24211_ch04_final_p001-012

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Unformatted text preview: 4-50 a. The penalty is based on $35,000, the lesser of 100 percent of the prior year tax ($35,000) or 90 percent of the current year tax [($40,000 .90) $36,000] and is calculated as follows: 4/15 6/15 9/15 1/15/02 Percentage required Required payments Payments made Underpayment Underpayment period Penalty rate (assumed) Penalty (rounded) Total penalty $1,786 b. c. 25% $ 8,750 (2,000) $ 6,750 61/365 ,,.10 $ ,113 50% $17,500 (4,000) $13,500 92/365 ,,.10 $ ,340 75% $ 26,250 (6,000) $ 20,250 122/365 ,,.10 $ ,667 100% $35,000 (8,000) $27,000 90/365 ,,.10 $ ,666 No interest is due since interest runs from the due date of the tax, which is the due date of the tax return. Because Z's prior year A.G.I. exceeded $150,000 (i.e., prior year A.G.I. was $160,000), his underpayment penalty is based on the lesser of $38,500 (110% of $35,000 prior year tax) or $36,000 (90% of current year's tax). Thus Z's penalty will be $1,862, calculated as follows: 4/15 6/15 9/15 1/15/02 Percentage required Required payments Payments made Underpayment Underpayment period Penalty rate (assumed) Penalty (rounded) Total penalty $1,862 25% $ 9,000 (2,000) $ 7,000 61/365 ,,.10 $ ,117 50% $18,000 (4,000) $14,000 92/365 ,,.10 $ ,353 75% $ 27,000 (6,000) $ 21,000 122/365 ,,.10 $ ,702 100% $36,000 (8,000) $28,000 90/365 ,,.10 $ ,690 (See Examples 32 and 33 and pp. 4-37 through 4-39.) 4-51 a. b. No. The tax that must be paid is the tax shown on the tax return. Yes. Interest calculated at the current rate on underpayment from April 15, 2011 until the tax is paid. (See p. 4-38.) 4-52 a. b. c. April 15, 2014--three years from the due date of the return (since it was later than the filing date.) If the amount of the omission exceeds 25 percent of the gross income included in the return, assessments may be made up to April 15, 2017. Because no return was filed to start the running of the statute of limitations, the IRS is never barred from making assessments. (See Exhibit 4-9, pp. 4-41 through 4-43, and 6501.) TAX RETURN PROBLEMS Solutions to the Tax Return Problems (4-534-55) are contained in the Instructor's Resource Guide and Test Bank for 2012. TAX RESEARCH PROBLEMS Solutions to the Tax Research Problems (4-604-61) are contained in the Instructor's Resource Guide and Test Bank for 2012....
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