Question

The disclosure of a tax return position will reduce or eliminate an accuracy-related penalty on the taxpayer in which of the following circumstances?

The position is frivolous

The position is not properly substantiated

The position concerns a tax shelter with substantial authority

The position does not concern a tax shelter and has a reasonable basis

Answer 1

The position does not concern a tax shelter and has a reasonable basis

Step-by-step explanation:

A disclosure of a tax return can either reduce or eliminate an accuracy related penalty if:

1. it isn't frivolous
2. it does not involve a tax shelter (disclosure is required, not optional, if tax shelters are involved)
3. has a reasonable basis
4. is properly substantiated