Based on the Advice of a Tax Return Preparer,a Taxpayer

question 28

Multiple Choice

Based on the advice of a tax return preparer,a taxpayer recently reported the market value of an unusual property distribution received from a real estate investment trust in her gross income.After the tax return was filed,the U.S.Tax Court ruled that similar kinds of distributions are not includible in gross income.The tax return preparer has:

• A) A duty to have retained the taxpayer's contact information and a duty to inform the client of this legal ruling
• B) A duty to inform the client of this legal ruling only if the amounts at issue are material to the taxpayer, measured as a percentage of the taxpayer's reported gross income
• C) A duty to inform the client of this legal ruling only if the amounts at issue are material to the taxpayer, measured as a percentage of the taxpayer's net worth
• D) No duty to contact the taxpayer

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Definitions:

Executive Corporate Officer

A high-ranking individual within a corporation, responsible for making major corporate decisions.

Potential Liability

The possibility of being responsible for some future obligation or facing legal penalties.

Specially Customized

Tailored or adapted for a specific purpose, user, or requirement, often involving unique modifications or designs.

Indemnification

A contractual obligation of one party to compensate for the loss incurred by another party due to specific acts or events.