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

question 97

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

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Definitions:

Promissory Estoppel

A legal principle that prevents a person from going back on a promise, even if it was not formally made as a contract, if it was reasonable to rely on that promise and doing so caused harm.

Refund

A repayment to someone of money they have previously paid.

Legal Obligation

A duty enforced by law whereby an individual or entity is required to perform or refrain from performing a certain action.

Consideration

In legal terms, it's something of value exchanged between parties in a contract, making the agreement binding.