1. Asha's actions constitute tax avoidance. Tax avoidance is the strategy of side stepping the law which, while consequently avoiding the intent of the law, does not violate it. It is worth pointing out that Asha bought the subject equipment in 2007. To avail herself of the special election, she uses the subject equipment in the said year. The only discrepancy is that her intent was to use the equipment for her business in 2008. Seeing that it would be more advantageous to her business to use the equipment in 2007, this is what she did. Asha did not evade the obligation to pay taxes, she simply made a business decision that gave her the upper hand of getting a better deduction to the taxes she has to pay.
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2. On the part of Asha's CPA, the following statements on standards need to be considered: Part 1, 5a. A member should not recommend a tax return position or prepare or sign a tax return taking a position unless the member has a good-faith belief that the position has at least a realistic possibility of being sustained administratively or judicially on its merits if challenged.
b. Notwithstanding paragraph 5(a), a member may recommend a tax return position if the member (i) concludes that there is a reasonable basis for the position and (ii) advises the taxpayer to appropriately disclose that position.
Notwithstanding paragraph 5(a), a member may prepare or sign a tax return that reflects a position if (i) the member concludes there is a reasonable basis for the position and (ii) the position is appropriately disclosed. Reconciling the above provisions, I see no legitimate ground to not prepare nor sign Asha's tax return. The only possible discrepancy is the taxpayer's intent to use purchased property for the future and instead uses it at a time that is more convenient for her business. But the property was bought in 2007 and the tax return will disclose this as a fact. The tax return does not have to state that the property was intended for use in 2008 as there is no evidence of this intent to begin with.
Furthermore, section 8 of the same chapter states: When recommending a tax return position, a member has both the right and the responsibility to be an advocate for the taxpayer with respect to any position satisfying the aforementioned standards. As Asha's CPA, my services would be employed to uphold the taxpayer's cause to the extent that it does not violate the law. No law is being violated by Asha's plan. At the same time, a CPA may have to reckon with the professional responsibility to recall part 2 section 5 of the Statements on Standards: A member should not omit an answer merely because it might prove disadvantageous to a taxpayer. As a CPA, I might have to overlook the knowledge that the taxpayer's intent is to use the property at a future time which many not be as beneficial at the present. But this would only be for the purpose of upholding part 1, section 8. Besides, statements of standards part 1, section 4 allows omission of answers on reasonable grounds. In this case, there is a reasonable uncertainty on the relevance of the future intent to use the property with the present return.
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