Ms. Barth is a professional tax return preparer. Three years ago, she prepared the Form 1120 for Denver Inc. Her fee for the preparation was $14,850. Upon audit of the return, the IRS disallowed a $112,000 deduction, which increased the corporation's tax liability by $39,200. a. Compute Ms. Barth's preparer penalty if the IRS concludes that Ms. Barth had no reasonable legal basis for claiming the deduction and was not acting in good faith by doing so. b. Compute Ms. Barth's preparer penalty if the IRS concludes that Ms. Barth intentionally disregarded the tax law by claiming the deduction in a willful attempt to understate Denver's tax. c. Compute Ms. Barth's preparer penalty if the IRS concludes that what would your answers to (a) and (b) be if Ms. Barth's preparation fee was only $3,500?
Ms. Barth is a professional tax return preparer. Three years ago, she prepared the Form 1120 for Denver Inc. Her fee for the preparation was $14,850. Upon audit of the return, the IRS disallowed a $112,000 deduction, which increased the corporation's tax liability by $39,200. a. Compute Ms. Barth's preparer penalty if the IRS concludes that Ms. Barth had no reasonable legal basis for claiming the deduction and was not acting in good faith by doing so. b. Compute Ms. Barth's preparer penalty if the IRS concludes that Ms. Barth intentionally disregarded the tax law by claiming the deduction in a willful attempt to understate Denver's tax. c. Compute Ms. Barth's preparer penalty if the IRS concludes that what would your answers to (a) and (b) be if Ms. Barth's preparation fee was only $3,500?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Ms. Barth is a professional tax return preparer. Three years ago, she prepared the Form 1120 for Denver Inc. Her fee for
the preparation was $14,850. Upon audit of the return, the IRS disallowed a $112,000 deduction, which increased the
corporation's tax liability by $39,200.
a. Compute Ms. Barth's preparer penalty if the IRS concludes that Ms. Barth had no reasonable legal basis for claiming the
deduction and was not acting in good faith by doing so.
b. Compute Ms. Barth's preparer penalty if the IRS concludes that Ms. Barth intentionally disregarded the tax law by
claiming the deduction in a willful attempt to understate Denver's tax.
c. Compute Ms. Barth's preparer penalty if the IRS concludes that what would your answers to (a) and (b) be if Ms. Barth's
preparation fee was only $3,500?
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