Problem 26-38 (LO. 8) Christie is the preparer of the Form 1120 for Yostern Corp

Question

Problem 26-38 (LO. 8) Christie is the preparer of the Form 1120 for Yostern Corporation. On the return, Yostern claimed a deduction that the IRS later disallowed on audit. Compute the tax preparer penalty that could be assessed against Christie in each of the following independent situations. If an amount is zero, enter "0." Form 8275 Disclosure on the Return of the Disputed Deduction Tax Reduction Resulting from the Deduction Probability That the Courts Would Approve the Deduction Christie's Fee to Complete the Yostern’s Return Amount of Preparer Penalty a. No $40,000 65% $7,000 $ 0 b. No 40,000 35 7,000 140 c. No 40,000 35 1,500 30 d. Yes 40,000 35 7,000 0 e. Yes 40,000 15 4,000 140

Explanation / Answer

Solution:

a. 0. Substantial authority for the position

b. 3,500. No substantial authority and no disclosure was made

c. 1,000. No substantial authority and no disclosure was made

d. 0. No substantial authority, however the disclosure was made

e. 2,000. There is not a reasonable basis

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