Page`1
RESEARCH CASE SOLUTIONS
Sawyers & Gill, Federal Tax Research 13th Edition
, Page`2
Research`Case`Solutions
The`solutions`to`the`research`cases`are`valid`as`of`February`2020.`It`is`likely`that`there`will`be`ch
anges`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`th
ose`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‘`respon
ses`may`vary`from`those`listed`for`each`question.
Chapter`1
Note:`For`the`following`cases,`students`may`present`other`positions,`which`could`be`considered`
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:
1-1
AICPA`Code`of`Professional`Con
duct`ET`§`1.200.001:`Independence
ET`§`1.100.001:`Objectivity`and`Integrity
ET`§`1.700.001:`Confidential`Client`Information`
ET`§`1.400.001:`Acts`Discreditable
SSTS` ` No.`1:`Tax`Return`Positions
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`a
nd`integrity,`avoiding`any`potential`or`existing`conflicts`of`interest.`The`CPA`mus
t`exercise`due`professional`care`in`the`performance`of`all`professional`services`and
`comply`with`all`standards`promulgated`by`the`bodies`designated`by`the`AICPA`C
ouncil.`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
, Page`3
Services`(SSTS),`a`CPA`should`have`a`good-
faith`belief`that`a`recommended`position`has`a`realistic`possibility`of`being`sustain
ed`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`ri
sks`as`in`the`instant`case.`Where`the`taxpayer`insists`on`the`specific`position,`the`C
PA`should`not`continue`with`the`engagement`as`the`tax`return`position`is`exploitat
ive`and`frivolous.
1-2.
AICPA`Code`of`Professional`Conduc
t` ET`§`1.100.001:`Objectivity`and`Integri
ty
SSTS` No.`1:`Tax`Return`Positions;`No.`6:`Knowledge`of`Error:`Return`Preparatio
n`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`
ET`§`1.100.001,`all`professional`services`by`a`CPA`should`be`rendered`with`objec
tivity`and`integrity,`avoiding`any`potential`or`existing`conflicts`of`interest.`In`addit
ion,`a`CPA`should`neither`knowingly`misrepresent`facts`nor`subordinate`his`or`he
r`judgment`to`that`of`others`in`rendering`any`professional`services.
Under`the`Statements`of`Standards`for`Tax`Services`(SSTS),`a`CPA`should`have`a
`good-
faith`belief`that`a`recommended`position`has`a`realistic`possibility`of`being`sustai
ned`if`challenged.`In`the`instant`case,`the`CPA`must`notify`and`advise`the`client`p
romptly`upon`his`or`her`knowledge`of`a`prior`or`current`tax`return`error(s)`that`ha
s`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`bee
, Page`4
n`verified`and`compared`against`the`amount`paid`by`Haddock`Corporation,`the`C
PA`should`take`the`appropriate`actions.`The`CPA`should
RESEARCH CASE SOLUTIONS
Sawyers & Gill, Federal Tax Research 13th Edition
, Page`2
Research`Case`Solutions
The`solutions`to`the`research`cases`are`valid`as`of`February`2020.`It`is`likely`that`there`will`be`ch
anges`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`th
ose`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‘`respon
ses`may`vary`from`those`listed`for`each`question.
Chapter`1
Note:`For`the`following`cases,`students`may`present`other`positions,`which`could`be`considered`
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:
1-1
AICPA`Code`of`Professional`Con
duct`ET`§`1.200.001:`Independence
ET`§`1.100.001:`Objectivity`and`Integrity
ET`§`1.700.001:`Confidential`Client`Information`
ET`§`1.400.001:`Acts`Discreditable
SSTS` ` No.`1:`Tax`Return`Positions
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`a
nd`integrity,`avoiding`any`potential`or`existing`conflicts`of`interest.`The`CPA`mus
t`exercise`due`professional`care`in`the`performance`of`all`professional`services`and
`comply`with`all`standards`promulgated`by`the`bodies`designated`by`the`AICPA`C
ouncil.`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
, Page`3
Services`(SSTS),`a`CPA`should`have`a`good-
faith`belief`that`a`recommended`position`has`a`realistic`possibility`of`being`sustain
ed`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`ri
sks`as`in`the`instant`case.`Where`the`taxpayer`insists`on`the`specific`position,`the`C
PA`should`not`continue`with`the`engagement`as`the`tax`return`position`is`exploitat
ive`and`frivolous.
1-2.
AICPA`Code`of`Professional`Conduc
t` ET`§`1.100.001:`Objectivity`and`Integri
ty
SSTS` No.`1:`Tax`Return`Positions;`No.`6:`Knowledge`of`Error:`Return`Preparatio
n`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`
ET`§`1.100.001,`all`professional`services`by`a`CPA`should`be`rendered`with`objec
tivity`and`integrity,`avoiding`any`potential`or`existing`conflicts`of`interest.`In`addit
ion,`a`CPA`should`neither`knowingly`misrepresent`facts`nor`subordinate`his`or`he
r`judgment`to`that`of`others`in`rendering`any`professional`services.
Under`the`Statements`of`Standards`for`Tax`Services`(SSTS),`a`CPA`should`have`a
`good-
faith`belief`that`a`recommended`position`has`a`realistic`possibility`of`being`sustai
ned`if`challenged.`In`the`instant`case,`the`CPA`must`notify`and`advise`the`client`p
romptly`upon`his`or`her`knowledge`of`a`prior`or`current`tax`return`error(s)`that`ha
s`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`bee
, Page`4
n`verified`and`compared`against`the`amount`paid`by`Haddock`Corporation,`the`C
PA`should`take`the`appropriate`actions.`The`CPA`should
