A Taxpayer Can Avoid a Substantial Understatement of Tax Penalty

question 9

Multiple Choice

A taxpayer can avoid a substantial understatement of tax penalty:

• A) if the position is frivolous and disclosed on the tax return.
• B) if the position has a realistic possibility of being sustained by the IRS or courts.
• C) if there is substantial authority to support the position.
• D) if the position has a reasonable basis and is not disclosed on the tax return.
• E) None of these.

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Definitions:

Courage

The ability to do something that frightens one or the strength in the face of pain or grief.

Practical Wisdom

The ability to make the right decisions in everyday life by applying moral values and rational thought.

Fundamental Principles

The basic or core ideas, values, or laws that form the foundation for a system or theory.

Specific Actions

Concrete, individual acts or behaviors taken in a particular context, often evaluated in terms of their morality, legality, or effectiveness.