Bennie underpaid his taxes by $250,000. A portion of the underpayment was shown to be...
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Accounting
Bennie underpaid his taxes by $250,000. A portion of the underpayment was shown to be attributable to Bennies negligence ($100,000). A court found that the rest of the deficiency constituted civil fraud ($150,000).
a. Compute the total fraud and negligence penalties incurred.
b. Bennie pays the penalties four years after committing the improper acts. His after-tax rate of return on available cash is 7%. What is the present value of Bennies penalty obligations?
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