QUESTION 36:

Normally, a good tax preparer should recommend a tax return position, only if the tax preparer has a good faith (belief) that the position has a realistic possibility of being held administratively or judicially on the merits of the position if challenged (ex. professional gambler has loss expenses).Which of the following is incorrectly listed as a condition under which a tax preparer may advise a client to take a position on a return? (Best option)

a) The position has the highest likelihood of being sustained on its merits. b) The position is not frivolous. c) The position is adequately disclosed. d) The professional informed the client of the sanctions that are likely to be applied concerning the position taken. This is only required if the practitioner is not subject to a sanction.

Question 65:

Sandra, a tax professional in California, prepares Lindas income tax return. Linda sold some stock in a corporation and believed the proceeds of the stock are all a return of capital, and therefore, not included in her gross income. After some research, Sandra determines that there is a reasonable basis for Lindas position, but she does not believe there is a realistic possibility of success based on those merits. Under what circumstances can Sandra sign Lindas return if the proceeds are not included in the income reported?

a) If the position is not frivolous and is adequately disclosed on the return. b) If Sandra documents her disagreement with Lindas position and keeps it in her file. c) If Linda agrees in writing not to dispute any IRS challenges to the position. d) Under no circumstances.