MODULE 37 TAXES: GIFT AND ESTATE 653

2. Any unused carryovers (e.g., NOL or capital loss) are passed through to beneficiaries for use on
their
individual tax returns.
3. Any excess deductions for its final year are passed through "to beneficiaries and can be
deducted as
miscellaneous itemized deductions.
IV. TAX RETURN PREPARERS
4. Preparer-an individual who prepares for compensation,or who employs one or more persons to prepare
for compensation, any federal tax return, or a substantial portion thereof, including income, employment,
excise, exempt organization, gift, and estate tax returns.
1. Preparer need not be enrolled to practice before the Internal Revenue Service.
"2. Compensation-must be received and can be implied or explicit (e.g., accountant who prepares
individual return of the president of a company, for which he performs the audit, for no additional fee
as part of a prior agreement has been compensated [implied])
5. The performance of the following acts will not classify a person as a preparer:
6. Preparation of a return for a friend, relative or neighbor free of charge even though the person
completing the return receives a gift of gratitude from the taxpayer;
7. The furnishing of typing, reproducing or other mechanical assistance in preparing a return; and
8. Preparation by an employee of a return for his or her employer, or an officer of the employer, or
for another employee if he ?r she is regularly employed by that employer.
9. AICPA Statement on Standards for Tax Services
10. Tax Return Positions
11. With respect to tax return positions, a CPA
(1) Should not recommend a position unless there is a realistic possibility of it being sustained
administratively or judicially on its merits if challenged.
(2) Should not prepare or sign a tax return if the CPA knows the return takes a position that the
CP A could not recommend under a. above.
(3) Notwithstanding a. and b., a' CP.A may recommend a" position that is not frivolous so long as
the position is adequately disclosed on the return or.claim for refund. A frivolous
position is
one which is knowingly advanced in bad faith and is patently improper (e.g., a return
position
that is contrary to a clear, unambiguous statute).
(4) Should advise the client of the potential penalty consequences of any recommended tax posi-
tion.
12. A CPA should not recommend a tax position that exploits the IRS audit process, or serves as a
mere arguing position advanced solely to obtain leverage in bargaining with the IRS.
13. A CPA has both the right and the responsibility to be an advocate for the client.
14. Realistic Possibility Standard
15. The CPA should consider the weight of each authority (e.g., Code, Regs., court decisions, well-
reasoned treaties, article in professional tax publications, etc.) in determining whether this stan-
dard is met, and may rely on well-reasoned treatises and articles in recognized professional tax
publications.
16. Realistic possibility of success may require as much as a one-third llkelihood of success.
17. The realistic possibility standard is less stringent than the "more likely than not" and "substantial
authority" standards, but is more strict than the "reasonable basis" standard.
18. Answers to Questions on Returns
19. A CPA should make a reasonable effort to obtain from the client and provide appropriate answers
to all questions on a tax return before signing as preparer.
20. When reasonable grounds for omitting an answer exist, the CPA is not required to provide an ex-
planation on the return of the reason for omission. Reasonable grounds for omitting an answer in-
clude