Question

A CPA assists a taxpayer in tax planning regarding a transaction that meets the definition of a tax shelter as defined in the Internal Revenue Code. Under the AICPA Statements on Standards for Tax Services, the CPA should inform the taxpayer of the penalty risks unless the transaction, at the minimum, meets which of the following standards for being sustained if challenged?a. Substantial authority.b. Realistic possibility.c. More likely than not.d. Not frivolous.

Answer 1

Answer:

c. More likely than not.

Explanation:

The CPA must act responsibly and keep the taxpayer informed of all possible details, so that it will provide security and credibility to the taxpayer. The CPA should report the cases in which the taxpayer may be charged with paying a fine related to the tax effects of the contribution. Fine cases occur unless the transaction meets at least the maintenance standards called more likely than not.