Upon audit by the IRS,Faith is assessed a deficiency of $40,000 of which $25,000 is attributable to negligence.The 20% negligence penalty will apply to only $25,000.

Question

Quizplus · Accepted Answer

The statement is true. As per the question, the deficiency of $40,000 includes $25,000 attributable to negligence. The 20% negligence penalty will apply to this amount only, not to the entire deficiency amount. Therefore, the penalty would be $5,000 (20% of $25,000).

Upon Audit by the IRS,Faith Is Assessed a Deficiency of $40,000