Exercise 17-19 (Algorithmic) (LO. 6)

Rivera underpaid her income tax by $45,000. The IRS can prove that $40,000 of the underpayment was due to fraud.

If required, round your answers to the nearest dollar.

a. Determine Rivera's civil fraud penalty. $30,000 is incorrect

b. Rivera pays the penalty five years after committing the fraudulent act. Compute the present value of Rivera's penalty. Assume her after-tax rate of return on available cash is 9%. The present value factor for 5 years and 9% is 0.6499. $19,497 is incorrect.

Please provide a solution with an explanation. [Tax Question]