Unformatted text preview: g false records and reporting fictitious transactions to minimize corporate tax liability. CPA-02064
Choice "d" is correct. Imposition of the civil fraud penalty requires conduct that transcends negligence or
stupidity. Maintaining false records and reporting fictitious transactions is adequate to demonstrate civil
fraud, a willful and deliberate attempt to evade taxes.
Choice "a" is incorrect. Negligence such as omitting income as a result of inadequate recordkeeping will
support a penalty, but not the civil fraud penalty.
Choice "b" is incorrect. Failing to report income erroneously considered not to be part of corporate profits
will support a penalty, but not the civil fraud penalty.
Choice "c" is incorrect. Filing an incomplete tax return will support a penalty, but not the civil fraud
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Becker CPA Review, PassMaster Questions
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