Federal @TERTax @TERResearch, Page @TER
@TER12th @TEREdition 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 @TERTax @TERResearch, Page @TER
@TER12th @TEREdition 2
Services @TER(SSTS), @TERa @TERCPA @TERshould @TERhave @TERa @TERgood-faith @TERbelief @TERthat
@TER a @TERrecommended @TERposition @TERhas @TERa @TERrealistic @TERpossibility @TERof @TERbeing
@TER sustained @TERif @TERchallenged.
The @TERCPA @TERmust @TERuse @TERjudgment @TERthat @TERreflects @TERprofessional
@TER competence @TERand @TERserves @TERthe @TERclient‘s @TERneeds. @TERWritten
@TER communication @TERshould @TERbe @TERgiven @TERto @TERthe @TERclient @TERin @TERimportant,
@TER unusual, @TERor @TERcomplicated @TERtransactions. @TERThe @TERCPA @TERshould
@TER advise @TERthe @TERclient @TERof @TERsuch @TERrisks @TERas @TERin @TERthe @TERinstant @TERcase.
@TER Where @TERthe @TERtaxpayer @TERinsists @TERon @TERthe @TERspecific @TERposition, @TERthe
@TER CPA @TERshould @TERnot @TERcontinue @TERwith @TERthe @TERengagement @TERas @TERthe
@TER tax @TERreturn @TERposition @TERis @TERexploitative @TERand @TERfrivolous.
1-2. AICPA @TERCode @TERof @TERProfessional
@TER Conduct @ T E R ET @TER§ @TER1.100.001:
Objectivity @TERand @TERIntegrity
@TER
SSTS @ T E R No. @TER1: @TERTax @TERReturn @TERPositions; @TERNo. @TER6: @TERKnowledge
@TER of @TERError: @TERReturn @TERPreparation @TERand @TERAdministrative @TERProceedings
A @TERCPA @TERmust @TERcomply @TERwith @TERall @TERstandards @TERpromulgated @TERby
@TER bodies @TERdesignated @TERby @TERthe @TERAICPA @TERCouncil @TERand @TERconform @TERto
@TER generally @TERaccepted @TERaccounting @TERprinciples. @TERUnder @TERET @TER§
@TER 1.100.001, @TERall @TERprofessional @TERservices @TERby @TERa @TERCPA @TERshould @TERbe
@TER rendered @TERwith @TERobjectivity @TERand @TERintegrity, @TERavoiding @TERany @TERpotential
or @TERexisting @TERconflicts @TERof @TERinterest. @TERIn @TERaddition, @TERa @TERCPA
@TER
@TER should @TERneither @TERknowingly @TERmisrepresent @TERfacts @TERnor @TERsubordinate
@TER his @TERor @TERher @TERjudgment @TERto @TERthat @TERof @TERothers @TERin @TERrendering @TERany
@TER professional @TERservices.
Under @TERthe @TERStatements @TERof @TERStandards @TERfor @TERTax @TERServices @TER(SSTS),
@TER a @TERCPA @TERshould @TERhave @TERa @TERgood-faith @TERbelief @TERthat @TERa
@TER recommended @TERposition @TERhas @TERa @TERrealistic @TERpossibility @TERof @TERbeing
,Federal @TERTax @TERResearch, Page @TER
@TER12th @TEREdition 3
@TER sustained @TERif @TERchallenged. @TERIn @TERthe @TERinstant @TERcase, @TERthe @TERCPA
@TER must @TERnotify @TERand @TERadvise @TERthe @TERclient @TERpromptly @TERupon @TERhis @TERor
@TER her @TERknowledge @TERof @TERa @TERprior @TERor @TERcurrent @TERtax @TERreturn @TERerror(s)
@TER that @TERhas @TERa @TERsignificant @TEReffect @TERupon @TERthe @TERtaxpayer‘s @TERliability.
@TER The @TERclient @TERmust @TERbe @TERnotified @TERand @TERadvised @TEReither @TERorally @TERor
@TER in @TERwriting. @TEROnce @TERrental @TERprices @TERof @TERthe @TERcurrent @TERarea @TERhave
@TER been @TERverified @TERand @TERcompared @TERagainst @TERthe @TERamount @TERpaid @TERby
@TER Haddock @TERCorporation, @TERthe @TERCPA @TERshould @TERtake @TERthe @TERappropriate
@TER actions. @TERThe @TERCPA @TERshould
, Federal @TERTax @TERResearch, Page @TER
@TER12th @TEREdition 4
consider @TERwhether @TERto @TERproceed @TERwith @TERthe @TERpreparation @TERof @TERthe
@TER current @TERyear‘s @TERreturn @TERor @TERresign @TERfrom @TERthe @TERengagement
@TER completely. @TERHe @TERor @TERshe @TERshould @TERnot @TERsign @TERthe @TERtax @TERreturn
@TER until @TERthe @TERappropriate @TERmeasures @TERhave @TERbeen @TERtaken @TERto @TERcorrect
@TER the @TERerrors @TERmade @TERin @TERthe @TERcurrent @TERand @TERprior @TERreturns.
1-3. AICPA @TERCode @TERof @TERProfessional
@TER Conduct @ T E R ET @TER§ @TER1.100.001:
Objectivity @TERand @TERIntegrity
@TER
ET @TER§ @TER1.700.001: @TERConfidential @TERClient @TERInformation
Under @TERET @TER§ @TER1.700.001 @TERof @TERthe @TERAICPA @TERCode @TERof @TERProfessional
@TER Conduct, @TERa @TERCPA @TERin @TERthe @TERpractice @TERof @TERpublic @TERaccounting
@TER must @TERnot @TERdisclose @TERconfidential @TERclient @TERdata @TERwithout @TERspecific
@TER consent @TERof @TERthe @TERclient. @TERThere @TERare @TERexceptions @TERthat @TERexist @TERfor
@TER Rule @TER301. @TERUnder @TERET @TER§ @TER1.100.001, @TERall @TERprofessional @TERservices
@TER by @TERa @TERCPA @TERshould @TERbe @TERrendered @TERwith @TERobjectivity @TERand
@TER integrity, @TERavoiding @TERany @TERpotential @TERor @TERexisting @TERconflicts @TERof
@TER interest. @TERIn @TERaddition, @TERa @TERCPA @TERshould @TERneither @TERknowingly
@TER misrepresent @TERfacts @TERnor @TERsubordinate @TERhis @TERor @TERher @TERjudgment @TERto
@TER that @TERof @TERothers @TERin @TERrendering @TERany @TERprofessional @TERservices.
In @TERthe @TERinstant @TERcase, @TERthe @TERCPA @TERshould @TERnotify @TERthe @TERclient,
@TER Shark @TERCorporation, @TERof @TERthe @TERmisrepresentation @TERof @TERfacts. @TERIf @TERthe
@TER client @TERis @TERnot @TERwilling @TERto @TERnotify @TERthe @TERbuyer @TERof @TERthe
@TER building‘s @TERcurrent @TERstructural @TERcondition, @TERthe @TERCPA @TERshould
@TER resign @TERfrom @TERthe @TERengagement. @TERIf @TERthe @TERCPA @TERhas @TERalready @TERtold
@TER the @TERother @TERside @TERthat @TERthe @TERbuilding @TERwas @TEROK @TERwhen @TERhe @TERor
@TER she @TERlearns @TERof @TERits @TERstatus, @TERthe @TERCPA @TERshould @TERresign @TERfrom
@TER the @TERengagement @TERwith @TERShark @TERCorporation.
1-4. AICPA @TERCode @TERof @TERProfessional
@TER Conduct @ T E R ET @TER§ @TER1.100.001:
@TER12th @TEREdition 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 @TERTax @TERResearch, Page @TER
@TER12th @TEREdition 2
Services @TER(SSTS), @TERa @TERCPA @TERshould @TERhave @TERa @TERgood-faith @TERbelief @TERthat
@TER a @TERrecommended @TERposition @TERhas @TERa @TERrealistic @TERpossibility @TERof @TERbeing
@TER sustained @TERif @TERchallenged.
The @TERCPA @TERmust @TERuse @TERjudgment @TERthat @TERreflects @TERprofessional
@TER competence @TERand @TERserves @TERthe @TERclient‘s @TERneeds. @TERWritten
@TER communication @TERshould @TERbe @TERgiven @TERto @TERthe @TERclient @TERin @TERimportant,
@TER unusual, @TERor @TERcomplicated @TERtransactions. @TERThe @TERCPA @TERshould
@TER advise @TERthe @TERclient @TERof @TERsuch @TERrisks @TERas @TERin @TERthe @TERinstant @TERcase.
@TER Where @TERthe @TERtaxpayer @TERinsists @TERon @TERthe @TERspecific @TERposition, @TERthe
@TER CPA @TERshould @TERnot @TERcontinue @TERwith @TERthe @TERengagement @TERas @TERthe
@TER tax @TERreturn @TERposition @TERis @TERexploitative @TERand @TERfrivolous.
1-2. AICPA @TERCode @TERof @TERProfessional
@TER Conduct @ T E R ET @TER§ @TER1.100.001:
Objectivity @TERand @TERIntegrity
@TER
SSTS @ T E R No. @TER1: @TERTax @TERReturn @TERPositions; @TERNo. @TER6: @TERKnowledge
@TER of @TERError: @TERReturn @TERPreparation @TERand @TERAdministrative @TERProceedings
A @TERCPA @TERmust @TERcomply @TERwith @TERall @TERstandards @TERpromulgated @TERby
@TER bodies @TERdesignated @TERby @TERthe @TERAICPA @TERCouncil @TERand @TERconform @TERto
@TER generally @TERaccepted @TERaccounting @TERprinciples. @TERUnder @TERET @TER§
@TER 1.100.001, @TERall @TERprofessional @TERservices @TERby @TERa @TERCPA @TERshould @TERbe
@TER rendered @TERwith @TERobjectivity @TERand @TERintegrity, @TERavoiding @TERany @TERpotential
or @TERexisting @TERconflicts @TERof @TERinterest. @TERIn @TERaddition, @TERa @TERCPA
@TER
@TER should @TERneither @TERknowingly @TERmisrepresent @TERfacts @TERnor @TERsubordinate
@TER his @TERor @TERher @TERjudgment @TERto @TERthat @TERof @TERothers @TERin @TERrendering @TERany
@TER professional @TERservices.
Under @TERthe @TERStatements @TERof @TERStandards @TERfor @TERTax @TERServices @TER(SSTS),
@TER a @TERCPA @TERshould @TERhave @TERa @TERgood-faith @TERbelief @TERthat @TERa
@TER recommended @TERposition @TERhas @TERa @TERrealistic @TERpossibility @TERof @TERbeing
,Federal @TERTax @TERResearch, Page @TER
@TER12th @TEREdition 3
@TER sustained @TERif @TERchallenged. @TERIn @TERthe @TERinstant @TERcase, @TERthe @TERCPA
@TER must @TERnotify @TERand @TERadvise @TERthe @TERclient @TERpromptly @TERupon @TERhis @TERor
@TER her @TERknowledge @TERof @TERa @TERprior @TERor @TERcurrent @TERtax @TERreturn @TERerror(s)
@TER that @TERhas @TERa @TERsignificant @TEReffect @TERupon @TERthe @TERtaxpayer‘s @TERliability.
@TER The @TERclient @TERmust @TERbe @TERnotified @TERand @TERadvised @TEReither @TERorally @TERor
@TER in @TERwriting. @TEROnce @TERrental @TERprices @TERof @TERthe @TERcurrent @TERarea @TERhave
@TER been @TERverified @TERand @TERcompared @TERagainst @TERthe @TERamount @TERpaid @TERby
@TER Haddock @TERCorporation, @TERthe @TERCPA @TERshould @TERtake @TERthe @TERappropriate
@TER actions. @TERThe @TERCPA @TERshould
, Federal @TERTax @TERResearch, Page @TER
@TER12th @TEREdition 4
consider @TERwhether @TERto @TERproceed @TERwith @TERthe @TERpreparation @TERof @TERthe
@TER current @TERyear‘s @TERreturn @TERor @TERresign @TERfrom @TERthe @TERengagement
@TER completely. @TERHe @TERor @TERshe @TERshould @TERnot @TERsign @TERthe @TERtax @TERreturn
@TER until @TERthe @TERappropriate @TERmeasures @TERhave @TERbeen @TERtaken @TERto @TERcorrect
@TER the @TERerrors @TERmade @TERin @TERthe @TERcurrent @TERand @TERprior @TERreturns.
1-3. AICPA @TERCode @TERof @TERProfessional
@TER Conduct @ T E R ET @TER§ @TER1.100.001:
Objectivity @TERand @TERIntegrity
@TER
ET @TER§ @TER1.700.001: @TERConfidential @TERClient @TERInformation
Under @TERET @TER§ @TER1.700.001 @TERof @TERthe @TERAICPA @TERCode @TERof @TERProfessional
@TER Conduct, @TERa @TERCPA @TERin @TERthe @TERpractice @TERof @TERpublic @TERaccounting
@TER must @TERnot @TERdisclose @TERconfidential @TERclient @TERdata @TERwithout @TERspecific
@TER consent @TERof @TERthe @TERclient. @TERThere @TERare @TERexceptions @TERthat @TERexist @TERfor
@TER Rule @TER301. @TERUnder @TERET @TER§ @TER1.100.001, @TERall @TERprofessional @TERservices
@TER by @TERa @TERCPA @TERshould @TERbe @TERrendered @TERwith @TERobjectivity @TERand
@TER integrity, @TERavoiding @TERany @TERpotential @TERor @TERexisting @TERconflicts @TERof
@TER interest. @TERIn @TERaddition, @TERa @TERCPA @TERshould @TERneither @TERknowingly
@TER misrepresent @TERfacts @TERnor @TERsubordinate @TERhis @TERor @TERher @TERjudgment @TERto
@TER that @TERof @TERothers @TERin @TERrendering @TERany @TERprofessional @TERservices.
In @TERthe @TERinstant @TERcase, @TERthe @TERCPA @TERshould @TERnotify @TERthe @TERclient,
@TER Shark @TERCorporation, @TERof @TERthe @TERmisrepresentation @TERof @TERfacts. @TERIf @TERthe
@TER client @TERis @TERnot @TERwilling @TERto @TERnotify @TERthe @TERbuyer @TERof @TERthe
@TER building‘s @TERcurrent @TERstructural @TERcondition, @TERthe @TERCPA @TERshould
@TER resign @TERfrom @TERthe @TERengagement. @TERIf @TERthe @TERCPA @TERhas @TERalready @TERtold
@TER the @TERother @TERside @TERthat @TERthe @TERbuilding @TERwas @TEROK @TERwhen @TERhe @TERor
@TER she @TERlearns @TERof @TERits @TERstatus, @TERthe @TERCPA @TERshould @TERresign @TERfrom
@TER the @TERengagement @TERwith @TERShark @TERCorporation.
1-4. AICPA @TERCode @TERof @TERProfessional
@TER Conduct @ T E R ET @TER§ @TER1.100.001:
