Two unrelated taxpayers consulted Andrew, a certified public accountant and active member of the AICPA, in regards to the depreciation method to be utilized in accordance with a particular specialized type of machinery affixed to realty. Although the machinery had historically been granted the status of 5- year property pursuant to Internal Revenue Code Section 168(c), a recently enacted statute classified the property as “water utility property” resulting in a 25 year life for cost recovery purposes. Although the taxpayers were clearly entitled to continue to consider earlier acquired machinery as 5-year property, both taxpayers had recently placed in service new property acquired which was of the same type and that would clearly fall under the provisions of the new statute. The obvious consequence to the taxpayers would be a much reduced annual write off attributable to the new property. Notwithstanding, one of the taxpayers had significant net operating losses and did not need or desire additional tax write offs in the applicable tax year. But, after discussing the matter with colleagues in his firm and with a number of other AICPA members that he knows and respects professionally, Andrew believes that the new statute incorrectly included the type of property owned by taxpayers in the water utility property category, and that the new statute was erroneous as regards the classification. In response to repeated calls from representatives of interested taxpayers and trade groups, the IRS issued a notice indicating that it concurred that the type of property was incorrectly included in the water utility category of property and that it would, as an administrative matter, interpret the statute in accordance with a proposed technical correction. Further, it indicated it would join other interested groups in seeking a technical correction to the statute. Andrew is in the process of filing two sets of tax returns which will, by necessity, need to take a position as to the appropriate cost recovery period assigned to the properties. First, in light of the new statute, must Andrew take a position that the property must be categorized as water utility property? Discuss. Does it make a difference under AICPA standards whether the IRS issues a notice indicating that it will seek a technical correction to the statute? Discuss. Finally, may Andrew take inconsistent tax return positions for the taxpayers? For example, may he properly treat the property as 5-year property for one taxpayer and as longer recovery life water utility property for the taxpayer possessing substantial net operating losses? Discuss.