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tax problems - questin and answer,.,. ch 26




Question;24. LO.5 Gordon paid the $10,000 balance of his Federal income tax three months late.Ignore daily compounding of interest. Determine the interest rate that applies relative to this amount, assuming that:a. Gordon is an individual.b. Gordon is a C corporation.c. The $10,000 is not a tax that is due, but is a refund payable by the IRS to Gordon (an individual).d. The $10,000 is not a tax that is due, but is a refund payable by the IRS to Gordon (aC corporation).25. LO.6 Rita forgot to pay her Federal income tax on time. When she actually filed, she reported a balance due. Compute Rita?s failure to file penalty in each of the following cases.a. Two months late, $1,000 additional tax due.b. Five months late, $3,000 additional tax due.c. Eight months late, $4,000 additional tax due.d. Two and a half months late, $3,000 additional tax due.e. Five months late due to fraud by Rita, $4,000 additional tax due.f. Ten months late due to fraud by Rita, $15,000 additional tax due.26. LO.6 Wade filed his Federal income tax return on time but did not remit the balance due. Compute Wade?s failure to pay penalty in each of the following cases. Assume that the IRS has not issued a deficiency notice.a. Four months late, $3,000 additional tax due.b. Ten months late, $4,000 additional tax due.c. Five years late, $5,000 additional tax due.27. LO.6 Compute the failure to pay and failure to file penalties for John, who filed his 2012 income tax return on December 20, 2013, paying the $10,000 amount due at that time. On April 1, 2013, John received a six-month extension of time in which to file his return. He has no reasonable cause for failing to file his return by October 15 or for failing to pay the tax that was due on April 15, 2013. John?s failure to comply with the tax laws was not fraudulent.28. LO.6 Olivia, a calendar year taxpayer, does not file her 2012 return until December 12, 2013. At this point, she pays the $40,000 balance due on her 2012 tax liability of $70,000.Olivia did not apply for and obtain any extension of time for filing the 2012 return.When questioned by the IRS on her delinquency, Olivia asserts: ?If I was too busy to file my regular tax return, I was too busy to request an extension.?a. Is Olivia liable for any penalties for failure to file and for failure to pay?b. If so, compute the penalty amounts.29. LO.6 Maureen, a calendar year taxpayer, files her 2011 return on November 4, 2013.She did not obtain an extension for filing her return, and the return reflects additional income tax due of $15,000.a. What are Maureen?s penalties for failure to file and to pay?b. Would your answer change if Maureen, before the due date of the return, had retained a CPA to prepare the return and the CPA?s negligence caused the delay?Explain.30. LO.6 Blair underpaid her taxes by $250,000. A portion of the underpayment was shown to be attributable to Blair?s negligence ($100,000). A court found that the rest of the deficiency constituted civil fraud ($150,000). Compute the total fraud and negligence penalties incurred.31. LO.6 Compute the overvaluation penalty for each of the following independent cases involving the fair market value of charitable contribution property. In each case, assume a marginal income tax rate of 35%.TaxpayerCorrected IRSValueReportedValuationa. Individual $ 40,000 $ 50,000b. C corporation 30,000 50,000c. S corporation 40,000 50,000d. Individual 150,000 200,000e. Individual 150,000 250,000f. C corporation 150,000 750,00032. LO.6 Compute the undervaluation penalty for each of the following independent cases involving the value of a closely held business in the decedent?s gross estate. In each case, assume a marginal estate tax rate of 40%.ReportedValueCorrected IRSValuationa. $ 20,000 $ 25,000b. 100,000 150,000c. 150,000 250,000d. 150,000 500,00033. LO.6 Singh, a qualified appraiser of fine art and other collectibles, was advisingColleen when she was determining the amount of the charitable contribution deduction for a gift of sculpture to a museum. Singh sanctioned a $900,000 appraisal, even though he knew the market value of the piece was only $300,000. Colleen assured Singh that she had never been audited by the IRS and that the risk of the government questioning his appraisal was negligible.But Colleen was wrong, and her return was audited. The IRS used its own appraisers to set the value of the sculpture at $400,000. Colleen is in the 33% Federal income tax bracket, while Singh?s fee for preparing the appraisal was $20,000.a. Compute the penalty the IRS can assess against Singh. (Do not consider the valuation penalty as to Colleen?s return.)b. What is the penalty if Singh?s appraisal fee was $7,500 (not $20,000)?34. LO.6 The Eggers Corporation filed an amended Form 1120, claiming an additional $400,000 deduction for payments to a contractor for a prior tax year. The amended return was based on the entity?s interpretation of a Regulation that defined deductible advance payment expenditures. The nature of Eggers?s activity with the contractor did not exactly fit the language of the Regulation. Nevertheless, because so much tax was at stake, Eggers?s tax department decided to broaden its interpretation and claim the deduction.Eggers?s tax department estimated that there was only a 15% chance that Eggers?s interpretation would stand up to a Tax Court review.a. What is the amount of tax penalty that Eggers is risking by taking this position?b. What would be the result if there was a 45% chance that Eggers?s interpretation of the Regulation was correct?


Paper#38716 | Written in 18-Jul-2015

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