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    El-Sayed Mohammed
    This document summarizes key aspects of gift and estate taxes as they relate to CPAs: 1) If the IRS assesses additional gift or estate taxes, the taxpayer can file a petition with the Tax Court within 90 days or pay the taxes and file a refund claim, then sue in federal court if denied. 2) CPAs can be liable for damages resulting from failing to file returns on time, gross negligence, erroneous tax advice, or disclosing confidential information. 3) CPAs should not recommend aggressive tax positions without a reasonable chance of being sustained and should advise clients of potential penalties.

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    This document summarizes key aspects of gift and estate taxes as they relate to CPAs: 1) If the IRS assesses additional gift or estate taxes, the taxpayer can file a petition with the Tax Court within 90 days or pay the taxes and file a refund claim, then sue in federal court if denied. 2) CPAs can be liable for damages resulting from failing to file returns on time, gross negligence, erroneous tax advice, or disclosing confidential information. 3) CPAs should not recommend aggressive tax positions without a reasonable chance of being sustained and should advise clients of potential penalties.

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    This document summarizes key aspects of gift and estate taxes as they relate to CPAs: 1) If the IRS assesses additional gift or estate taxes, the taxpayer can file a petition with the Tax Court within 90 days or pay the taxes and file a refund claim, then sue in federal court if denied. 2) CPAs can be liable for damages resulting from failing to file returns on time, gross negligence, erroneous tax advice, or disclosing confidential information. 3) CPAs should not recommend aggressive tax positions without a reasonable chance of being sustained and should advise clients of potential penalties.

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    © All Rights Reserved
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    Download as rtf, pdf, or txt
    19 views2 pages

    Scan 0098

    Uploaded by

    El-Sayed Mohammed
    This document summarizes key aspects of gift and estate taxes as they relate to CPAs: 1) If the IRS assesses additional gift or estate taxes, the taxpayer can file a petition with the Tax Court within 90 days or pay the taxes and file a refund claim, then sue in federal court if denied. 2) CPAs can be liable for damages resulting from failing to file returns on time, gross negligence, erroneous tax advice, or disclosing confidential information. 3) CPAs should not recommend aggressive tax positions without a reasonable chance of being sustained and should advise clients of potential penalties.

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    672 MODULE 37 TAXES: GIFT AND ESTATE

    payer would then have ninety days to file a petition with the ignore the implications of information furnished and should
    Tax Court. Alternatively, a taxpayer may choose to pay the make reasonable inquires if the information furnished ap-
    additional taxes and file a claim for refund. When the re- pears to be incorrect, incomplete, or inconsistent either on its
    fund claim is disallowed, the taxpayer could then commence face or on the basis of other facts known to the CP A.
    an action in federal district court.
    54. (c) A CPA will be liable to a tax client for damages
    resulting from the following activities: (1) failure to file a
    client's return ona timely basis, (2) gross negligence or
    fraudulent conduct resulting in client losses, (3) erroneous
    advice or failure to advise client of certain tax elections, and
    (4) wrongful disclosure or use of confidential information.
    A CP A will not be liable to a tax client for refusing to sign a
    client's request for a filing extension, therefore answer (c) is
    correct.

    55. (b) According to the AICP A Statements on Stan-


    dards for Tax Services, a CP A should not recommend a po-
    sition unless there is a realistic possibility of it being sus-
    tained if it is challenged. Furthermore, a CPA should not
    prepare or sign an income tax return if the CP A knows that
    the return takes a position that will not be sustained if chal-
    lenged. Therefore, answer (d) is incorrect. Also, a CPA
    should advise the client of the potential penalty conse-
    quences of any recommended tax position. Therefore, an-
    swer (c) is incorrect. Answer (a) is incorrect as a CPA may
    not recommend a position that is frivolous even if the posi-
    tion is adequately disclosed on the return.
    56. (a) While performing services for a client, a CPA
    may become aware of an error in a previously filed return.
    The CP A should advise the client of the error (as required by
    the Statements on Standards for Tax Services) and the
    measures to be taken. It is the client's responsibility to de-
    cide whether to correct the error. In the event that the client
    does not correct an error, or agree to take the necessary steps
    to change from an erroneous method of accounting, the CP A
    should consider whether to continue a professional relation-
    ship with the client.
    57. (b) 'A CPA may in good faith rely without verifica-
    tion upon information furnished by the client when prepar-
    ing the client's tax return. However, the CPA should not
    ignore implications of information furnished and should
    make reasonable inquiries if information appears incorrect,
    incomplete, or inconsistent.
    58. (c) Answer (a) is incorrect because IRC §6695(a)
    imposes a $50 penalty upon income tax return preparers who
    fail to furnish a copy of the return to the taxpayer. An-
    swer (b) is incorrect because IRC §6695(b) imposes a $50
    penalty upon income tax return preparers who fail to sign a
    return, unless the failure is due to reasonable cause. An-
    swer (d) is incorrect because IRC §6695(f) imposes a $500
    penalty upon income tax return preparers who endorse or
    otherwise negotiate a client's tax refund· checks. There is no
    code section imposing a penalty for the understating of a
    client's tax liability due to an error in calculation.
    59. (c) A CPA should consider both: (1) information
    actually known to the CPA from the tax return of another
    client; and (2) information provided by the client that ap- .
    pears to be correct based on the client's returns from prior
    years. In preparing or signing a return, a CP A may in good
    faith rely without verification upon information furnished by
    the client or by third parties. However, the CPA should nor

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