Problem
Alex Alert is the in-house Certified Public Accountant for a large manufacturing firm. President asks Alex to prepare a pro forma schedule to be used by the president's personal tax preparer in the preparation of the president's individual income tax return. When Alert receives the figures from the president, he notes that the only income items are the president's already sizable salary and two cash dividends paid to all stockholders during that year. Alert knows that the maintenance staff of the company has rebuilt the president's summer cottage during that year with "surplus goods" rerouted from the plant expansion site. Alert has been reviewing some of the cost overruns on the plant expansion, and he estimates that the cost of labor and materials that went into the president's four-bedroom, three-bath "cottage" is approximately $500,000.
1. What, if anything, does Circular 230 require Alert to do in this situation?
2. What should be done as a practical matter?