A Client Wants to Take a Tax Return Position with Less

question 1729

Multiple Choice

A client wants to take a tax return position with less than a 10% probability of being upheld in court. The CPA should

• A) inform the client that the position does not have a realistic possibility of success.
• B) ask the client to sign a waiver of his right to sue the CPA in the event the IRS disallows the position.
• C) take the client's desired position and sign the return as usual.
• D) take the client's desired position, but not sign the tax return.

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Definitions:

Variable Costs

Costs that vary directly with the level of production or with volume of services provided.

Fixed Costs

Fixed costs are expenses that do not vary with the level of production or sales within a certain range, such as rent, salaries, and insurance.

Automated Machine

A machine operated with minimal human intervention, typically using computer-controlled systems.

Margin of Safety

The difference between actual or projected sales and the break-even point, indicating the extent to which sales can drop before a business incurs a loss.