Federal Tax Research, 12th 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‘
responses 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 Conduct
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
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
,Federal #zTax #zResearch, #z12th Page #z2
#zEdition
Services #z(SSTS), #za #zCPA #zshould #zhave #za #zgood-faith #zbelief #zthat #za #zrecommended
#z position #zhas #za #zrealistic #zpossibility #zof #zbeing #zsustained #zif #zchallenged.
The #zCPA #zmust #zuse #zjudgment #zthat #zreflects #zprofessional #zcompetence #zand
#z serves #zthe #zclient‘s #zneeds. #zWritten #zcommunication #zshould #zbe #zgiven #zto #zthe
#z client #zin #zimportant, #zunusual, #zor #zcomplicated #ztransactions. #zThe #zCPA #zshould
#z advise #zthe #zclient #zof #zsuch #zrisks #zas #zin #zthe #zinstant #zcase. #zWhere #zthe #ztaxpayer
#z insists #zon #zthe #zspecific #zposition, #zthe #zCPA #zshould #znot #zcontinue #zwith #zthe
#z engagement #zas #zthe #ztax #zreturn #zposition #zis #zexploitative #zand #zfrivolous.
1-2. AICPA #zCode #zof #zProfessional #zConduct
# z ET #z§ #z1.100.001: #zObjectivity #zand
Integrity
#z
SSTS # z No. #z1: #zTax #zReturn #zPositions; #zNo. #z6: #zKnowledge #zof #zError: #zReturn
#z Preparation #zand #zAdministrative #zProceedings
A #zCPA #zmust #zcomply #zwith #zall #zstandards #zpromulgated #zby #zbodies #zdesignated
#z by #zthe #zAICPA #zCouncil #zand #zconform #zto #zgenerally #zaccepted #zaccounting
#z principles. #zUnder #zET #z§ #z1.100.001, #zall #zprofessional #zservices #zby #za #zCPA
#z should #zbe #zrendered #zwith #zobjectivity #zand #zintegrity, #zavoiding #zany #zpotential #zor
existing #zconflicts #zof #zinterest. #zIn #zaddition, #za #zCPA #zshould #zneither #zknowingly
#z
#z misrepresent #zfacts #znor #zsubordinate #zhis #zor #zher #zjudgment #zto #zthat #zof #zothers #zin
#z rendering #zany #zprofessional #zservices.
Under #zthe #zStatements #zof #zStandards #zfor #zTax #zServices #z(SSTS), #za #zCPA #zshould
#z have #za #zgood-faith #zbelief #zthat #za #zrecommended #zposition #zhas #za #zrealistic
#z possibility #zof #zbeing #zsustained #zif #zchallenged. #zIn #zthe #zinstant #zcase, #zthe #zCPA
#z must #znotify #zand #zadvise #zthe #zclient #zpromptly #zupon #zhis #zor #zher #zknowledge #zof
a #zprior #zor #zcurrent #ztax #zreturn #zerror(s) #zthat #zhas #za #zsignificant #zeffect #zupon #zthe
#z
#z taxpayer‘s #zliability. #zThe #zclient #zmust #zbe #znotified #zand #zadvised #zeither #zorally
#z or #zin #zwriting. #zOnce #zrental #zprices #zof #zthe #zcurrent #zarea #zhave #zbeen #zverified
#z and #zcompared #zagainst #zthe #zamount #zpaid #zby #zHaddock #zCorporation, #zthe #zCPA
,Federal #zTax #zResearch, #z12th Page #z3
#zEdition
#z should #ztake #zthe #zappropriate #zactions. #zThe #zCPA #zshould
consider #zwhether #zto #zproceed #zwith #zthe #zpreparation #zof #zthe #zcurrent #zyear‘s
#z return #zor #zresign #zfrom #zthe #zengagement #zcompletely. #zHe #zor #zshe #zshould #znot
#z sign #zthe #ztax #zreturn #zuntil #zthe #zappropriate #zmeasures #zhave #zbeen #ztaken #zto
#z correct #zthe #zerrors #zmade #zin #zthe #zcurrent #zand #zprior #zreturns.
1-3. AICPA #zCode #zof #zProfessional #zConduct
# z ET #z§ #z1.100.001: #zObjectivity #zand
Integrity
#z
ET #z§ #z1.700.001: #zConfidential #zClient #zInformation
Under #zET #z§ #z1.700.001 #zof #zthe #zAICPA #zCode #zof #zProfessional #zConduct, #za #zCPA
in #zthe #zpractice #zof #zpublic #zaccounting #zmust #znot #zdisclose #zconfidential #zclient
#z
#z data #zwithout #zspecific #zconsent #zof #zthe #zclient. #zThere #zare #zexceptions #zthat #zexist
#z for #zRule #z301. #zUnder #zET #z§ #z1.100.001, #zall #zprofessional #zservices #zby #za #zCPA
#z should #zbe #zrendered #zwith #zobjectivity #zand #zintegrity, #zavoiding #zany #zpotential #zor
existing #zconflicts #zof #zinterest. #zIn #zaddition, #za #zCPA #zshould #zneither #zknowingly
#z
#z misrepresent #zfacts #znor #zsubordinate #zhis #zor #zher #zjudgment #zto #zthat #zof #zothers #zin
#z rendering #zany #zprofessional #zservices.
In #zthe #zinstant #zcase, #zthe #zCPA #zshould #znotify #zthe #zclient, #zShark #zCorporation, #zof
#z the #zmisrepresentation #zof #zfacts. #zIf #zthe #zclient #zis #znot #zwilling #zto #znotify #zthe
#z buyer #zof #zthe #zbuilding‘s #zcurrent #zstructural #zcondition, #zthe #zCPA #zshould #zresign
#z from #zthe #zengagement. #zIf #zthe #zCPA #zhas #zalready #ztold #zthe #zother #zside #zthat #zthe
#z building #zwas #zOK #zwhen #zhe #zor #zshe #zlearns #zof #zits #zstatus, #zthe #zCPA #zshould
#z resign #zfrom #zthe #zengagement #zwith #zShark #zCorporation.
, Federal #zTax #zResearch, #z12th Page #z4
#zEdition
1-4. AICPA #zCode #zof #zProfessional #zConduct
# z ET #z§ #z1.100.001: #zObjectivity#zand
#z Integrity #zET #z§ #z1.300.001 #zGeneral
#z Standards
ET #z§ #z1.700.001: #zConfidential #zClient #zInformation
Under #zET #z§ #z1.700.001 #zof #zthe #zAICPA #zCode #zof #zProfessional #zConduct, #za #zCPA
in #zthe #zpractice #zof #zpublic #zaccounting #zmust #znot #zdisclose #zconfidential #zclient
#z
#z data #zwithout
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‘
responses 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 Conduct
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
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
,Federal #zTax #zResearch, #z12th Page #z2
#zEdition
Services #z(SSTS), #za #zCPA #zshould #zhave #za #zgood-faith #zbelief #zthat #za #zrecommended
#z position #zhas #za #zrealistic #zpossibility #zof #zbeing #zsustained #zif #zchallenged.
The #zCPA #zmust #zuse #zjudgment #zthat #zreflects #zprofessional #zcompetence #zand
#z serves #zthe #zclient‘s #zneeds. #zWritten #zcommunication #zshould #zbe #zgiven #zto #zthe
#z client #zin #zimportant, #zunusual, #zor #zcomplicated #ztransactions. #zThe #zCPA #zshould
#z advise #zthe #zclient #zof #zsuch #zrisks #zas #zin #zthe #zinstant #zcase. #zWhere #zthe #ztaxpayer
#z insists #zon #zthe #zspecific #zposition, #zthe #zCPA #zshould #znot #zcontinue #zwith #zthe
#z engagement #zas #zthe #ztax #zreturn #zposition #zis #zexploitative #zand #zfrivolous.
1-2. AICPA #zCode #zof #zProfessional #zConduct
# z ET #z§ #z1.100.001: #zObjectivity #zand
Integrity
#z
SSTS # z No. #z1: #zTax #zReturn #zPositions; #zNo. #z6: #zKnowledge #zof #zError: #zReturn
#z Preparation #zand #zAdministrative #zProceedings
A #zCPA #zmust #zcomply #zwith #zall #zstandards #zpromulgated #zby #zbodies #zdesignated
#z by #zthe #zAICPA #zCouncil #zand #zconform #zto #zgenerally #zaccepted #zaccounting
#z principles. #zUnder #zET #z§ #z1.100.001, #zall #zprofessional #zservices #zby #za #zCPA
#z should #zbe #zrendered #zwith #zobjectivity #zand #zintegrity, #zavoiding #zany #zpotential #zor
existing #zconflicts #zof #zinterest. #zIn #zaddition, #za #zCPA #zshould #zneither #zknowingly
#z
#z misrepresent #zfacts #znor #zsubordinate #zhis #zor #zher #zjudgment #zto #zthat #zof #zothers #zin
#z rendering #zany #zprofessional #zservices.
Under #zthe #zStatements #zof #zStandards #zfor #zTax #zServices #z(SSTS), #za #zCPA #zshould
#z have #za #zgood-faith #zbelief #zthat #za #zrecommended #zposition #zhas #za #zrealistic
#z possibility #zof #zbeing #zsustained #zif #zchallenged. #zIn #zthe #zinstant #zcase, #zthe #zCPA
#z must #znotify #zand #zadvise #zthe #zclient #zpromptly #zupon #zhis #zor #zher #zknowledge #zof
a #zprior #zor #zcurrent #ztax #zreturn #zerror(s) #zthat #zhas #za #zsignificant #zeffect #zupon #zthe
#z
#z taxpayer‘s #zliability. #zThe #zclient #zmust #zbe #znotified #zand #zadvised #zeither #zorally
#z or #zin #zwriting. #zOnce #zrental #zprices #zof #zthe #zcurrent #zarea #zhave #zbeen #zverified
#z and #zcompared #zagainst #zthe #zamount #zpaid #zby #zHaddock #zCorporation, #zthe #zCPA
,Federal #zTax #zResearch, #z12th Page #z3
#zEdition
#z should #ztake #zthe #zappropriate #zactions. #zThe #zCPA #zshould
consider #zwhether #zto #zproceed #zwith #zthe #zpreparation #zof #zthe #zcurrent #zyear‘s
#z return #zor #zresign #zfrom #zthe #zengagement #zcompletely. #zHe #zor #zshe #zshould #znot
#z sign #zthe #ztax #zreturn #zuntil #zthe #zappropriate #zmeasures #zhave #zbeen #ztaken #zto
#z correct #zthe #zerrors #zmade #zin #zthe #zcurrent #zand #zprior #zreturns.
1-3. AICPA #zCode #zof #zProfessional #zConduct
# z ET #z§ #z1.100.001: #zObjectivity #zand
Integrity
#z
ET #z§ #z1.700.001: #zConfidential #zClient #zInformation
Under #zET #z§ #z1.700.001 #zof #zthe #zAICPA #zCode #zof #zProfessional #zConduct, #za #zCPA
in #zthe #zpractice #zof #zpublic #zaccounting #zmust #znot #zdisclose #zconfidential #zclient
#z
#z data #zwithout #zspecific #zconsent #zof #zthe #zclient. #zThere #zare #zexceptions #zthat #zexist
#z for #zRule #z301. #zUnder #zET #z§ #z1.100.001, #zall #zprofessional #zservices #zby #za #zCPA
#z should #zbe #zrendered #zwith #zobjectivity #zand #zintegrity, #zavoiding #zany #zpotential #zor
existing #zconflicts #zof #zinterest. #zIn #zaddition, #za #zCPA #zshould #zneither #zknowingly
#z
#z misrepresent #zfacts #znor #zsubordinate #zhis #zor #zher #zjudgment #zto #zthat #zof #zothers #zin
#z rendering #zany #zprofessional #zservices.
In #zthe #zinstant #zcase, #zthe #zCPA #zshould #znotify #zthe #zclient, #zShark #zCorporation, #zof
#z the #zmisrepresentation #zof #zfacts. #zIf #zthe #zclient #zis #znot #zwilling #zto #znotify #zthe
#z buyer #zof #zthe #zbuilding‘s #zcurrent #zstructural #zcondition, #zthe #zCPA #zshould #zresign
#z from #zthe #zengagement. #zIf #zthe #zCPA #zhas #zalready #ztold #zthe #zother #zside #zthat #zthe
#z building #zwas #zOK #zwhen #zhe #zor #zshe #zlearns #zof #zits #zstatus, #zthe #zCPA #zshould
#z resign #zfrom #zthe #zengagement #zwith #zShark #zCorporation.
, Federal #zTax #zResearch, #z12th Page #z4
#zEdition
1-4. AICPA #zCode #zof #zProfessional #zConduct
# z ET #z§ #z1.100.001: #zObjectivity#zand
#z Integrity #zET #z§ #z1.300.001 #zGeneral
#z Standards
ET #z§ #z1.700.001: #zConfidential #zClient #zInformation
Under #zET #z§ #z1.700.001 #zof #zthe #zAICPA #zCode #zof #zProfessional #zConduct, #za #zCPA
in #zthe #zpractice #zof #zpublic #zaccounting #zmust #znot #zdisclose #zconfidential #zclient
#z
#z data #zwithout
