After consulting with a tax adviser, a taxpayer believes that the odds of her state income tax return being audited are 80%. If audited, she believes that the odds of the state taxing authorities detecting and disallowing a certain deduction claim are 80%. If the state authorities disallow this deduction claim, she objectively believes that there is a 30% chance that a state tax court will overturn the state taxing authority's decision and allow this deduction.
a. What is the probability that she in fact will ultimately get the benefit of this deduction on her tax return?
b. May she claim this deduction, without making special disclosures?