In Reviewing Your Corporate Client's Tax Return for Last Year,you

question 4

Multiple Choice

In reviewing your corporate client's tax return for last year,you discovered that it overstated the beginning balance of its Patent account by $15 million.The client amortizes patents over a15-year period on a straight-line basis,so the company's pretax income was understated by $1 million last year.You informed your client over this error,and the client acknowledged that an error had been made.Nonetheless,your client insists that,for tax purposes,it intends to continue to amortize this patent balance in the same manner and for the same amounts as it did last year.You have a duty to:

• A) Inform the IRS about the client's refusal to make required corrections
• B) Not serve as the client's tax return preparer during the current year
• C) Not serve the client in any tax-related capacity, including as its tax preparer or tax adviser
• D) Continue to serve as the client's tax return preparer in accordance with your tax advocacy and confidentiality obligations

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Definitions:

Hobby

An activity done regularly in one's leisure time for pleasure, not normally intended as a primary source of income.

Deductible

An expense that can be subtracted from gross income to reduce taxable income, thereby lowering the tax liability.

Trade Or Business

Engagements or activities conducted for the purpose of income or profit, characterized by continuity and regularity.

Mortgage Interest

The interest charged on a loan used to purchase a property, often tax-deductible for the borrower.