MrBennett Is a Professional Tax Return Preparer

question 65

Essay

Mr.Bennett is a professional tax return preparer.Three years ago,he prepared Form 1120 for Philly Inc.His fee for the preparation was $15,000.Upon audit of the return,the IRS disallowed a $100,000 deduction,which increased the corporation's tax by $35,000.Compute Mr.Bennett's preparer penalty if the IRS concludes that:
a.Mr.Bennett had no reasonable legal basis for claiming the deduction and was not acting in good faith by doing so.
b.Mr.Bennett intentionally disregarded the tax law by claiming the deduction in a willful attempt to understate Philly's tax.
c.How would your answers to a.and b.change if Mr.Bennett's preparation fee was only $6,000?

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Definitions:

Present Tense

The form of verbs used to describe actions or conditions that are currently happening or general truths.

Confrontation

A direct encounter or challenge between parties where differences are openly discussed or faced, often seen as a means to resolve disagreements.

Confusion

A state of being bewildered or unclear in one’s mind about something.

Avoidance

A behavior or strategy aimed at keeping away from certain situations or stimuli that are perceived as harmful or unpleasant.