ABA Tax Section - Recap

One piece of advice: If you are not a member of the ABA Tax Section then join! If you are a member of the ABA Tax Section then try to attend at least one of the conferences held throughout the year. This year I was fortunate to be part of a panel that presented to the Young Lawyer’s section a Q&A on IDR’s. Christopher M. Pietruszkiewicz a law professor at LSU was the mediator and Joshua Odintz, from the Senate Finance committee, was the co-presenter. They were both excellent. What we tried to communicate to the young lawyers is that IDR’s should not be viewed as a one-way street in favor of the IRS but a communication channel that allows the taxpayer to understand and narrow the IRS’s position.

Yes, under § 6001 a taxpayer is required to maintain books and records to support the position claimed on the income tax return, which the IRS and tax litigators realize is an admission as to one’s interest. An IDR should be responded in a similar fashion as it is written – If the IRS asks for an item in general terms then respond accordingly. The next IDR written by the IRS will be more focused and tailored to the information that the IRS is truly seeking. In turn, this helps the taxpayer identify and understand the true issue at hand. For the process to works correctly, the taxpayer’s representative needs to research and understand the tax position at issue. More important the representative needs to learn how to communicate with his/her counterpart. Other wise the process will fail that means communication has failed and thus the process may evolve into a contentious matter.

This is not to say that the taxpayer should just turn over all records to the IRS. We are lawyers and have a responsibility to our clients. Therefore as tax litigators, we must not only know the code but must be fully aware of the privileges that our respective clients have, attorney-client. And don’t forget our own privilege - the work-product doctrine. Can we say – Textron. And to the criminal defense attorney who did not understand how IDR’s work, yes we understood the dangers of interviews just see United States v. Stein.

I was fortunate to take in as much of FIN 48 as one could possibly take in. To my astonishment, the individual who educated me the most was not a name partner nor a government tax litigator but an associate –Diana Wollman from Sullivan & Cromwell. She and her colleagues, including a certain former acting chief counsel Emily Parker, did a tremendous job in their presentation- “Transactional Tax in a FIN 48 world”. The points they addressed were extremely insightful With the 12 month projection will the IRS demand additional adjustments? Will the IRS require settlements to reflect the reserves? The specific table of issues detail – how much and how does the detail or lack thereof impact resolutions?

In an earlier presentation “FIN 48 – Impact on Litigation and Settlements”, the government official made it clear that FIN 48 workpapers and tax accrual workpapers are viewed by the government as one and the same. As such the same procedures that apply for a request for tax accrual workpapers apply to FIN 48 workpapers. So check out the Q&A on the IRS’s website to determine when the workpapers will be requested. Hint: Think tax avoidance transactions. For potential mergers, Wollman’s panel brought out the problems that can arise when a company acquires/mergers with another company an shelters are involved.

Finally there was the Civil and Criminal Tax Penalties presentation with an update on “Economic Substance Doctrine in the Prosecution and Defense of a Criminal Tax Case”. “Interestingly”, the parties disagreed on whether there had to be a uniform instruction to the jury as to economic substance. I tend to agree with the private practitioners – how can a defendant be convicted of a crime if the crime can not be properly defined? But, credit to the government official for finally admitting why KPMG was left of the hook – pure business as big business could not afford another Arthur Anderson. Observation for the government: What a heavy price - our constitutional rights.

Again I find these presentations to be educating while stimulating and encourage everyone to come out next time.

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