Tim Trying, who is single, purchase a house on the beach in sunny Southern California 35 years ago. He is now retiring and moving to Hawaii for his golden years.

Tim sold his house for $1,200,000 this year. Tim has been a client of yours for the past decade. He became a client when he was referred to you by your parents, who lived two houses away from Tim.

Whe asked what his tax basis is in the house, Tim says it is $975,000. Your parents bought their house at about the same time, and you know they paid $100,000 for it. You have seem Tim's house many times and, although the house is well-maintained, you know it does not have any major improvements, or betterments,

You are reasonably certain that Tim is overstating his tax basis by hundreds of thousands of dollars in order to avoid reporting a taxable gain on the sale.

Would you sign the Paid Preparer's declaration on this return? Why or why not? Be very specific with your reasoning. What potential issues does Tim face? In answering take into consideration, potential pitfalls for the preparer if the Paid Preparer's declaration is signed.