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Who Ultimately Wins From the 'Fiscal Cliff'?

If anyone wins from the "fiscal cliff," it's sure to be accountants and lawyers.

Shares of tax expert H&R Block were higher Tuesday, and it is likely to be a beneficiary of Washington's handling of the tax issues associated with the "cliff," no matter what the outcome, analysts say.

BTIG analyst Mark Palmer, in a note Tuesday, said investors are needlessly worrying that H&R Block would be negatively impacted if Congress simplifies the tax code. (Read More: Fix the 'Cliff' and 'Ton of Cash' Gets Freed Up.)

Palmer said despite the fact that President Barack Obama has called on Congress to reform the tax code and make it fair and simple, the barriers to that are too high to make it a likely outcome.

"While the president has proposed a few carve-outs for elimination, they wouldn't simplify the tax system in a way that would really matter—or be a meaningful threat to demand for HRB's services," he noted in a report. BTIG rates H&R Block a "buy."

"While we certainly understand why an outcome that would have a potentially devastating effect on the company would be part of one's analysis, we also believe that the probability of meaningful tax simplification in the current political context is insignificant," Palmer writes.

John Stoltzfus, chief market strategist at Oppenheimer Asset Management, said H&R is one of the names on his favorites list because he expects it to benefit from tax payer confusion and adjustment to whatever changes are made.

The fiscal cliff is the double whammy the economy would feel from the onset Jan. 1 of about $500 billion in taxes and $100 billion in automatic spending cuts if Congress does not act.

Obama and Democrats have favored restoring the top tax rates, reduced in the Bush era. Republicans oppose raising rates, and there is talk that eliminating deductions would be a potential compromise.

And in illustrating his comments, Palmer points to the fact that there were just 400 pages when the modern federal income tax code was first imposed in 1913. That number grew to 8,200 in 1945, and by 2011 it ballooned to 72,316 pages.

Palmer also detailed some of the 70 tax breaks that expired last Dec. 31 and have not been renewed. They include an additional 34 million taxpayers facing the alternative minimum tax, meaning many who receive tax refunds could instead face a tax bill. Also at risk are the state and local sales tax deduction, affecting residents of states with no income tax; tuition and fees deduction, worth about $4,000 per college student and mortgage insurance, deductible as residence interest. (Read More: It's 'Simply Not Going to Happen': Sen. Corker.)

He says there is peril for H&R Block in the potential for refunds to be delayed if Congress allows the U.S. to go over the cliff, but there is also opportunity in the resulting confusion. "A taxpayer who might have been inclined to purchase and use Intuit's TurboTax in a normal year—one in which tax law was essentially unchanged and he anticipated a refund—may be more inclined to seek the assistance of an HRB preparer when he's trying to find ways to reduce or avert a tax bill," Palmer wrote.

If Congress lets the U.S. go over the cliff, it may later try to undo some of the automatic tax changes, such as the expansion of the AMT. That could delay the tax season, and that would impact timing of H&R Block revenues, possibly moving more into the August quarter from the traditional April 30 quarter, Palmer noted.

H&R stock is up about 8 percent in the past three months. On Tuesday, the company announced a dividend of 20 cents per share, payable Jan. 2 (payable two days after Bush era tax breaks on dividend taxes expire).

In October, the company said it was exploring strategic alternatives for H&R Block Bank that could result in H&R no longer being regulated by the Federal Reserve as a savings and loan holding company. The Fed in June announced proposals to impose higher capital requirements on savings and loan holding companies.

Follow Patti Domm on Twitter: @pattidomm

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  • Patti Domm

    Patti Domm is CNBC Executive Editor, News, responsible for news coverage of the markets and economy.

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