Question

TROBLEM MATERIALS Note: To complete the online research problems for this ch service. DISCUSSION QUESTIONS 1:15-1 1:15-2 Explain the difference between closed-fact and open-fact situations. According to the AICPA's Statements on Standards for Tax Services, what duties does the tax practitioner owe the client?

Answer 1

Answer 15-1) The difference between closed-fact and open-fact situations are as follows :-

Closed - fact Situations

- also known as tax compliance situations

- In Closed - fact situations the facts have occurred.

- Here, the tax advisor's task is to analyse them to determine appropriate tax treatment.

- It involves

* Least amount of flexibility

*Provide best solution within predetermined constraints

Open - fact situations

- also known as tax planning situations

- The facts have not yet occurred.

- Here , the tax advisor's task is to plan them and shape them into a favourable tax result.

- It involves

* Planning and shaping in helping clients structure transaction to reach his or her objective

Answer 15-2) The practitioner owes the client the following duties :-

1 ) To inform

- It means disclosing the potential adverse consequences of tax return position

- How the client can avoid a penalty through disclosure

- Errors in previously filed tax return

- Corrective measures to be taken

2) To inquire of the client

- When can client must satisfy condition to take deduction

- When information provided by him or her appears incorrect , incomplete or inconsistent

3) Not to disclose tax related errors without client consent.

The duty of tax practitioner is to ensure the tax returns do not contain advertent error or omission as taxpayer hire tax practitioner to save time and effort.

They also act as a negotiators on behalf of client and tax authorities.