What should a CPA do if the tax position they are considering for a client contradicts prior court rulings?

When a CPA considers a tax position that contradicts prior court rulings, the best course of action is to evaluate whether the circumstances have changed to justify the position. This approach acknowledges that legal interpretations can evolve and that particular facts or changes in tax law may lead to a different outcome than in past cases. By analyzing the specifics of the current situation, the CPA can determine whether any new developments or variations in factual circumstances warrant a different interpretation of the law, allowing the client to possibly pursue a legitimate and defensible position.

In this context, simply disregarding court rulings as outdated does not adhere to ethical guidelines; legal precedents are meant to provide guidance and should be respected unless there is a compelling reason to believe the application of those precedents has changed. Advising the client to avoid the position based solely on prior losses may overlook beneficial opportunities if the current facts could justify a different approach. Consulting with legal counsel, while often prudent, is not always necessary if the CPA can sufficiently evaluate the situation using their professional judgement and available legal resources. Therefore, evaluating the circumstances is a critical step in ensuring compliance with ethical standards and making a well-informed recommendation.