A client, Henry Price, fills out his client questionnaire for the previous year and on it he provides information for the preparation of his individual income tax return. The IRS has never audited Henrys returns. Henry reports that he made over one hundred (100) relatively small cash contributions totaling $26,735 to charitable organizations. In the last few years, Henrys contributions have averaged about $12,000 per year. For the previous year, Henrys adjusted gross income was roughly $325,000, about a 10% increase from the previous year.

a) Applying Statements on Standards for Tax Services No. 3, determine whether you can accept at face value, Henrys information concerning his charitable contributions.

b) Now assume that the IRS recently audited Henrys return from two years ago and denied 75% of that years charitable contribution deduction because the deduction was not substantiated. Assume also that Henry indicates in the previous year that he contributed $27,000 (instead of $26,375). How do these changes of fact impact your earlier decision?