Claude is a CPA and a partner with SKH and Associates, a regional public accounting firm. In September 2018, Brokaw Technologies approached one of his clients, Walter Fenner, about acquiring 100 acres of land that Walter owned next to the company’s headquarters. To minimize its tax liability, Brokaw was interested in doing a like-kind exchange to obtain the property. Walter was not interested in a like-kind exchange because he wanted to recognize the capital gain from the sale of the land to offset losses he had incurred in the stock market. In November 2018, Brokaw Technology was approached by Simmons Corporation about buying land that Brokaw owned in a neighboring town. Brokaw informed Simmons that it would be interested in doing a like-kind exchange if the corporation could acquire Walter Fenner’s property. Because Walter was anxious to recognize the capital gain in 2018, Simmons Corporation bought the property from him on December 15, 2018, with the intention of making the exchange with Brokaw Technology. Because of a legal problem with the title on the Brokaw property, the exchange did not take place until July 1, 2019. 

In June 2020, Brokaw Technology becomes a client of SKH and Associates, and Claude is named the partner-in-charge on the engagement. While reviewing the prior year audit workpapers and tax return, he notices that Brokaw acquired the land for its new warehouse in a like-kind exchange. Because the address and description of the property are familiar, Claude obtains the supporting documentation on the transaction from the previous auditors. The documentation confirms that Claude’s client, Walter Fenner, did previously own the land acquired in the like-kind exchange. Since Brokaw did not acquire the property within 180 days of Walter’s sale of the property, Claude is unsure of Brokaw’s treatment of the transaction as a like-kind exchange. A closer look at the supporting document shows the date Simmons Corporation acquired the property from Walter as January 15, 2019. The chief financial officer of Brokaw tells Claude: “I remember it took a little longer than we expected because of some legal issues concerning title to the property we owned. As to when Simmons acquired the property, that is documentation Simmons provided to us.” Claude is sure that the CFO is not telling him the whole story. However, he is unsure how to proceed. What is Claude’s obligation under the Statements on Standards for Tax Services (which can be found at www.aicpa.org) concerning Brokaw’s 2019 return and the preparation of its 2020 return?