 5 years from death (B) is not the standard. 10 years (C) is the collection SOL. Estate tax SOL is not unlimited (D).

Question 14

1. Indefinitely, since no tax was reported.
2. 6 years, since there is always an extended period when income is omitted.
3. 3 years from the filing date or due date of the return - even a return showing zero tax starts the SOL running if the return is filed and contains sufficient information for the IRS to calculate the liability. (correct answer)
4. Only 1 year, since there is no tax liability to protect.

Explanation: A return showing zero tax still starts the SOL running if it is properly filed. The 3-year general period applies. The 6-year extension would apply only if the omission exceeds 25% of gross income. Answer C is correct. Zero tax doesn't prevent the SOL from running (A). The 6-year period is not automatic (B). 1 year is not the standard (D).

Question 15

1. 3 years from when the gift was made.
2. 6 years from when the gift was made.
3. 10 years from the date of the gift.
4. Indefinitely - the SOL for gift tax assessment never begins to run if no Form 709 is filed for a taxable gift. (correct answer)

Explanation: The gift tax SOL only starts running when Form 709 is filed. If no return is filed for a taxable gift, the IRS can assess gift tax at any time. Answer D is correct. SOL doesn't run from the gift date without a filed return (A, B, C).

Question 16

1. The taxpayer submits an offer in compromise - the 10-year collection SOL under Section 6502 is suspended while the offer is pending, for 30 days after a rejection, and while any Tax Court challenge to the rejection is pending. (correct answer)
2. The taxpayer enters into an installment agreement - the collection SOL is suspended while the agreement is pending or in effect, plus 90 days after.
3. The IRS issues a levy against the taxpayer's bank account.
4. The taxpayer pays part of the tax liability.

Explanation: Under Section 6331(i) and (k), submitting an offer in compromise suspends the 10-year collection SOL while the offer is pending, for 30 days after rejection, and while any Tax Court proceeding challenging the rejection is pending. Answer A is correct. Answer B is incorrect because an installment agreement does not automatically suspend the collection SOL merely by being in effect - the 10-year period continues to run unless a waiver is executed or the agreement is entered into before the collection period would otherwise expire under Section 6502(a)(2). Issuing a levy (C) is a collection action that must occur within the 10-year period - it does not extend it. Partial payment (D) does not extend the collection SOL.

Question 17

1. Be required by law to sign the extension if requested by the IRS.
2. Refuse to sign - the IRS cannot force a taxpayer to consent to an extension. However, refusing may prompt the IRS to issue a notice of deficiency before the SOL expires to preserve its assessment rights. (correct answer)
3. Sign the extension only if the IRS agrees to limit its audit to specific issues.
4. Ignore the request without any consequences.

Explanation: Taxpayers are not required to sign Form 872 - consent is voluntary. However, refusing may cause the IRS to issue a deficiency notice before the SOL expires to protect its rights. Answer B is correct. Signing is not mandatory (A). The IRS doesn't need to agree to limit the audit for the taxpayer to sign (C). Ignoring has consequences (D) - the IRS will protect its rights.

Question 18

1. The notice is timely - April 14, 2024 is within 3 years of the April 15, 2021 filing/due date, so the IRS has preserved its right to assess. (correct answer)
2. The notice is untimely - the 3-year period expired on April 15, 2024.
3. The notice is untimely - the 3-year period expired on April 14, 2024.
4. The notice is timely only if the taxpayer consented to extend the SOL.

Explanation: The 3-year SOL expires April 15, 2024. The notice mailed April 14, 2024 is within the period - the IRS has until the last day of the period (April 15) to mail the notice of deficiency, so April 14 is timely. Answer A is correct. April 15 (B) is the last day, not an expiration that has passed. April 14 (C) is before the expiration date. No consent was required (D).

Question 19

1. Any expense claimed that later proves to be nondeductible.
2. A deduction that overstates the taxpayer's basis in property sold.
3. Income reported in the wrong tax year (timing difference).
4. Amounts received that are not disclosed as gross income in the return and are not properly described so the IRS has enough information to compute the tax - not including amounts reported on the return or in attached schedules. (correct answer)

Explanation: Under Section 6501(e)(1), the 6-year SOL applies to omissions from gross income - amounts that are not disclosed in the return or in attached schedules so that the IRS has adequate information to compute the correct tax. Routine timing errors (C) and nondeductible expense claims (A) are generally subject to the 3-year SOL because the income itself was reported. A basis overstatement (B) is more nuanced: if a taxpayer overstates basis on an asset sale and the overstatement results in a 25% or greater understatement of gross income, current law (post-2012 regulations and subsequent guidance) may treat the resulting omission as subject to the 6-year period. Answer D is the clearest example of a traditional omission from gross income - amounts received and not reported.

Question 20

1. July 15, the date the return was actually filed (since the extended due date is July 15 and the return was filed by that date, the assessment period runs from July 15). (correct answer)
2. April 15, the original due date of the return.
3. The date the extension was granted.
4. October 15, automatically extended to allow the IRS additional time.

Explanation: When a return is filed on or before the extended due date, the 3-year period runs from the actual filing date (the extended due date). Answer A is correct. The original due date (B) would apply only if the return was filed before it. Extension grants (C) are not the starting point. October 15 (D) would be a further extension.