25 May Question 1. Lori, a calendar year individual taxpayer, files her 201
Question
1. Lori, a calendar year individual taxpayer, files her 2013 return on February 10, 2015. She had obtained a six-month extension for filing her return. There was additional income tax of $30,000 due with the return.
a. What are Lori’s penalties for failure to file and to pay?
b. Would your answer to a. change if Lori, before the due date of the return, had retained a CPA
to prepare the return and it was the CPA’s negligence that caused the delay?
2. Compute the overvaluation penalty for each of the following independent cases involving the taxpayer’s reporting of the fair market value of charitable contribution property. In each case, assume a marginal Federal income tax rate of 35%.
| Taxpayer | Corrected IRS Value | Reported Value | |
| a. | Individual | $ 10,000 | $ 20,000 |
| b. | C corporation | 10,000 | 30,000 |
| c. | S corporation | 10,000 | 30,000 |
| d. | Individual | 100,000 | 175,000 |
| e. | Individual | 100,000 | 250,000 |
| f. | C corporation | 100,000 | 500,000 |
3. Compute the undervaluation penalty for each of the following independent cases involving the executor’s reporting of the value of a closely held business in the decedent’s gross estate. In each case, assume a marginal Federal estate tax rate of 40%.
| Reported Value | Corrected IRS Value | |
| a. | $10,000 | $20,000 |
| b. | 60,000 | 100,000 |
| c. | 80,000 | 150,000 |
| d. | 50,000 | 300,000 |
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