[IMGCAP(1)]Is reality what something actually is or what people perceive it to be? Jack Welch of GE fame once said that reality is “seeing the world as it is rather than as you wish it were.”

Sometimes that is not so. And sometimes you can alter reality to make it seem like something else. One time we were handling a state tax audit for a client on a very complicated and esoteric issue. It was so involved that the state ruled on it three times, setting the rule, reversing it and then setting it again. The courts ruled on an even narrower part of this in the taxpayer’s favor (the taxpayer in this situation was Forbes magazine), and based on that case, our client was entitled to a very substantial tax refund. The interest alone would have put a kid through four years of an Ivy League college at that time.

We had numerous meetings with the tax agent and their supervisor and couldn’t even get agreement on the facts, let alone the issue. We then requested a meeting with the boss’s boss before we would have to go to more formal hearings.

I had just become partners with Peter and he prepared our case for the meeting. We requested a late afternoon meeting, and the time was set for 3 pm. Peter worked about four days organizing everything, cataloging the backup, and preparing a great presentation that he was very proud of.

As we were getting ready to leave our office, I took out of my pocket about six shopping bags, the kind you get in the supermarket, and told Peter that we were going to take everything out of the boxes he meticulously organized and throw the files and papers into the shopping bags. There was an order to what we did, but it looked terribly messy, disorganized and in complete disarray.
Peter was naturally upset since he had worked hard at organizing everything for an efficient and effective meeting. When we walked into the tax agent’s office, he saw Peter’s frown and perhaps anger at me, and the half dozen shopping bags of “papers” we were carrying. Even before the introductions were completed, he said, “Let’s settle!”

A lesson here is that in some situations, how you look is more important than what you know. Maybe the lesson here should be to always look the way you want others to perceive you. And in most case that requires you looking your best—but there are exceptions.

Edward Mendlowitz, CPA, is a partner in WithumSmith+Brown, PC, CPAs. He has authored 20 books and has written hundreds of articles for business and professional journals and newsletters plus a Tax Loophole article for every issue of TaxHotline for 27 years. Ed also does a blog twice a week that addresses issues his clients have at www.partners-network.com. He is the winner of the Lawler Award for the best article published during 2001 in the Journal of Accountancy. He has also taught in the MBA graduate program at Fairleigh Dickinson University, and is admitted to practice before the U.S. Tax Court. Ed welcomes practice management questions and he can be reached at WithumSmith+Brown, One Spring Street, New Brunswick, N.J. 08901, (732) 964-9329, or emendlowitz@withum.com.

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