Kim Kardashian-West Tax Company prepared the 2014, 2015, and 2016 business income tax return for Chrissy Teigen. Chrissy and her husband John operate an LLC that produces sunglasses. In December 2017, Kim attended the University of Nebraska-Lincoln Tax Seminar, where she learned about the domestic production activities deduction. Following the class, Kim realized that she could have taken the deduction on Chrissys 2014, 2015, and 2016 returns, but had failed to do so.
Chrissy called Kim in early 2018 to prepare her 2017 return. Kim reviewed the 2016 return in preparation for preparing the 2017 return. She discovered that one of her employees had made a mistake on the return. The employee had inadvertently deducted an expense rather than amortizing it, resulting in an overstatement of a loss, an underpayment of tax on the 2016 return, and an incorrectly calculated loss carryforward that will affect the 2017 return.
1. Should Kim call the mistakes to Chrissys attention?
2. Must Chrissy file an amended return?
3. What if she refuses to file an amended return?
4. By acknowledging the mistakes, is Kim conceding that she committed malpractice?
5. What should Kim do on the 2017 return?
Required:
Write a memo identifying the issue(s) raised in this situation.
Services (SSTS) and Circular 230 that apply to address the issues.
Analyze the situation using the SSTS and Circular 230 provisions you have identified.
Provide your conclusion and recommendations regarding this situation.
Format of Response:
Memo:
To: Kay Maresh From: (yourname) Date: October 4, 2018 Re: Case #1
1
Length of Memo:
The memo should be no longer than two pages double-spaced.
Method of Submission:
Submit through Canvas or by email to kmaresh2@unl.edu
Grading Rubric:
A grading rubric is in Canvas
The Ethics assignment is worth 25 points
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