CPA · Question 02 · Area 1: Ethics & Procedures
A CPA is preparing a tax return for a client who wishes to take a position that the CPA believes has a 'reasonable basis' but does not meet the 'substantial authority' standard. To avoid a preparer penalty for an understatement of liability due to an unreasonable position, which of the following actions must the CPA take?
Answer options:
Ensure the position is more likely than not (>50%) to be sustained on its merits.
Disclose the position on Form 8275.
Obtain a written representation letter from the client accepting responsibility.
The CPA cannot sign the return under any circumstances.
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