News 29 Jan. 2015

Linda Galler quoted by Bloomberg BNA on Attorney-Client Privilege for Tax Professionals

Curtis Senior Tax Counsel Linda Galler was quoted extensively in an article in Bloomberg BNA's Daily Tax Report on January 26 concerning how much access the IRS can demand for communications and work product prepared by tax professionals and provided to their clients.

Ms. Galler commented on two recent court decisions in the area of attorney-client privilege and work product. The first case involved a challenge by Texas-based German billionaire Georg F.W. Schaeffler to a lower court decision that documents prepared by EY LLP and law firm Dentons US LLP in advance of a business transaction are not protected by the work product doctrine because they do not specifically refer to litigation. Ms. Galler said, among other remarks, “if the lower court opinion is affirmed, attorneys will have to assumeat least in the Second Circuitthat pre-transaction advice probably will not be protected work product. In practical terms, phrases like if the matter is litigated' or should be matter be litigated, as anticipated' will become a regular part of pre-transaction written advice.”

In the second case, which also involved pre-transaction planning, the Tax Court held that participants in a tax shelter waived the attorney-client privilege when they put their legal knowledge, understanding and beliefs into contention by raising a “reasonable cause and good faith” defense to penalties. The taxpayer had not specifically relied on the legal opinion letter sought by the IRS. According to Ms. Galler, the result of the decision may be that “putting the taxpayer's state of mind at issue enables discovery of any and all otherwise privileged materials that could have contributed to the taxpayer's reasons for taking a return position. Any and all advice the taxpayers received from counsel would be discoverable, whether or not that advice supports the taxpayer's position.”