Academic journal article Journal of Accountancy

California Court Rules on Statute of Limitations for Malpractice

Academic journal article Journal of Accountancy

California Court Rules on Statute of Limitations for Malpractice

Article excerpt

The California Court of Appeals, Fifth District, ruled that the statute-of-limitations period for a malpractice action began when an accounting firm's clients paid taxes in excess of the amount they expected to pay instead of the date Internal Revenue Service proceedings were completed.

This case began in September 1991, when the appellants received their 1990 tax returns from their accounting firm and discovered the returns did not include a credit against taxes equal to the fair market value of the donated property. The clients conceded that they were told at that time that the firm had made a mistake when it had advised the clients they would receive a dollar-for-dollar income tax credit for the donation of the $125,000 parcel.

The clients filed a malpractice complaint in June 1994, more than two years after they had--or should have--discovered the facts supporting their malpractice claim. The clients contended their cause of action against the firm did not accrue until December 1994, when the IRS finally had determined the impact of the charitable donation on their 1990 tax obligation. …

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