A Taxpayer's Return Is Audited and Additional Taxes Are Assessed

question 56

Multiple Choice

A taxpayer's return is audited and additional taxes are assessed. The IRS also asserts that a negligence penalty should be assessed. The taxpayer concurs with the additional $15,000 tax liability; $7,000 of this amount is attributable to negligence. What is the amount of the penalty for negligence?

• A)$700
• B)$1,400
• C)$5,600
• D)$1,750

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Definitions:

Contractual Provision

A specific clause or term within a contract that outlines duties, rights, or obligations of the parties involved.

Liquidated Damages

A pre-determined amount of money agreed upon in a contract that is payable as damages for breach of contract.

Reasonable

Pertains to actions or decisions that are sensible, fair, and logical based on the circumstances presented.

Punitive

Relating to or aimed at punishment, especially within the context of punitive damages in legal judgments, intended to punish wrongful conduct and deter similar actions in the future.