Printer Friendly

Modifications of substantial understatement penalty for nonreportable transactions.

Before the AJCA, a 20% accuracy-related penalty applied to any substantial tax understatement. A "substantial understatement" existed if the correct income tax liability for a tax year exceeded that reported by the taxpayer by the greater of 10% of the correct tax or $5,000 ($10,000 in the case of most corporations); see Sec. 6662(a) and (d)(1)(A).

New Law

AJCA Section 819 modifies the Sec. 6662 definition of "substantial" for corporate taxpayers, to provide that there is a substantial understatement when the amount of the understatement for the tax year exceeds the lesser of 10% of the correct tax (or, if greater, $10,000) or $10 million.

Effective Date

The provision is effective for tax years beginning after Oct. 22, 2004. FROM PAUL MANNING, WASHINGTON, DC
COPYRIGHT 2005 American Institute of CPA's
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 2005, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

Article Details
Printer friendly Cite/link Email Feedback
Author:Manning, Paul
Publication:The Tax Adviser
Date:Jan 1, 2005
Words:130
Previous Article:Modifications of actions to enjoin certain conduct related to tax shelters and reportable transactions.
Next Article:Modified accuracy-related penalty for listed transactions and other reportable transactions.
Topics:


Related Articles
The penalty rules have changed - again.
The carrot and the stick: IRS's new disclosure initiative and guidelines for imposing the section 6662 accuracy-related penalty.
IRS releases 2003 guidelines for "adequate disclosure".
Modified accuracy-related penalty for listed transactions and other reportable transactions.
Penalty for failing to disclose reportable transactions.
The new penalty regime finally arrives: proceed with caution!
IRS releases 2004 guidelines for "adequate disclosure".
AJCA penalties for noncompliance with reportable transaction regs.
IRS guidance on reportable transaction understatement penalties.
IRS releases 2005 guidelines for "adequate disclosure".

Terms of use | Privacy policy | Copyright © 2021 Farlex, Inc. | Feedback | For webmasters |