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:

Equity Method

An accounting method used to record investments in associate companies, where the investment is initially recorded at cost and adjusted according to the investor's share of the associate's net income or loss.

Equity Investment

Equity investment involves purchasing stocks or shares in a company, providing the investor with ownership interest and potentially dividends.

Cost Method

A method of accounting for equity investments representing less than 20% of the outstanding shares of the investee. The purchase is at original cost, and any gains or losses upon sale are recognized by the difference between the sale proceeds and the original cost.

Parent Company

The corporation owning all or a majority of the voting stock of the other corporation.