Starr, CPA, prepared and signed Cox's current-year federal income tax return. Cox informed Starr that Cox had paid doctors' bills of $20,000 although Cox actually had paid only $7,000 in doctors' bills during the year. Based on Cox's representations, Starr computed the medical expense deduction that resulted in an understatement of tax liability. Starr had no reason to doubt the accuracy of Cox's figures and did not ask Cox to submit documentation of the expenses claimed. Cox orally assured Starr that sufficient evidence of the expenses existed. In connection with the preparation of Cox's tax return, Starr is

Starr, CPA, prepared and signed Cox's current-year federal income tax return. Cox informed Starr that Cox had paid doctors' bills of $20,000 although Cox actually had paid only $7,000 in doctors' bills during the year. Based on Cox's representations, Starr computed the medical expense deduction that resulted in an understatement of tax liability. Starr had no reason to doubt the accuracy of Cox's figures and did not ask Cox to submit documentation of the expenses claimed. Cox orally assured Starr that sufficient evidence of the expenses existed. In connection with the preparation of Cox's tax return, Starr is

Starr, CPA, prepared and signed Cox's current-year federal income tax return. Cox informed Starr that Cox had paid doctors' bills of $20,000 although Cox actually had paid only $7,000 in doctors' bills during the year. Based on Cox's representations, Starr computed the medical expense deduction that resulted in an understatement of tax liability. Starr had no reason to doubt the accuracy of Cox's figures and did not ask Cox to submit documentation of the expenses claimed. Cox orally assured Starr that sufficient evidence of the expenses existed. In connection with the preparation of Cox's tax return, Starr is



A. Not liable to the IRS for any penalty or interest.
B. Liable to Cox for interest on the underpayment of tax.
C. Not liable to the IRS for any penalty but is liable to the IRS for interest on the underpayment of tax.
D. Liable to the IRS for negligently preparing the return.




Answer: A


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