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  3. in preparing the tax return for nash plumbing, in

In preparing the tax return for Nash Plumbing, Inc., you notice a large deduction...

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Question

Accounting

In preparing the tax return for Nash Plumbing,
Inc., you notice a large deduction for
consulting services. You ask your client
to explain this deduction, and he explains it
represents tuition paid for his son to attend
college. You know that no 1099 or W-2 was
issued for these services nor is any of this
income reflected on your clients personal
tax return or his sons. Your client states
that everyone in this industry does this.
This deduction is equivalent to 20% of the
net income. Which of the following is correct
regarding your ability to sign the tax return for
Nash Plumbing, Inc. per Circular 230 Section
10.34:
A. you may sign the return since the return
meets the nonfrivolous standard
B. the clients assertion that the deduction is
industry practice is frivolous. Accordingly, the
position does not meet Section 10.34 and
you may not sign the return
C. you may sign the return only if the deduction
is clearly identified on the return as
consulting expense paid to son or some
similar disclosure
D. you may sign the return since everything on
the return is the representation of the client

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