Tax Research and Representation

¶ … Alacare Home Health Services Inc., Petitioner vs. Commissioner of Internal Revenue The comparison of American Institute of CPAs' (AICPA) Statements on Tax Standards and the Treasury Department Circular 230 rules to practice. Alacare Home Health Services, Inc., Petitioner vs. Commissioner of Internal Revenue Respondent Facts: In the addressed case, the petitioner was from Birmingham, Alabama, and was a Medicare-certified home health care agency which uses accrual method of accounting.

As admitted by the respondent, the figure for office expenses in 1996 was overstated and should've been $247,413 and not $259,062 (Tax Attorney Resources - Alacare Home Health Services, Inc. - Page 7 - U.S. Tax Court Opinions, 2001). In 1995, the computer expenses amount had also been overstated due to an error in valuing depreciation and so, instead of $104,806, $101,806 had been recorded. A petition was formed in 1982 and from 1995-1996, the petitioner treated the cost of capital items less than $500 as an expense.

Issues: It is crucial that a decision is made about whether the petitioner must continue to expense the capital items at less than $500 (Tax Attorney Resources - Alacare Home Health Services, Inc. - Page 7 - U.S. Tax Court Opinions, 2001). In order to decide, we must ensure that those expenses are incurred by new fixed assets to permanently improve and increase the value of property, and for that, sections 263 and 446 must be studied deeply.

Applicable Authorities / Analysis Using These Authorities: According to the guidelines by the Interstate Commerce Commission, taxpayers in Pacific Union and Cincinnati had to expense the disputed assets whereas Medicare didn't hold any such condition. We can come to know if the tax system is being controlled by the Federal tax system when business taxpayer's accounting method is standardised. However, in both cases, the Court of Claims concluded that a deduction could be made from the total expenses to settle differences if the accounting method selected by the ICC reflects income.

Conclusion / Recommendation: The resultant judgement stated that since income wasn't reflected in the accounting method, the petitioner didn't hold the right to expense the cost of assets costing at less than $500 and having a useful life more than one year (ALACARE HOME HEALTH SERVICES, INC. v. COMMISSIONER -- Leagle.com, 2001). And thus, with reference to section 6662 (year 1995-96), it was to be concluded that the petitioner wouldn't be penalised for accuracy-related crime.

Comparison: The AICPA Code has to be abided to by all public and industrial members and so should the IRC and Treasury regulations. According to AICPA Code Rule 201, there are "four standards for professional practice for all AICPA members and those are: Professional competence Due professional care Planning and supervision Sufficient relevant data. (Schreiber Jr., 2014; 1)" According to Circular 230, Section 10.22, IRS rule states that diligent accuracy is required and this rule crosses all documents such as tax returns, affidavits and other IRS papers.

The Integrity and Objectivity rule of the AICPA (Code Rule 102) states that during any professional service, conflicts of interest and misinterpretation of facts must be avoided. Circular 230, Section 10.29 of the AICPA Code explains conflict as the adversity of clients' interests. The Tax Return Position has been described as a position on a tax return which has been advised by the tax payers and the members are aware of all the factual information and can analyse that information. (AICPA Statements on Standards for Tax Services (SSTS) No.1, Tax Return Positions, paragraph.