692 MODULE 40 TAXES: GIFT AND ESTATE

(
the process of an ordinary audit or unless the CP A agreed to
greater responsibility to uncover fraud.
76. (b) If the IRS issues a thirty-day letter to an individ-
ual taxpayer who wishes to dispute the assessment, the tax-
payer may ignore the thirty-day letter and wait to receive a
ninety-day letter. Answer (a) is incorrect because a taxpayer
must receive a ninety-day letter before a petition can be filed
in Tax Court. Answer (c) is incorrect because a taxpayer has
a thirty-day period during which to file a written protest.
Answer (d) is incorrect because a taxpayer is not required to
pay the taxes and commence an action in federal district
court.
Generally, .upon the receipt of a thirty-day letter, a tax-
payer who wishes to dispute the findings has thirty days to
(1) request a conference with an appeals officer or file a
written protest letter, or (2) may elect to do nothing during
the thirty-day period and await a ninety-day letter. The tax-
payer would then have ninety days to file a petition with the
Tax Court. Alternatively, a taxpayer may choose to pay the
additional taxes and file a claim for refund. When the re-
fund claim is disallowed, the taxpayer could then commence
an action in federal district court.
77. (c) A CPA will be liable to a tax client for damages
resulting from the following activities: (1) failure to file a
client's return on a timely basis, (2) gross negligence or
fraudulent conduct resulting in client losses, (3) erroneous
advice or failure to advise client of certain tax elections, and
(4) wrongful disclosure or use of confidential information.
A CP A will not be liable to a tax client for refusing to sign a
client's request for a filing extension, therefore answer (c) is
correct.

78. (b) According to the AlCPA Statements on Stan-

dards for Tax Services, a CP A should not recommend a po-
sition unless there is a realistic possibility of it being sus-
tained if it is challenged. Furthermore, a CP A should not
prepare or sign an income tax return if the CP A knows that
the return takes a position that will not be sustained if chal-
lenged. Therefore, answer (d) is incorrect. Also, a CPA
should advise the client of the potential penalty conse-
quences of any recommended tax position. Therefore, an-
swer (c) is incorrect. Answer (a) is incorrect as a CPA may
not recommend a position that is frivolous even if the posi-
tion is adequately disclosed on the return.
79. (a) While performing services for a client, a CPA
may become aware of an error in a previously filed return.
The CPA should advise the client of the error (as required by
the Statements on Standards for Tax Services) and the
measures to be taken. It is the client's responsibility to de-
cide whether to correct the error. In the event that the client
does not correct an error, or agree to take the necessary steps
to change from an erroneous method of accounting, the CP A
should consider whether to continue a professional relation-
ship with the client.
80. (b) A CPA may in good faith rely without verifica-
tion upon information furnished by the client when prepar-
ing the client's tax return. However, the CPA should not
ignore implications of information furnished and should
make reasonable inquiries if information appears incorrect,
incomplete, or inconsistent.