LO.8 Christie is the preparer of the Form 1120 for Yostern Corporation. On the return, Yostern claimed a deduction that the IRS later disallowed on audit. Compute the tax preparer penalty that could be assessed against Christie in each of the following independent situations.

Form 8275 Disclosure on the Return of the Disputed Deduction?

Tax Reduction Resulting from the Deduction Probability That the Courts Would Approve the Deduction Christie’s Fee to Complete Yostern’s Return

a. No $40,000 65% $7,000

b. No 40,000 35 7,000

c. No 40,000 35 1,500

d. Yes 40,000 35 7,000

e. Yes 40,000 15 4,000