CPA-08406  
        Shore, a paid tax return preparer, was given three partnership Schedule K-1 forms by client  Fuller. Fuller is a limited partner in each of the partnerships. The K-1s disclosed small passthrough losses allocated to Fuller. Fuller had passive income in excess of these losses from other partnerships. According to the AICPA Statements on Standards for Tax Services, assuming that no at-risk limitations apply, what is Shore's professional responsibility regarding the reporting of these partnership losses on Fuller's federal income tax return?   

        a. To verify the client's basis by examining client's records from the initial investment to the present.  

        b. To accept the information without further inquiry unless Shore has reason to believe that the information is incorrect.  

        c. To verify the initial investment in each partnership entity unless Shore has reason to believe that the information is incorrect.  

        d. To request the complete partnership returns of the partnership entities unless Shore has reason to believe that the information is incorrect.   

        AICPA Difficulty Rating:        MEDIUM  Question Title: AICPA Newly Released 2014 Lecture to be assigned to: R-2  Topic to be assigned to: AICPA Standards On Tax services 5 Page reference (page # and outline point): R2-59, III. E. 1.   

        ANSWER      Choice "b" is correct. Without obtaining verification, a tax preparer may in good faith rely on information furnished by a taxpayer or third parties when preparing a tax return. The tax preparer should, however, make reasonable inquiries if the information appears to be incomplete, incorrect, or inconsistent.  Choices "a", "c", and "d" are incorrect, per the above rule.