Question

C: 15-64

Chapter 15 Tax Strategy Problem

The IRS is disputing a deduction reported on your Year 1 tax return, which you filed on April 12 of Year 2. On April 4 of Year 5, the IRS audit agent asks you to waive the statute of limitations for the entire return so as to give her additional time to obtain a Technical Advice Memorandum. The agent proposes in return for the waiver a “carrot”—the prospect of an offer in compromise—and a “stick”—the possibility of a higher penalty. Although you have substantial authority for the deduction, you consider the following alternatives: (1) waive the statute of limitations for the entire return, (2) waive the statute of limitations for the deduction only, or (3) do not waive the statute of limitations in any way, shape, or form. Which alternative should you choose, and why?

Answer 1

Answer :

• In the given issue alternative 2 that is to surrender deduction for statue of constraints only(and for a sensible timeframe) is helpful postponing the statue of restrictions for whole return as in alternative. I will give IRS time to audit different things on the return.
• An individual has duty to report these things properly and to pay fair amount of the taxation rate. Also,IRS likewise has an duty to acquire conclusiveness in matters related with taxpayer affairs inside the time period set by congress.
• Declining to defer the statue of restrictions here and there .Frame or shape as in alternative 3 not exclusively will accelerate the audit agent to assess a higher fine finally .yet additionally hinder the possibility of charming the evaluation to IRS Appeals office or the courts.
• As an individual have significant expert for the deduction.Alternative 2 relieves him/her of possibility of accuracy - related fine .it likewise gives him an opportunity to bid any ill-disposed audit conclusion and opens the entryway for a probable idea in negotiation.