Mr Bennett Is a Professional Tax Return Preparer

question 43

Essay

Mr Bennett is a professional tax return preparer. Three years ago, he prepared the 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:

Plate Boundaries

The edges where two tectonic plates meet, which can be sites of significant geological activity including earthquakes, volcanoes, and mountain building.

Subduction Zone

A geological region where one tectonic plate moves under another, leading to various geological phenomena, including earthquakes and volcanoes.

Destructive Earthquakes

Earthquakes that result in significant damage and loss of life, often occurring near tectonic plate boundaries where energy release is concentrated.

Red Triangle

An area notorious for its frequency of shark attacks; without context, it could also simply refer to a geometric shape in a specific color.