Question

DESCRIBE THE DIFFERENCE BETWEEN CONFIDENTIALITY AND INSIDER TRADING.

DISCUSS THE PENALTIES UNDER IRC 6694 AND 6695.

Answer 1

Penalties under IRC 6694 and 6695 are as follows

Section	Title	Penalty Amount
6694 (a)	Understatement due to unreasonable position	$1,000 or 50% of income, whichever is higher
6694 (b)	Willful understatement	$5,000 or 75% of income, whichever is higher
6695 (a)	Failure to furnish copy to taxpayer	$50 for each failure. Maximum penalty $26,000 in a calendar year
6695 (b)	Failure to sign the return	$50 for each failure. Maximum penalty $26,000 in a calendar year
6695 (c)	Failure to furnish identification number	$50 for each failure to comply with IRC 6109(a)(4). Maximum penalty $26,000 in a calendar year
6695 (d)	Failure to retain copy	$50 for each failure to comply with IRC 6107(b). Maximum penalty $26,000 in a period
6695 (e)	Failure to file correct information	$50 for each failure to comply with IRC 6060. Maximum penalty $26,000 in a period
6695 (f)	Negotiation of check	$520 for a tax return preparer who defaults
6695 (g)	Failure to be diligent in determining eligibility for child tax credit, American opportunity tax credit and earned income credit	$520 for each failure

Information from the point of view of a publically traded company is CONFIDENTIAL when it has not been "GENERALLY DISCLOSED" to the general public. Information is considered generally disclosed if it has been given out in the share market and there has been enough time for the market players to react.

Any person who has substantial CONFIDENTIAL non disclosed information that can influence the movement of stock price is not allowed to trade in securities for his/her own advantage. But if such a person illegally trades, it is known as INSIDER TRADING.