A Taxpayer Can Avoid a Substantial Understatement of Tax Penalty

question 79

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 the position is not frivolous and disclosed on the tax return.
• D) if the position has a reasonable basis and is disclosed on the tax return.
• E) None of these.

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Definitions:

State Legislatures

The legislative bodies within each of the states in the United States, responsible for creating state laws and policies.

Corporate Veil

A legal concept that separates the actions and liabilities of a corporation from those of its shareholders, protecting them from personal liability.

Creditors

Individuals or entities to whom money is owed by another individual or entity known as the debtor.

Not-for-Profit Corporations

Organizations that operate for purposes other than making a profit, often focusing on cultural, educational, and charitable activities.