Kopel was engaged to prepare Raff's Year 4 federal income tax return. During the tax preparation interview, Raff told Kopel that he paid $3,000 in property taxes in Year 4. Actually, Raff's property taxes amounted to only $600. Based on Raff's word, Kopel deducted the $3,000 on Raff's return, resulting in an understatement of Raff's tax liability. Kopel had no reason to believe that the information was incorrect. Kopel did not request underlying documentation and was reasonably satisfied by Raff's representation that Raff had adequate records to support the deduction. Which of the following statements is correct?
|
a. | Kopel is not subject to the preparer penalty for willful understatement of tax liability because Kopel was justified in relying on Raff's representation. | |
b. | To avoid the preparer penalty for willful understatement of tax liability, Kopel was obligated to examine the underlying documentation for the deduction. | |
c. | Kopel is not subject to the preparer penalty for willful understatement of tax liability because the deduction that was claimed was more than 25% of the actual amount that should have been deducted. | |
d. | To avoid the preparer penalty for willful understatement of tax liability, Kopel would be required to obtain Raff's representation in writing. |
|
