Contingent Fees

1.Example of a situation:

Mike. Mike is a real estate developer and wants to claim a large conservation easement deduction. He says his CPA is preparing all the paperwork and will file the return. He wants a tax practitioner to defend him in the inevitable audit and controversy. He offers 15 percent of the dollar amount of the deduction ultimately obtained to represent him up to and including in a Tax Court trial.

Required: Based on the situation above explain the choices that the tax advisor can make in advising the taxpayer, including both the ethical and non-ethical considering the contingent fees?

2.Example of a situation

Mikayla. Mikayla filed her 2019 return and was promptly audited by the IRS. She received a 90-day letter and wants to file in Tax Court. There is $1 million in dispute, but she wants a tax practitioner to handle it for a contingent fee. She proposes to pay 30 percent of any money save her. So, if the $1 million tax bill sticks, you earn no fee. If you eliminate the entire $1 million in additional tax, you earn $300,000.

Required: Based on the situation above explain the choices that the tax advisor can make in advising the taxpayer, including both the ethical and non-ethical considering the contingent fees?