Question

The IRS assessed a $32,800 income tax deficiency plus $4,015 interest against Mr. and Mrs. Reczyks because of an alleged understatement of investment income. They refused to pay and took their case to the U.S. Tax Court. The Reczyks incurred $7,829 attorney fees and other costs of the litigation. Determine their after-tax cost assuming that:

The Reczyks won their case, and the IRS failed to demonstrate that its position was substantially justified.

The Reczyks won their case, but the IRS convinced the court that its position was substantially justified.

The Reczyks lost their case.

Answer 1

The Reczyks won their case, and the IRS failed to demonstrate that its position was substantially justified.

In This Case,The Position of Reczyks is not required to pay amount of Income Tax deficiency, Interest, and litigation expenses also pay by Government

The Reczyks won their case, but the IRS convinced the court that its position was substantially justified.

In this Case Reczyks is not required to pay the Income Tax deficiency and Interest because he won the case but he convinced the court that its position was substantially justified so need to Incur the Litigation Expense.These expenses may be allowed under deductions depends on other Income computations

The Reczyks lost their case

Reczyks required to pay all such as the Income Tax deficiency and Interest and Litigation Expenses