A company is selling units in a limited partnership tax shelter. The company had acquired software for
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A company is selling units in a limited partnership tax shelter. The company had acquired software for $ on the open market and transferred it to the limited partnership on the same day for $ The prospectus prepared by the company states that the FMV of the software is $ and is supported by an appraisal. The tax shelter is registered with the CRA and is available as an investment opportunity in the current year. The company's gross entitlements are $
The CRA reviews the tax shelter and determines that the FMV of the software on the day of transfer to the limited partnership is $ The appraisal supporting the $ value was prepared by an independent appraiser. However, it was not prepared using normal valuation principles. The appraiser informed the CRA that all calculations were based on the assumptions and other relevant facts provided by the company. The appraiser was paid $ for the appraisal.
A
The prospectus prepared by the company contains a false statementoverstated fair market value of the software that could be used for tax purposes. The company knew or would reasonably be expected to know that the fair market value was a false statement. The CRA would consider assessing the company with thirdparty civil penalties but would not assess the appraiser with thirdparty civil penalties. The amount of the penalty would be the fair market value of the software.
B
The prospectus prepared by the company contains a false statementoverstated fair market value of the software that could be used for tax purposes. The company knew, or would reasonably be expected to know, that the fair market value was a false statement. The CRA would consider assessing the company with thirdparty civil penalties and would also consider assessing the appraiser with thirdparty civil penalties. The amount of the penalty would be the preparer's gross entitlements from the valuation activity.
C
The prospectus prepared by the company contains a false statementoverstated fair market value of the software that could be used for tax purposes. The company is unlikely to have known that the fair market value was a false statement. The CRA would not consider assessing the company with thirdparty civil penalties but would consider assessing the appraiser with thirdparty civil penalties.
D
The prospectus prepared by the company contains a false statementunderstated fair market value of the software that could be used for tax purposes. Since it appears that the error was an honest mistake, no penalties are likely to be assessed by the CRA.
Related Book For
Fundamental accounting principle
ISBN: 978-0078025587
21st edition
Authors: John J. Wild, Ken W. Shaw, Barbara Chiappetta
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