Ethics Check

[erchess]

"John" is my client for his MFJ return and also my client with respect to a corporation owned in the names of his wife and her two sons and also "Sam" who is not related.

Now "Sam" wishes to retain my services with respect to a corporation of which he and his wife are the owners so that in the near future when they sell part of their interest to an outside investor certain tax problems will have been resolved. (Without going into any detail the corp has neither made revenue nor filed paperwork with anyone and I wonder if it has not legally passed out of existence. Money has passed through the corporation's bank account but apparently all its money in was deposited there by shareholders without niceties such as loan agreements and all its money out went to pay personal expenses of the owners including their mortgage which was taken out to get money for the two corporations and is I think owned by the second. Naturally I want green before I worry too much about all that.)

The two corporations do not compete with each other and they do not do business with each other and everyone associated with the first is aware of the existence of the second but Sam wants to keep the others involved in the first in the dark as to my involvement in the second. So them's the facts. Can I take this engagement?

[Jiggers]

Ethics

I would say that you can. I don't divulge that I do the work for one taxpayer to a related taxpayer. Confidentiality applies.

You do have to walk a fine line.

For example, I have a corporation with 3 shareholders. I do all the monthly work and tax returns for the corporation.

I also do the individual tax returns for the 3 shareholders. Each shareholder also has some combination of C's, E's, and F's. I come across a check from one shareholder paying another shareholder for some hay. The second shareholder doesn't report the hay sale. I take the deduction for the expense on one. I question the second about "any other sales or income" and he says there was none. I don't report the sale on the second and I can't disclose what I know.

I keep my client list very confidential. If someone crosses paths in my office, they can assume that I do each other's work, may even comment on it, yet I do not acknowledge that fact.

[BHoffman]

Sounds like Sam just wants to make sure you aren't gossiping about his other business with the partners. Not too much to ask, surely.

I'd take Sam without hesitation based on the facts you gave that none of your work is likely to cross paths or result in any conflict. Just another client who happens to have some dealings with other clients. Happens all the time.