44. MedPlus manufactures medical devices that are sold to hospitals. MedPlus engaged a consulting firm to perform a tax research credit study to determine whether they qualified for the credit and if so, how much credit they could claim. The consulting firm evaluated MedPlus activities and determined that the company qualified for the credit. Using three different approaches to allocating expenses, the consultants provided support for three different credit amounts: $2 million, $1.5 million or $500,000. MedPlus decided to claim the $2 million credit on its current year return, knowing they would never get the $2 million credit if they did not claim it on the return. There is an 80 percent likelihood that the credit will be sustained on audit. The company provided the following analysis of the probabilities of the estimated outcomes.

Possible Outcome Individual Probability

$2,000,000 35%

$1,500,000 40%

$500,000 25%

a. What is the accrual for an uncertain tax position, if any?

b. Explain why or why not an accrual for an uncertain tax position would be required.