Assignment 2
You are working in house for a large peanut butter manufacturer as part of the CFO’s office. Your company opened a division to trade in virtual currency, called “peanut BITter.” Your company is also highly litigious and often sues state and local governments for refunds of taxes it pays to them. One day, the CEO of the company, Mrs. Total E. Nutt, runs into your office screaming that you have to get $50,000 of Amazon gift cards to give to the IRS. After calming her down, she explains that she just got a call in her office and the caller stated that the company owes $50,000 in Federal taxes and the IRS is on the way to the office and will seize control of the company unless the company pays $50,000 in Amazon gift cards TODAY! She asks you to draft a paragraph advising her what to do.
Shortly after that, your company receives a letter from the IRS (Letter 6173) stating that the IRS has knowledge of the company’s virtual currency dealings and suspects that the company has not complied with its tax obligations. The letter instructs the company to reply with a response that is signed under the penalties of perjury. After sending in the letter, your company is informed by the IRS that it Is opening an audit of the company. The IRS spends six months pouring over peanut BITter’s books and records, and determines a deficiency of $59 million dollars and the company pays the deficiency. Six months later, the IRS contacts your company again and says that it received an information return from a state that amended the amount of a taxable refund given to the company, and the IRS adjusted the company’s tax accordingly. Mr. Nutt blows into your office and starts hollering that the IRS is hounding his wife’s business. While his tirade was only semi coherent, you extrapolated the following points:
How did the IRS select his wife’s business for audit?
Was the IRS allowed to audit the business after sending Letter 6173?
Was the IRS allowed to adjust the tax due in response to the information return from the state?
Would the IRS be allowed to come and examine the company’s books and records a second time?
The CFO tells you that you probably should put together answers to Mr. Nutt’s questions, and suggests that you append them to the paragraph you drafted regarding the phone call demanding Amazon gift cards. Citations to statutes and regulations are not required. However, the company holiday party is coming and your boss tells you that the more you are able to support your answers, the more entries into the company raffle you’ll get.
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