A.Looking at the corporate tax return, form 1120S:

1.What appears strange on page 1 of the tax return and why?

2.Looking at page 2 (balance sheet), what can you assume took place from the changes in the figures from the beginning of the year to the end of the year?

3.Looking at form 4562, which figure appears to be completely false and why?

4.Looking at the last page, Other Deduction, which two expense items did we discuss in class and what concerns would you have as a tax auditor about those 2 deductions?

a.What documentation and/or other forms should the taxpayer have to backup those two deductions?

b.What penalties would be imposed if the taxpayer did not file the necessary forms to support one of those two deductions?

5.Which deduction on the first page of the corporate return leads an auditor to suspect that such deduction is completely false because the address on the top of the tax return is the same as the doctor’s home address?

B.Looking at the personal income tax return, form 1040:

1.What was it about the address of the Schedule C and one of the expenses shown on Schedule C that leads an auditor to believe that such expense was completely false (assume the address on the Schedule C is the same address as the address on the front of the form 1040)?

2.What other large expense on Schedule C is completely unsupportable by the taxpayer and why?

3.What expense item on Schedule E looks completely unreasonable and alone would trigger an audit?

4.What form filed with the IRS by a lender would help trigger an audit because of a mismatch between the amount reported on that form and the amount of the expense reported on Schedule E by the taxpayer?

5.Why should an auditor think the depreciation expense shown on each form 4562 is completely overstated?

a.What is the correct useful life of rental property of the type this taxpayer owns?

b.How would you determine the approximate depreciation expense annually for the taxpayer’s 3 rental properties based on internet searches?

i.Which website would you visit to determine the original purchase price of the property?

ii.Which website would you visit to determine the portion of the purchase price to be allocated to building/improvements versus land (which is not depreciable)?