Be very specific in your response. No cover page needed.

1. Under the AICPA’s Statements on Standards for Tax Services,

what is the practitioner’s professional duty in the following situations? .

Client refuses to file an amended return to correct a deduction error. (minimum 325 words)

2. The tax laws associated with foreign transactions are

found in the 900s section of the Internal Revenue Code (IRC). Refer to the IRC, Subchapter N and summarize one of the code sections in Subpart

D. Provide an example as to how the tax code would apply to a taxpayer. (minimum 325 words)

 

SOLUTIONS

 

 

1. Under the AICPA’s Statements on Standards for Tax Services, what is the practitioner’s professional duty in the following situation?

When a client refuses to file an amended return to correct a deduction error, the practitioner's professional duty is to inform the client of the potential risks and consequences of not filing an amended return. The practitioner should explain to the client that failing to file an amended return may result in penalties and interest, as well as an increased risk of an IRS audit or examination. The practitioner should also explain to the client that it is their ethical duty to ensure that the client is in compliance with all tax laws and regulations.

If the client still refuses to file an amended return, the practitioner should consider whether they can continue to provide services to the client in light of the potential risks and consequences. The practitioner may need to terminate the engagement if they are unable to resolve the issue with the client.

It is important to note that the practitioner cannot file an amended return without the client's consent. However, the practitioner can provide the client with the necessary information and guidance to assist them in making an informed decision about whether to file an amended return.

Ultimately, the practitioner's duty is to act in the best interests of the client and ensure that they are in compliance with all applicable tax laws and regulations.

2. The tax laws associated with foreign transactions are found in the 900s section of the Internal Revenue Code (IRC). Refer to the IRC, Subchapter N and summarize one of the code sections in Subpart D. Provide an example as to how the tax code would apply to a taxpayer.

Subpart D of Subchapter N of the Internal Revenue Code deals with the taxation of controlled foreign corporations (CFCs). Specifically, Section 951 outlines the rules for determining the amount of a U.S. shareholder's inclusion in a CFC's subpart F income.

Subpart F income is a category of income that is subject to current U.S. taxation, regardless of whether the income is actually distributed to the U.S. shareholder. Examples of subpart F income include foreign base company income, which is income earned by a CFC from certain passive or related-party transactions.

For example, let's say that a U.S. taxpayer owns 50% of the stock of a CFC that earns foreign base company income of $100,000. Under Section 951, the U.S. taxpayer would be required to include $50,000 of subpart F income in their taxable income, even if the CFC does not distribute any of the income to the taxpayer.

In addition to the inclusion of subpart F income, there are various other tax implications associated with owning a CFC, including the application of the anti-deferral rules and the potential for double taxation. It is important for taxpayers who own or control CFCs to be aware of these rules and to consult with a tax professional to ensure compliance with all applicable tax laws and regulations.