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Audit Techniques Guide

 

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Accuracy - Related Penalties For Taxpayers Involved In Tax Shelter Transactions

Accuracy-Related Penalties for Taxpayers Involved In Tax Shelter Transactions - Table of Contents

Publication Date - August, 2004

NOTE: This guide is current through the publication date. Since changes may have occurred after the publication date that would affect the accuracy of this document, no guarantees are made concerning the technical accuracy after the publication date.


This Audit Techniques Guide (ATG) is presented in several chapters. These chapters can be accessed and then printed by following the links in the Table of Contents below.  To print the entire ATG please refer to the PDF version.

Table of Contents

1.       Introduction

o        Coverage

o        Overview

o        Focus

o        Tax Shelters

o        Tax Shelters continued

o        Penalty Policy: Facts and Documentation to be Developed During the Examination

o        LMSB

o        SB/SE

o        Managerial Approval of Penalties

2.       Accuracy-Related Penalty – IRC § 6662

o        In General

o        IRC § 6662 - Accuracy-Related Penalty

o        Penalty Amount

o        Definition of Underpayment

3.       Negligence or Disregard of Rules or Regulations

o        Negligence

o        Disregard of Rules or Regulations

o        Adequate Disclosure

4.       Substantial Understatement

o        In General

o        Definition of Tax Shelter for Purposes of IRC § 6662(d)

o        Substantial Authority Exception 

5.       Substantial Valuation Misstatement

o        In General

6.       Fraud Penalty – IRC § 6663

o        Introduction

7.       Reasonable Cause and Good Faith – IRC § 6664

o        Reasonable Cause & Good Faith Exception - In General 

o        Taxpayer’s effort to assess the proper tax liability 

o        Experience, Knowledge, Sophistication and Education of Taxpayer 

o        Reliance on Advice 

o        Reportable Transactions 

o        Nontax Matters 

o        Advisor Independence  

o        Special Rules for Tax Shelter items of a Corporation 

8.       Announcement 2002-2 

o        Introduction 

o        “Issues Raised During An Examination” 

o        Applicability of Announcement 2002-2 

9.       Policy Statements 

o        IRS Commissioner Memorandum dated December 29, 2003 

o        LMSB Commissioner Memorandum dated December 20, 2001 

o        LMSB Commissioner Memorandum dated July 10, 2003 

10.    Audit Techniques – Development of Potential Penalty Issues for Tax Shelter Cases 

o        Inquiries relating to accuracy-related penalty 

o        Inquiries relating to Reasonable Cause & Good Faith 

o        Inquiries Relating to Reliance on Advice 

 

 

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