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a. Stage 2.

Here I am assessing the risk of punishment and am focused on the good faith argument in favor of
claiming the deduction, that will minimize the magnitude of any punishment, and that IRS is unlikely to impose
severe penalties, or at least, the punishment is proportionate to the severity of misconduct.
b. Stage 3. Here, I am concerned with desire to please senior management, as this decision is carried forward to
please senior management.
c. Stage 5. The reasoning adheres to the inner principle that some laws reasonably can be challenged and changed.
At this stage, we tend to intellectually question social values underlying this law, and that broad policies of
matching principle permit deduction of this payment as an ordinary expense. Furthermore, we tend to believe in
pursuing needed changes through democratic process, and by fighting for it in federal tax court if possible.

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