The Revenue Agent Who Audited Mr

question 48

Multiple Choice

The revenue agent who audited Mr.and Mrs.Wilke's 2017 Form 1040 assessed a $40,200 deficiency and concluded that $13,900 of the deficiency resulted from Mr.Wilke's deliberate disregard of the tax rules concerning business entertainment expense.The remaining deficiency resulted from various errors caused by confusing instructions on the tax forms.Compute the negligence penalty that the agent can impose.

• A)$8,040
• B)$3,475
• C)$2,780
• D)Only a federal court can impose a negligence penalty.

---

Definitions:

Parent

A company that controls other companies (subsidiaries) through ownership of more than half their voting stock or by having a significant influence over them.

Equity Method Investments

An accounting technique used to record investments in which the investor has significant influence over the investee but does not control it outright, typically through the ownership of 20% to 50% of the voting stock.

Cash Dividends

A financial distribution in the form of cash from a corporation to its investors as profits.

Dividend Revenue

Income received from owning shares in a company when the company decides to distribute some of its earnings to shareholders.