Statement on Standards for Tax Services No. 1 establishes as a basic principle of providing tax services that the CPA:
A) Must have a good faith belief that the tax return position will be accepted by the IRS
B) Must have a good faith belief that the tax return position has a realistic possibility of success if challenged by the IRS
C) Can never recommend a tax position to the client when it is more likely than not to be challenged by the IRS
D) Can never recommend a tax position to the client without disclosing it to the SEC

Question

Quizplus · Accepted Answer

Statement on Standards for Tax Services No. 1 requires a CPA to have a good faith belief that the tax return position has a realistic possibility of success if challenged by the IRS. This means that the position should be based on a reasonable interpretation of the tax law and facts, and not just an aggressive attempt to minimize tax liability. A CPA cannot guarantee that the position will be accepted by the IRS, but must have a reasonable basis for recommending it to the client. Choices A, C, and D are incorrect as they do not accurately reflect the basic principle established in the standard.