A Tax Practitioner Can Avoid IRS Penalty Relating to a Tax

question 95

Multiple Choice

A tax practitioner can avoid IRS penalty relating to a tax return position:

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

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Definitions:

Dividends Declared

Profits distributed by a company to its shareholders out of its earnings, based on the number of shares owned.

Retained Earnings

Profits that a company has earned to date, less any dividends or other distributions paid to shareholders, often reinvested in the business or kept as a reserve.

Cost Of Goods Sold

The direct costs attributable to the production of the goods sold by a company, including materials and labor costs, but excluding indirect expenses.

Expense

An outflow of cash or other valuable assets from a person or company to another entity in exchange for goods or services.