Before Recommending a Tax Position That Meets the "Substantial Authority

question 10

Multiple Choice

Before recommending a tax position that meets the "substantial authority" standard,a tax return preparer should make sure that:

• A) The taxpayer adequately understands the potential penalties associated with claiming a tax position that satisfies this reporting standard
• B) The tax law does not impose a higher reporting standard on the particular transaction or matter at issue
• C) A list of the authorities that support this position is attached to the taxpayer's tax return
• D) The taxpayer adequately discloses to the IRS a minimum of one "recognized contrary authority" that fails to support the taxpayer's asserted position

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Definitions:

Top-Down Approach

A decision-making process that starts at the highest level of an organization and cascades down to lower levels; also, a method of analysis that begins with a macro overview before drilling down into specifics.

Operating Cash Flow

The cash generated by a company's normal business operations, indicating whether a company is able to generate sufficient positive cash flow to maintain and grow its operations.

Cash Expenses

These are expenses that require an immediate outlay of cash by the business.

Opportunity Cost

The cost of forgoing the next best alternative when making a decision, a fundamental concept in economics and financial decision-making.