Federal Tax Research, 12th Edition
Complete Research Case Solutions
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Federal Tax Research, 12 Edition Page 1
Research Case Solutions
The solutions to the research cases are valid as of February 2020. It is likely that there will be
changes in the code, regulations, administrative pronouncements, and case law after this manual
is published. Further, it is likely that the services available to the students will not be identical to
those available to the authors of this manual. All possible citations are not provided; only a
sample of the citations most likely provided by students is presented. Consequently, the students‘
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responses may vary from those listed for each question.
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Chapter 1
Note: For the following cases, students may present other positions, which could be considered
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R ted
ethically correct. The answers presented below are the views of the authors and are presented as
a basis to judge a student‘s ethical conclusion:
SE s
1-1 AICPA Code of Professional Conduct
ET § 1.200.001: Independence
ET § 1.100.001: Objectivity and Integrity
D ch
ET § 1.700.001: Confidential Client Information
ET § 1.400.001: Acts Discreditable
O o
SSTS No. 1: Tax Return Positions
C la
It is not advisable for Ahi Corporation to complete the transaction. Under ET §
1.100.001, all professional services by a CPA should be rendered with objectivity
S
and integrity, avoiding any potential or existing conflicts of interest. The CPA
must exercise due professional care in the performance of all professional services
and comply with all standards promulgated by the bodies designated by the
AICPA Council. Under ET §1.400.001, a CPA must not commit an act that is
discreditable to the profession. Under the Statements of Standards for Tax
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Federal Tax Research, 12 Edition Page 2
Services (SSTS), a CPA should have a good-faith belief that a recommended
position has a realistic possibility of being sustained if challenged.
The CPA must use judgment that reflects professional competence and serves the
client‘s needs. Written communication should be given to the client in important,
unusual, or complicated transactions. The CPA should advise the client of such
risks as in the instant case. Where the taxpayer insists on the specific position, the
N us
CPA should not continue with the engagement as the tax return position is
exploitative and frivolous.
U
1-2. AICPA Code of Professional Conduct
Tr
R ted
ET § 1.100.001: Objectivity and Integrity
SE s
SSTS No. 1: Tax Return Positions; No. 6: Knowledge of Error: Return
Preparation and Administrative Proceedings
A CPA must comply with all standards promulgated by bodies designated by the
AICPA Council and conform to generally accepted accounting principles. Under
D ch
ET § 1.100.001, all professional services by a CPA should be rendered with
objectivity and integrity, avoiding any potential or existing conflicts of interest. In
O o
addition, a CPA should neither knowingly misrepresent facts nor subordinate his
or her judgment to that of others in rendering any professional services.
C la
Under the Statements of Standards for Tax Services (SSTS), a CPA should have a
S
good-faith belief that a recommended position has a realistic possibility of being
sustained if challenged. In the instant case, the CPA must notify and advise the
client promptly upon his or her knowledge of a prior or current tax return error(s)
that has a significant effect upon the taxpayer‘s liability. The client must be
notified and advised either orally or in writing. Once rental prices of the current
area have been verified and compared against the amount paid by Haddock
Corporation, the CPA should take the appropriate actions. The CPA should
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Federal Tax Research, 12 Edition Page 3
consider whether to proceed with the preparation of the current year‘s return or
resign from the engagement completely. He or she should not sign the tax return
until the appropriate measures have been taken to correct the errors made in the
current and prior returns.
1-3. AICPA Code of Professional Conduct
ET § 1.100.001: Objectivity and Integrity
N us
ET § 1.700.001: Confidential Client Information
U
Under ET § 1.700.001 of the AICPA Code of Professional Conduct, a CPA in the
practice of public accounting must not disclose confidential client data without
Tr
R ted
specific consent of the client. There are exceptions that exist for Rule 301. Under
ET § 1.100.001, all professional services by a CPA should be rendered with
SE s
objectivity and integrity, avoiding any potential or existing conflicts of interest. In
addition, a CPA should neither knowingly misrepresent facts nor subordinate his
or her judgment to that of others in rendering any professional services.
In the instant case, the CPA should notify the client, Shark Corporation, of the
D ch
misrepresentation of facts. If the client is not willing to notify the buyer of the
building‘s current structural condition, the CPA should resign from the
O o
engagement. If the CPA has already told the other side that the building was OK
when he or she learns of its status, the CPA should resign from the engagement
C la
with Shark Corporation.
S
1-4. AICPA Code of Professional Conduct
ET § 1.100.001: Objectivity and Integrity
ET § 1.300.001 General Standards
ET § 1.700.001: Confidential Client Information
Under ET § 1.700.001 of the AICPA Code of Professional Conduct, a CPA in the
practice of public accounting must not disclose confidential client data without
r
Trustedscholar
Complete Research Case Solutions
Tr
us
te
ds
ch
ol
ar
, th
Federal Tax Research, 12 Edition Page 1
Research Case Solutions
The solutions to the research cases are valid as of February 2020. It is likely that there will be
changes in the code, regulations, administrative pronouncements, and case law after this manual
is published. Further, it is likely that the services available to the students will not be identical to
those available to the authors of this manual. All possible citations are not provided; only a
sample of the citations most likely provided by students is presented. Consequently, the students‘
N us
responses may vary from those listed for each question.
U
Chapter 1
Note: For the following cases, students may present other positions, which could be considered
Tr
R ted
ethically correct. The answers presented below are the views of the authors and are presented as
a basis to judge a student‘s ethical conclusion:
SE s
1-1 AICPA Code of Professional Conduct
ET § 1.200.001: Independence
ET § 1.100.001: Objectivity and Integrity
D ch
ET § 1.700.001: Confidential Client Information
ET § 1.400.001: Acts Discreditable
O o
SSTS No. 1: Tax Return Positions
C la
It is not advisable for Ahi Corporation to complete the transaction. Under ET §
1.100.001, all professional services by a CPA should be rendered with objectivity
S
and integrity, avoiding any potential or existing conflicts of interest. The CPA
must exercise due professional care in the performance of all professional services
and comply with all standards promulgated by the bodies designated by the
AICPA Council. Under ET §1.400.001, a CPA must not commit an act that is
discreditable to the profession. Under the Statements of Standards for Tax
r
Trustedscholar
, th
Federal Tax Research, 12 Edition Page 2
Services (SSTS), a CPA should have a good-faith belief that a recommended
position has a realistic possibility of being sustained if challenged.
The CPA must use judgment that reflects professional competence and serves the
client‘s needs. Written communication should be given to the client in important,
unusual, or complicated transactions. The CPA should advise the client of such
risks as in the instant case. Where the taxpayer insists on the specific position, the
N us
CPA should not continue with the engagement as the tax return position is
exploitative and frivolous.
U
1-2. AICPA Code of Professional Conduct
Tr
R ted
ET § 1.100.001: Objectivity and Integrity
SE s
SSTS No. 1: Tax Return Positions; No. 6: Knowledge of Error: Return
Preparation and Administrative Proceedings
A CPA must comply with all standards promulgated by bodies designated by the
AICPA Council and conform to generally accepted accounting principles. Under
D ch
ET § 1.100.001, all professional services by a CPA should be rendered with
objectivity and integrity, avoiding any potential or existing conflicts of interest. In
O o
addition, a CPA should neither knowingly misrepresent facts nor subordinate his
or her judgment to that of others in rendering any professional services.
C la
Under the Statements of Standards for Tax Services (SSTS), a CPA should have a
S
good-faith belief that a recommended position has a realistic possibility of being
sustained if challenged. In the instant case, the CPA must notify and advise the
client promptly upon his or her knowledge of a prior or current tax return error(s)
that has a significant effect upon the taxpayer‘s liability. The client must be
notified and advised either orally or in writing. Once rental prices of the current
area have been verified and compared against the amount paid by Haddock
Corporation, the CPA should take the appropriate actions. The CPA should
r
Trustedscholar
, th
Federal Tax Research, 12 Edition Page 3
consider whether to proceed with the preparation of the current year‘s return or
resign from the engagement completely. He or she should not sign the tax return
until the appropriate measures have been taken to correct the errors made in the
current and prior returns.
1-3. AICPA Code of Professional Conduct
ET § 1.100.001: Objectivity and Integrity
N us
ET § 1.700.001: Confidential Client Information
U
Under ET § 1.700.001 of the AICPA Code of Professional Conduct, a CPA in the
practice of public accounting must not disclose confidential client data without
Tr
R ted
specific consent of the client. There are exceptions that exist for Rule 301. Under
ET § 1.100.001, all professional services by a CPA should be rendered with
SE s
objectivity and integrity, avoiding any potential or existing conflicts of interest. In
addition, a CPA should neither knowingly misrepresent facts nor subordinate his
or her judgment to that of others in rendering any professional services.
In the instant case, the CPA should notify the client, Shark Corporation, of the
D ch
misrepresentation of facts. If the client is not willing to notify the buyer of the
building‘s current structural condition, the CPA should resign from the
O o
engagement. If the CPA has already told the other side that the building was OK
when he or she learns of its status, the CPA should resign from the engagement
C la
with Shark Corporation.
S
1-4. AICPA Code of Professional Conduct
ET § 1.100.001: Objectivity and Integrity
ET § 1.300.001 General Standards
ET § 1.700.001: Confidential Client Information
Under ET § 1.700.001 of the AICPA Code of Professional Conduct, a CPA in the
practice of public accounting must not disclose confidential client data without
r
Trustedscholar
