ExpertHard1 markMultiple Choice
CPA · Question 29 · Area I: Ethics & Tax Procedures
Which of the following acts by a CPA would most likely result in the assessment of a penalty for 'willful or reckless conduct' under IRC §6694(b)?
Which of the following acts by a CPA would most likely result in the assessment of a penalty for 'willful or reckless conduct' under IRC §6694(b)?
Answer options:
A.
Taking a position that has a reasonable basis but is not disclosed.
B.
Intentionally disregarding a Treasury Regulation without a reasonable basis for challenging it.
C.
Making a mathematical error that results in an understatement.
D.
Relying on client information that appears reasonable on its face.
How to approach this question
Distinguish between negligence/unreasonable position (lower penalty) and willful/reckless conduct (higher penalty).
Full Answer
B.Intentionally disregarding a Treasury Regulation without a reasonable basis for challenging it.✓ Correct
B
IRC §6694(b) imposes a higher penalty for understatements due to willful or reckless conduct. This includes a willful attempt to understate liability or a reckless or intentional disregard of rules or regulations. Taking a position with a reasonable basis (but failing to disclose) is a §6694(a) violation, not necessarily willful/reckless.
Common mistakes
Confusing the two tiers of preparer penalties.
Practice the full CPA REG Practice Exam 2
72 questions · hints · full answers · grading
More questions from this exam
Q01A CPA is representing a client in an IRS examination regarding a complex tax shelter transaction....HardQ02A tax return preparer is facing a penalty for an understatement of tax liability on a client's re...HardQ03Taxpayer L received a Statutory Notice of Deficiency (90-day letter) from the IRS regarding a tax...HardQ04A CPA is sued for common law negligence by a third party who relied on the CPA's audit report. Th...HardQ05Which of the following communications between a CPA and a client would generally be protected by ...Hard