The revenue agent who audited Mr. Silver's 2009 Form 1040 concluded that Mr. Silver deliberately disregarded the tax rules about charitable contributions. Consequently, the agent disallowed $19,320 of Mr. Silver's contribution deduction. Mr. Silver also miscalculated his AMT in spite of his good faith effort to make the difficult calculation. Because of these two errors, the agent assessed a tax deficiency for 2009. Which of the following statements is false?

Question

Quizplus · Accepted Answer

The statement that is false is B: "The agent could impose a negligence penalty on the entire deficiency." A negligence penalty can only be imposed on the portion of the deficiency that is attributable to the taxpayer's negligence or disregard of the tax rules, which in this case would be the disallowed contribution deduction. Therefore, the agent could impose a negligence penalty on the portion of the deficiency attributable to the disallowed contribution deduction (choice C), but not on the entire deficiency. As for choice A and D, they are both true. The agent has the authority to impose a negligence penalty in addition to the deficiency, and if the agent imposes a negligence penalty, Mr. Silver has the right to appeal the penalty.

The Revenue Agent Who Audited Mr