What does reasonable cause mean on the CPA exam?
Reasonable cause. An excuse the Code accepts for failing to file, pay or report correctly, when the taxpayer exercised ordinary business care and prudence. It waives most penalties; it does not waive interest.
Defined against Sec. 6664(c).
Which CPA exam sections use reasonable cause?
Reasonable cause appears in the REG section of the CPA exam.
Related terms
- capital asset: For tax, almost everything a taxpayer owns EXCEPT inventory, receivables, and depreciable or real property used in a trade or business.
- ordinary income: Income taxed at the regular graduated rates rather than at preferential capital gain rates.
- report release date: The date the auditor grants the entity permission to use the report.
- related person: A person close enough to the taxpayer that the Code distrusts the transaction: family, controlled entities, and certain fiduciaries.
- ordinary loss: A loss deductible against ordinary income without the capital loss limits.