You normally prepare the tax return for ABC Manufacturing, an S corporation. The sole shareholder of the corporation submits all of the year$-$end figures except the closing inventory. The owner tells you that they are still in the process of extending the inventory, but that you should start working on those portions of the return that you can do without the closing inventory. He suggests you use $$250,000$ as an estimate for the closing inventory. After you have the return sketched out, you call the owner to get the closing inventory figures. The conversation goes as follows:

You: I have sketched out your return using the $$250,000$ estimate for the closing inventory. Do you have any accurate figures for the closing inventory yet?

Owner: No$,$ we$$re just finishing that up right now. Tell me$,$ how does the year look using the estimated figure?

You: Well, it looks like you had a pretty good profit. It$$s hard to say without all the figures, but I would guess your profit could be as high as $$145,000$ this year.

Owner: You say that I could have a $$145,000$ profit this year?

You: That assumes that your inventory will close at $$250,000.$

Owner: What will my profit be if the closing inventory is only $$175,000?$

You: It looks like your profit will only be $$70,000.$

Owner: What if the ending inventory is only $$125,000?$

You: Then your profit will probably be about $$20,000.$ Why do you ask?

About an hour later the owner comes in$.$ He says, $$I just got the figures for the closing inventory. We had to do a lot of computing to come up with an accurate figure, but I$$m pretty sure this is it$.$ He hands you a sheet of paper showing the closing inventory to be $$95,000.$

$($A$)$ What does Circular $230$ tell you to do in such a situation? $($B$)$ As a practical matter, what should you do in this situation? Important: please cite relevant Circ. $230$ sections that apply in answering this question.