A practitioner's written advice concerning one or more federal tax issues must be based on the following :

(i) Reasonable factual and legal assumption, including assumptions on future events.

(ii) Reasonably consider all relevant facts and circumstances that the practitioner knows or reasonably should know.

(iii) Reasonable efforts to identify and ascertain the facts relevant to written advice on each federal tax matter.

(iv) Not rely on representations, statements, findings or agreements of the taxpayer or any other person if the reliance on them is reasonable.

(vi) Not in evaluating a federal tax matter, take into account the possibility that a tax return will not be audited or that a matter will not be raised in an audit.

When an IRS agent on completion of the examination issues a no change report, it indicates that the IRS agent has accepted the return as filed and there are no proposed adjustments at this time. A closed year may be open only in case of fraud or similar misrepresentations.

The director's duty of loyalty implies that they must put the interest of the corporation before their personal interest.
A corporate opportunity presented to a director must be duly re-directed by the director to the company first. If the company rejects the offer, the director may choose to accept it .

Dissolution of a limited partnership takes place upon the following events:

4) Dissolution of court decree when not practical to continue partnership.

Therefore, when the only general partner withdraws, the business effectively terminates.

In a merger, the acquiring corporation becomes liable for the obligations of the acquired corporation.

Limited Liability Company (LLC) is unique in the sense that it enjoys both the benefits if a partnership as well as a Corporation. It is created formally like a Corporation where members have limited liability and functions like a partnership where taxes are paid at member level via pass-through income instead of the corporation paying taxes. An added benefit when compared to S Corporation is that, unlike S Corp. which pays tax on distribution of appreciated property, the distribution of appreciated property to members of LLC is tax-free.

Board of Directors are small group of shareholder representatives that meet 1 to 12 times per year to set policy and make broad decisions.They are in charge of general operations of the corporation; therefore, while deciding on purchasing substantially all of the assets of another corporation it does not require stockholder approval.

Option (b),(c) and (d) are incorrect because shareholders approval is required for:

3. Dissolution of the corporation, i.e., selling substantially all of the assets of the corporation

5. Loans to directors (not required for officers, even if officer is a director)

Merger of a subsidiary that is already 90% owned by the parent does not require support of a majority of board and stockholder as it is not considered a material event requiring consent. However, any shareholder that dissents from the combination is entitled to make a written demand for appraisal of their shares which the board must then repurchase at the appraised amount.

I. The assignee is personally responsible for the assigning partners share of past and future partnership debts.

II. The assignee is entitled to the assigning partner's interest in partnership profits and surplus on dissolution of the partnership.

Assignment is typically made to secure a loan. Assignee is not substituted as a partner without the consent of all other partners and does not receive right to manage partnership, to have access to accounting records, to inspect books, to possess and own any individual partnership property.

A general partner in a partnership has the apparent authority to make any contract necessary to carry out the business of the partnership with the exception of the following which require unanimous consent: (Need to get unanimous consent ASAP for the following transactions)

In this case, since Acorn and Bean were in the farm machinery business, it creates the impression that a partner would have the authority to buy tractors which is within the scope of the usual activities of the farming business. This apparent authority of Acorn would allow Cobb to prevail and enforce the contract.

A partner may transfer his partnership interest in profits without the need for approval by the other partners. However, the right to participate in management or right to use partnership property are not transferable. Since Bean is not made a partner, he is only entitled to Cobb's share of partnership profits and cannot participate in the management of TLC.

Prior to formation of a corporation, a promoter might enter into contracts on behalf of the corporation. Since the promoter performs work before the corporation itself exists, a contract by the promoter is not binding on the corporation unless the Board adopts the contract. A promoter is personally liable on the contract unless the other party releases the promoter through a novation, substituting the corporation for the promoter as the obligator on in the contract.

Generally tax preparers are responsible for the errors on the tax return and are subject to various penalties. When recommending any position on tax return, it is the preparer's responsibility to advise the client on the potential penalties that may be imposed by the IRS if the position is not sustained. When dealing with transactions relating to tax shelters, the AICPA Statements on Standards for Tax Services requires that CPA recommend/inform a taxpayer of the potential penalties unless the transaction meets the more likely than not standard (more than 50% probability of success of sustaining).

Under Treasury Department Circular 230, a CPA tax advisor's best practice includes establishing relevant facts, evaluating the reasonableness of assumptions and representations, and arriving at a conclusion supported by the law and facts in a tax memorandum.

Can sue the accounting firm for the loss of the loan because of negligence.
The plaintiff can be anyone with privity including the client, intended third party beneficiary or foreseen third party (allowed in states which follow 2nd Restatement of Torts). The bank in this case was an intended third party beneficiary and therefore can sue the accounting firm for the loss of loan because of negligence.

Generally, an accountant in the performance of an engagement must exercise due professional care expected of an ordinary prudent CPA. According to the 2nd Restatement of Torts followed by the majority of states, an accountant who negligently prepares a client's financial report will be liable to anyone in privity (client) and intended third party beneficiary.

A tax return preparer will not be subject to penalty for a tax shelter transaction that has been reported on a tax return with adequate disclosures, provided it meets the more likely than not standard. According to this standard, a tax shelter transaction must have more than 50% chance of being sustained on its merits to avoid penalty.

According to the Treasury Department Circular 230 a Practitioner who prepares tax returns, cannot endorse or otherwise negotiate any refund check issued to a client by the government.

Option (a) is incorrect because CPA providing audit services must be independent in fact and appearance and therefore provide investment advisory services to audit client and accept fees for the same.

From the given choices, a CPA who has an investment in corporate client held through a regulated mutual fund represents indirect material or immaterial financial interest in the stock of the company, thus impairing independence.

Options (a), (b) and (d) are incorrect because they represent direct financial interest in client.

In this case as the CPA is aware of the client's illegal insider-trading actions, he/she should discuss the entire conversation including illegal acts based on the general rule. Additionally, if there is an enforceable subpoena, the CPA is required to discuss all information about the client as per the Code of Professional Conduct and Ethics.

However in jurisdictions that follows Ultramares vs. Touche, only those in privity and intended third party beneficiary can file a negligence lawsuit against the CPA. In this case, though Third bank is a third party beneficiary that can be forseen by the CPA, there was no privity of contract between Third bank and Hark. Therefore, Hark will win.

Negligence is the absence of due professional care. A CPA is considered to be negligent when previously discussed errors are not corrected. Additionally, a CPA is negligent when he fails to:

An accountant has a duty in the performance of an engagement to exercise due professional care expected of an ordinarily prudent CPA. Standards that guide the determination of a CPA’s duty of due care are: GAAS & GAAP, Customs of the profession, state and federal statues, court decisions and contracts with client.

In a common law suit against CPA firm where a plaintiff asserts that the CPA firm has committed actual fraud or is grossly negligent (constructive fraud), the best defense that the CPA firm can use is lack of scienter.

Scienter indicates actual knowledge of fraud. The CPA firm on the basis of good faith, can defend itself by submitting that it lacks both actual and constructive knowledge of falsity of the financial statements when providing the unqualified opinion, i.e, Scienter. However, the CPA firm cannot escape a negligence law suit based on this defense.

client consent is not needed is during review of professional practice (quality review) by AICPA or a state CPA society. (Mnemonic: IRIS scan)

Options (a) is incorrect because information cannot be shared with a purchaser of CPA's practice.

Therefore, when a CPA negligently gives an opinion on the financial statements, he would be liable to a third party that he knows would rely on the opinion.

CPA is not liable to foreseeable parties in a negligence law suit. A foreseeable party is any unknown and unnamed third party who may rely on the financial statements audited by the CPA.

When completing a return with the possibility of a taxpayer penalty being assessed, a tax advisor should inform the taxpayer of potential penalties and advise to disclose the position on the tax return. Note that the final decision of whether or not the position is disclosed on the return rests with the taxpayer and not the tax advisor.

Ivor can claim accountant-client privilege only in states that have enacted a statute creating such privilege, provided the privilege statue is used to protect the CPA and not the client. However, in general, information/discussions between client and CPA is considered confidential and not privileged, allowing CPAs to reveal information based on subpoenas, etc. Privileged communication is not recognized under common law.

According to Treasury Regulation 301.7701-15, a tax return preparer is defined as "any person who prepares for compensation, or who employs one or more persons to prepare for compensation, all or a substantial portion of any return of tax or any claim for refund of tax under the Internal Revenue Code (Code)." This can include a signing preparer and any number of nonsigning preparers.

In simple terms a husband believes that the tax preparer of his wife has not prepared her return properly. So the question is asking for CPA's defense which is the party the CPA can show the prepared tax return to. Even husband is third party so he can't show it to him without his wife's consent but the CPA's lawyer/attorney is gonna defend him he has to show the return to his attorney and it can be done without wife's consent

Partnership agreement is required to be in writing only when the partnership term exceeds one year. This is as per the statute of frauds.

Option (a) is incorrect because partner's capital contribution over $500 does not require written agreement. As per statute of frauds, a written agreement is only required in case of sale of goods worth $500 or more.

Option (c) is incorrect because a partnership involving real estate sales require written evidence; only an intention to own real estate does not require a written agreement between partners.

In a general partnership, all partnership property including those purchased in the partnership name or with partner funds, belong to the partnership and partners have rights to use such property. These rights are not transferable, except in the case of death of a partner, upon which the right to use partnership property is transferred to the deceased partner's estate. Any further selling or pledging of partnership property requires unanimous consent of all partners.

In general a partner can transfer only his or her interest in profits to another party without requiring approval of other partners. No other rights such as right to use partnership property or right to participate in management are transferable.

However, when a partner withdraws from a partnership and a new partner is admitted to the partnership as a general partner, the new partner will receive the rights to participate in the management of the business. Therefore, Nolan who is newly admitted to the QVM partnership as general partner, has the right to participate in QVM's management.

However, purchase of 55% of another corporation's stock which is neither a merger nor a consolidation does not require approval of shareholders.

A general partner of a limited partnership is responsible for the management of the partnership and has unlimited liabilities. A general partner can also be a creditor of the partnership, whether secured or unsecured.

7) The statute of limitations for collection of tax that is unpaid is 10 years from assessment. The collection may be made by levy or court proceedings. Accordingly, the due date for collection of taxes due is 4/15/Year 12.

5) The statute of limitations for the IRS to assess tax on an individual income tax return is the later of (i) three years after the due date of the return or (ii) three years after the return is filed. As the Year 1 tax return was filed on 4/15/Year 5, later than its original due date of 4/15/Year 2, we must go with limitation (ii). Accordingly, the statute of limitations for assessment of tax for Year 1 tax return would expire on 4/15/Year 8.

(B) - When a partnership is dissolved, it is generally advisable to provide a notice of dissolution to indicate termination of actual and apparent authority of the partners. An actual notice is required for each of the third parites that have dealt with the partnership in the past. A constructive noitce on the other hand, is a public notice, such as a notice in a newspaper, given to elimiate apparent authority with third parties who have not dealt with the partner or the partnership. Here Ace Automoblie Co, is a third party that has dealt with ACH partnership in the past and therefore, would require an actual notice of termination of ACH partnership. Absence of such notice, ACH is bound by the actions of Hook who displays apparent authority, even though the partnership was terminated at the time of the contract (contract with Ace signed in Oct 20X2, where as partnership terminated in Sept 20X2). Therefore, Ace will win a suit it brings against ACH.

(B) - General partners of a partnership are jointly and severally liable for contracts and debts resulting to the partnership through actual or apparent authority of the partners. Therefore, all the partners would be jointly and severally liable for any judgment recoverable by Ace automobiles. Ace would first attempt recovery from the partnership [ unless it is bankrupt] and recover any remaining amounts from the partners.