Mr Braco Is an Enrolled Agent Who Prepares Tax Returns

question 68

Multiple Choice

Mr. Braco is an enrolled agent who prepares tax returns for a living. In preparing Mr. and Mrs. Colter's Form 1040, Mr. Braco claimed a deduction based on an unreasonable legal position. Mr. Braco's compensation for the return was $3,800. What is the consequence to Mr. Braco if the IRS disallows the deduction?

• A) The IRS can terminate Mr. Braco's status as an enrolled agent.
• B) The IRS can impose a $1,900 penalty on Mr. Braco.
• C) The IRS can impose a negligence penalty on the Colters but can't penalize Mr. Braco.
• D) The IRS can impose a civil fraud penalty on Mr. Braco.

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Definitions:

Return on Common Shareholders' Equity Ratio

A financial metric that measures a company's profitability by showing how much profit it generates with the money shareholders have invested, specifically focusing on common stockholders.

Profit Margin

A financial metric that measures the amount of profit a company earns per dollar of revenue, indicating the efficiency of the company in converting sales into profits.

Inventory Turnover Ratio

A measure of how often a company sells and replaces its inventory over a period, indicating the efficiency of inventory management.

Profit Margin

A financial metric used to evaluate a company's financial health by dividing net income by net sales, showing the percentage of revenue that exceeds the cost of goods sold.