Tom and Mary were married during the calendar years 20x4 through 20x0. Tom worked as a travelling salesman and Mary worked as a consultant. Tom and Mary's joint federal income tax returns were prepared by Sally, an accountant whose office was in their neighborhood. For the year 20x4, Tom and Mary directed Sally to prepare their joint return in paper form, not in electronic form. Tom went to Sally's office to sign the return on April 14, 20x5. Mary didn't go with him because she was out of town on business, so Tom signed Mary's name to the return for her. It was mailed and postmarked that day, and received by the IRS on April 18, 20x5.

For the year 20x5, Tom and Mary again directed Sally to prepare their joint return in paper form, not in electronic form. Again Mary was out of town on business when the return was due. Tom signed the return, but failed to sign Mary's name at all. So the return was filed with Tom's signature alone. Tom mailed the return to the IRS on March 1, 20x6, and it was received on March 5, 20x6. Tom and Mary both took sabbatical leaves from their jobs for most of 20x6. They traveled the world nearly the whole year. In preparation for the sabbatical leave, however, in early 20x6 Tom had cashed-in an annuity contract so that he and Mary would have spending money for their travels. The proceeds were $120,000. Tom told Sally that none of the proceeds from the contract was taxable. Tom and Mary had only $5,000 of gross income in 20x6, all of which was Tom's. Mary had

no income for the year. Tom and Mary timely filed a joint return for the year 20x6 in March 20x7. Tom and Mary were the sole shareholders of Tomary, Inc., a C corporation, through which they did some consulting work. Because Tom and Mary didn't work in 20x6, Tomary had no gross income that year. Sally also prepared Tom and Mary's 20x7 joint return, in paper form. Sally mailed the return to them on April 1, 20x8, with instructions to sign and mail it to the IRS. Tom and Mary knew that the due date for returns was April 15th. That date fell on Saturday in 20x8. After Tom and Mary signed the return on April 10, 20x8, Tom put it in his car intending to mail it, but forgot. It was still on the front seat of his car on April 17th, when he and Mary went out to dinner. Mary gasped when she saw the return. Tom admitted that he had simply forgotten to mail it. So on the way home

they went to a post office that was open late. They gave the envelope to the clerk in the post office for mailing at 9:30 P.M. It was postmarked immediately, and received by the IRS on April 20, 20x8. Tom's brother, Bill, who was a U.S. citizen, lived in Greece. Bill had $35,000 of earned income in 20x7, all of which was excluded from income under IRC section 911. Mary didn't want to repeat the 20x7 experience again for 20x8, so this time she took their signed joint return (for 20x8) to her office on Monday, April 15, 20x9, and sent it to the IRS by FedEx. The FedEx driver picked it up at Mary's office at 6:30 P.M. It was delivered to the IRS on April 16, 20x9. Tom and Mary had participated in a tax shelter transaction during 20x8. Tom and Mary told Sally about the transaction in February 20x9, so that she could ask whatever questions were

necessary. Sally correctly determined that it was a “reportable transaction,” but did not make any disclosure of the transaction on the return. Sally attended a tax lecture in July 20x8, at which she learned that the $120,000 that Tom had received in early 20x6 as proceeds from the annuity contract should have been treated in full as gross income. She promptly advised Tom and Mary. Sally also prepared Tom and Mary's 20x9 joint return. Tom and Mary were late getting the information to Sally in order for her to prepare the return. They again wanted to file a paper return. So Sally filed an Extension of Time to File (Form 4868) on their behalf, which automatically granted them a 6-month extension of time to file, until October 15, 20x0. Sally mailed the return to them on September 30, 20x0, and after Tom and Mary signed it, Tom mailed it on October 5, 20x0.

It was postmarked later that day, and received by the IRS on October 11, 20x0.

1. Is the 20x4 return a valid joint return?

2. Will the 20x4 return be treated as having been filed timely?

3. Is the 20x5 return a valid joint return?

4. Will the 20x5 return be treated as having been filed timely?

5. Were Tom and Mary required to file a return for 20x6?

6. Should Tom and Mary file an amended return for 20x6?

7. Was Tomary required to file a return for 20x6?

8. Was Tom and Mary's 20x7 return filed timely?

9. On what date is the 20x7 return treated as having been filed?

10. Was Bill required to file a return for 20x7?

11. On what date is the 20x8 return treated as having been filed?

12. What is the result to Tom and Mary of their failure to disclose the tax shelter transaction on their 20x8 return? What is the result to Sally?

13. Will the 20x9 return be treated as having been filed timely?

14. On what date is the 20x4 return treated as having been filed?

Answer rating: 100% (QA)

It was postmarked later that day and received by the IRS on October 11 20x0 1 Is the 20x4 return a valid joint return The 204 was not a valid joint return because Tom and Marys joint federal income ta... View the full answer