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Cheatography

TR Cheat Sheet by

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
 

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)
 

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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