Cheatography
https://cheatography.com
Penalties
Failure to File |
5% of net tax |
Failure to Pay |
0.5% of net tax |
Accuracy Related |
20% of under payment |
Fraud (underpmt) |
75% of underpmt |
Accuracy Related Penalties (IRC Sec. 6662)
(1) Negligence or disregard of rules/regs. |
(2) Subst. understmt of income tax |
(3) subst. valuation misstatement |
(4) subst. overstatment of pension liabilities |
(5) subst. estate/gift tax valuation understmt |
Return Preparer Penalty
IRC Sec 6694, imposed on preparer who signs or prepares all or subst. return.
Imposed if any part of understmt due to unreasonable position.
Greater of $1,000 or 50% of income derived
Avoid if adequately disclosed and supported by subst authority
NO REASONABLE BASIS OR GOOD FAITH avoidance clause |
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Percentage Standards
MLTN |
50% chance |
TPs, RPs, TaxShelt P |
Subst. Authority |
35%-40% |
TPs and RP (non taxshelt) |
Realistic Possibility |
1/3 |
Compliance |
Reasonable Basis |
10%-20% |
TPs/RPs, SSTS (disclosure) |
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Judicial Docrtines
Business Purpose |
txs should have legit nontax biz purpose |
Substance over Form |
form of tx will not govern tax-->form does not match economic reality (substance) of the tx |
Sham Transaction |
tx sole purpose=prod. of tax deducts; false/incomplete facts to achieve results; arms length issue |
Step Transaction |
all steps of tx merged to det. true nature (start and finished) |
Assignment of income |
IRC Sec. 61; income matches owner/provider |
Economic Substance (Codified) |
tx as real, nontax econ benefit (tx changes in a meaningful way) |
Econ substance penalty |
20%, if nondisclosed= 20%-40% |
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