What does reasonable basis mean on the CPA exam?
Reasonable basis. The lowest standard at which a return position may be taken without penalty if it is disclosed. Roughly a one-in-five chance of being sustained, and significantly higher than 'not frivolous'.
Defined against Sec. 6662.
Which CPA exam sections use reasonable basis?
Reasonable basis appears in the REG section of the CPA exam.
Related terms
- substantial authority: The standard between reasonable basis and more likely than not: roughly a 40 percent chance, judged on the weight of published authorities rather than on the preparer's confidence.
- more likely than not: A greater than 50 percent chance of being sustained on its merits.
- adjusted basis: What the taxpayer has invested in property for tax purposes: cost, plus improvements, less depreciation taken.
- basis of accounting: The rule for WHEN something is recorded: cash when money moves, accrual when it is earned or incurred, modified accrual somewhere between.
- carryover basis: Basis that follows the property from the previous owner instead of resetting to what was paid.
- cash basis: Recognizing revenue when cash is received and expense when cash is paid.