Tax Ethics Case:
The date is April 14, and Helen Baldwin, CPA tax practitioner, sits at her desk, pondering the tax return before her. Helen has spent plenty of time pondering during the past year since moving from her home in a large eastern city to set up her new tax practice in a small western town. Clients in this small town have not exactly beaten a path to Helen's door to take advantage of her services. Building a client base has proven much more difficult than she had anticipated.
The return in front of Helen was completed on behalf of her newest client, Billy Joe Carter, who owns Honest Bill's Used Car Lot. He is a cousin of half of the members of the town council and is very influential in the local business community. Establishing a client relationship with Billy is the break that Helen has been looking for. In fact, Billy has made it clear that if Helen can complete and file his return before the April 15 deadline, Helen will receive his tax return business, as well as that of his family, for years to come.
Of concern to Helen, however, are several items on Billy's return. Billy insists that he is entitled to a business deduction for his new four-wheel-drive truck, since he uses it 100% of the time for business errands (such as traveling to car auctions, picking up parts, etc.). Helen thinks she has seen Billy driving the truck a number of times on what appeared to be personal trips. Also, Billy insists that the expenses associated with several trips to Las Vegas are deductible since the trips were "primarily of a business nature." Billy also claims several other large deductions without offering what Helen would consider to be "substantial documentation." As if anticipating Helen's skepticism, Billy said, "I don't know how things were in the big city where you came from, but around here people believe that a person's word is worth something. You'll just have to trust good old ‘Honest Bill' this year, and next year I'll try to keep some better records."