What does substantial authority mean?

Substantial Authority means the weight of authorities for the tax treatment of an item is substantial in relation to the weight of authorities supporting contrary positions.

How do you know when there is substantial authority for a tax return position?

Under IRS rules, the tax treatment of an item has “substantial authority” only if the weight of published cases, rules and other legal and administrative authorities is substantial in relation to the weight of opposing authorities.

What does substantial understatement mean?

The understatement is substantial if it is more than the larger of 10 percent of the correct tax or $5,000 for individuals. For corporations, the understatement is considered substantial if the tax shown on your return exceeds the lesser of 10 percent (or if greater, $10,000) or $10,000,000.

Should vs more likely than not?

A “should” opinion” suggests a reasonably high level of confidence that the position will be sustained— significantly higher than “more likely than not”—but allows for a not insignificant risk of being wrong. Will Opinion. A “will” opinion is consistent with a conclusion that there is no material risk of being wrong.

What is a substantial valuation misstatement?

Substantial valuation misstatement. In the case of any transaction between related parties described in IRC § 482, a substantial valuation misstatement exists when the price for any property or service, claimed on any tax return, is 200% or more, or 50% or less, of the price determined under IRC § 482 to be correct.

What is a substantial underpayment?

The substantial underpayment penalty applies if you underpay your taxes by the higher of 10% of the amount you should have paid, or $5,000. The general rule is that the IRS can’t impose a penalty if you had reasonable cause for understating your tax and acted in good faith.

What is more likely than not?

Sample 1. More likely than not means a likelihood of more than 50%. Sample 1. More likely than not means that when the examination of all the relevant evidence and materials, a preponderance of the evidence and materials support the conclusion.

Which authority is the most persuasive when determining a tax position level of confidence?

Supreme Court of the United States. The court does not decide many tax cases; if there is a constitutional issue concerning a tax or if there is a split in the Circuits on a particular tax matter, the Supreme Court is far more likely to accept the case.

Is substantial authority more likely than not?

In relative terms, however, substantial authority is defined as a less stringent standard than “more likely than not” (Regs. Sec. 1. 6662 – 4 (d) (2)).

Is the substantial authority standard an objective standard?

Because the substantial authority standard is an objective standard, the taxpayer’s belief that there is substantial authority for the tax treatment of an item is not relevant in determining whether there is substantial authority for that treatment. (ii) Nature of analysis.

What is the effect of having substantial authority for tax purposes?

The applicable Treasury Regulation (26 CFR § 1.6662-4 (d)) provides in relevant part: (1) Effect of having substantial authority. If there is substantial authority for the tax treatment of an item, the item is treated as if it were shown properly on the return for the taxable year in computing the amount of the tax shown on the return.

What is substantial authority in family law cases?

Substantial authority is an objective standard that requires an analysis and application of the law to the relevant facts.