Grossmont College Substantial Authority v Reasonable Basis Questions 11

I’m working on a accounting exercise and need an explanation to help me learn.

11. Which of the following reporting standards is higher:

a. Substantial Authority versus Reasonable Basis?

b. Realistic Possibility of Success versus More Likely Than Not?

c. Reasonable Basis versus Realistic Possibility of Success?

d. Substantial authority versus More Likely Than Not?

13. Assume that the tax law does prescribe a reporting standard for a particular taxposition. What threshold standard should a tax return preparer apply to avoid penalties?

16. Your client operates a small telemarketing company out of her home, and she hasone full-time employee who assists in making phone calls to prospective customers.Her teenage daughter also enters data into the company’s electronic record-keepingsystem on a regular basis. Her daughter is somewhat “spoiled,” so your client pays her$40 cash per hour to encourage her to develop a solid work ethic and work diligently.Your client has told you that she wants to“be straight” with the IRS in every way. Arethere any issues that you might want to challenge or research?

17. Your client owns a 3-bedroom home with a 2-car garage in a suburb ofTucson,Arizona. Although the home office rules are strict on deducting expenses, youhave determined that your client satisfies these rules. Her home office occupies thespare bedroom in her home, and it comprises about 480 square feet of her 2,400 squarefoot home. The garage is an additional 480 square feet. Your client is interested inclaiming the maximum allowable deductions for her home office. In reviewing yourclient’s tax return for last year, you noticed that she claimed a deduction equal to the fullamount of her mortgage payment on the house.Your client did not, however, deduct anyother expenses associated with her home office. She did not maintain detailed recordsand was concerned that the IRS might think that she was exaggerating her otherexpenses if she just “ballparked them” without adequate supporting documentation.

a. Are there any issues that you want to challenge or research?

b. Should you inform the tax return preparer who filed her return last year about theseerrors?

c. What other advice should you give to your client?

d. Assume that the prior-year tax return preparer is a friend of yours, but he reallyscrewed up and should compensate your client if she incurs tax penalties and interest.Would you inform your client about her rights against your friend? Should you informyour friend about this?

18. Kupan, a famous forensic pathologist, failed to report income from the sale of hismansion on his tax return. His gain on sale exceeded $1.7 million. He also sold stock at a$400,000 gain and did not report that gain either. In a criminal prosecution against Kupanfor tax fraud, Kupan blamed his accountant, Rachel, for the omission, claiming thatRachel knew that the pathologist was a “poor record-keeper.” Kupan admitted that heread the tax return prepared by Rachel and signed it. Will Kupan’s defense of shifting responsibility to Rachel in this criminal prosecution be successful?

4 to 5 lines for each requirement Requirements: Requirements: 2-3 pages