In preparing Watt’s individual income tax return, Stark, CPA, took a deduction contrary to a Tax Court decision that had disallowed a similar deduction. Stark’s position was adopted in good faith and with a reasonable belief that the Tax Court decision failed to conform to the Internal Revenue Code. Under the circumstances, Stark will:
A. be liable for the preparer’s negligence penalty.
B. not be liable for a preparer penalty unless the understatement of taxes is at least 25% of Watt’s tax liability.
C. be liable for the preparer’s penalty because of Stark’s intentional disregard of the Tax Court decision.
D. not be liable for a preparer penalty if Stark exercised due diligence.