What’s A Young Tax Attorney to Do When….?

Moderator: Bradley A. Ridlehoover, McGuireWoods LLP, Richmond, VA Panelists: Karen L. Hawkins, Director, IRS Office of Professional Responsibility, Washington, DC Jenny L. Johnson, Holland & Knight LLP, Chicago, Illinois Dianna K. Muth, Steptoe & Johnson LLP, Washington DC Christopher S. Rizek, Caplin & Drysdale, Washington DC

Practice Education Bar Admission

Moderator Bradley A. Ridlehoover

Bradley A. Ridlehoover Associate (804) 775-4312 bridlehoover@mcguirewoods.com Richmond, Virginia

Bradley A. Ridlehoover, an associate in the Richmond office of McGuireWoods LLP, focuses his practice on tax controversy matters including assisting clients with Internal Revenue Service (IRS) audits, administrative appeals, and tax litigation. He represents individuals, businesses, and estates before the U.S. Tax Court and federal district courts. Brad has experience handling cases involving income, estate, gift, and excise tax matters.

• Tax • Tax Controversy and

Litigation • ERISA Litigation

• New York University School of Law, LLM, Taxation, 2009

• The College of William & Mary, JD, 2008

• Presbyterian College, BA, BS Business Administration, Political Science with Honors, 2005

• Georgia • New York • Virginia

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Panelist Karen L. Hawkins, Director IRS Office of Professional Responsibility

Karen L. Hawkins has been Director of the IRS Office of Professional Responsibility since April, 2009. Ms. Hawkins was formerly in private practice as a Member of Taggart & Hawkins, P.C., bringing 30 years of practice experience to her IRS position.

Ms. Hawkins is a past Chair of the Taxation Section of the State Bar of California, a past chair of the ABA Taxation Section Subcommittee on Civil Penalties, and the ABA Taxation Section IRS Liaison Meetings Committee. She served as a Director on the Council of the ABA Taxation Section and as the Section's Vice-Chair Professional Services. She is also a Fellow of the American College of Tax Counsel.

Ms. Hawkins is the founder of the San Francisco Pro Se/Pro Bono Tax Court project, and she played a key role in efforts to reform the innocent spouse statute. Her honors include the V. Judson Klein Award from the State Bar of California Taxation Section in 2002; the National Pro Bono Award from the American Bar Association Tax Section in 2004; The Distinguished Alumna Award from Golden Gate University Scholl of Law in 2004; the Jules Ritholz Memorial Merit Award from the ABA Tax Section Civil & Criminal Tax Penalties Committee in 2008; and, the Lifetime Achievement Award from the Taxation Section of the State Bar of California in 2012. In September, 2012, Golden Gate University School of Law Library dedicated its Tax Law Collection in Ms. Hawkins’ name. When she was in private practice, Ms. Hawkins wrote and spoke extensively on all aspects of civil and criminal tax controversy issues and on ethics in tax practice.

Ms. Hawkins earned her J.D. and MBA - Taxation degrees at Golden Gate University in San Francisco. She also holds an M.Ed. from the University of California, Davis. Her B.A. is from the University of Massachusetts, Amherst.

Practice Education Bar Admission

Panelist Jenny L. Johnson

Jenny L. Johnson Partner (312) 578-6523 jenny.johnson@hklaw.com Chicago, IL

Jenny L. Johnson, a partner in Holland & Knight's Chicago office, leads the Tax Controversy and Tax Litigation Team. She represents clients through all stages of criminal and civil tax investigations and litigation, working closely with others in the Private Wealth Services group to offer clients comprehensive counseling on income tax and estate and gift tax issues.

• Tax Controversies & Litigation

• White Collar Defense • Taxation • Private Wealth Services

• Harvard Law School, J.D., cum laude

• Sewanee: The University of the South, B.A., summa cum laude

• Illinois

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Practice Education Bar Admission

Panelist Dianna K. Muth

Dianna K. Muth Associate 202-429-1362 dmuth@steptoe.com Washington DC

Dianna K. Muth, an associate in Steptoe & Johnson LLP’s Washington DC office, is focused on tax issues for both domestic and foreign clients and assists clients in tax controversy matters at the Federal and State level, including the Internal Revenue Service administrative process and in litigation. Her experience includes dealing with technical tax matters and issues of broad policy significance.

• Tax • Corporate Tax Transactions • International Tax Controversy

and Transfer Pricing • IRS Controversy & Tax

Litigation • Vetting & Government Ethics

• Georgetown University Law Center, LL.M., 2011

• American University, Washington College of Law, J.D., 2010,

• College of the Holy Cross, B.A., 2007

• District of Columbia • New York

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Practice Education Bar Admission

Panelist Christopher S. Rizek

Christopher S. Rizek Member 202-862-8852 crizek@capdale.com Washington DC

Christopher S. Rizek, a member in Caplin & Drysdale's Washington, D.C., office and General Counsel to the firm, represents taxpayers in all types of federal civil and criminal tax controversy matters. He also guides clients through IRS audits, prepares administrative claims and protests of IRS actions, and litigates tax and tax-related cases in U.S. district and appellate courts, the U.S. Court of Federal Claims, and the U.S. Tax Court.

• Tax Controversies • Tax Litigation

• LL.M., Georgetown University Law Center, 1997

• J.D., Georgetown University Law Center, 1982,

• A.B., Dartmouth College, 1979

• Maryland • District of Columbia

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Agenda

I. Introduction

II. Scenario I – Production of Documents

III. Scenario II – Prior Work Conflict

IV. Scenario III – Client Lies to IRS Agent

V. Scenario IV – Errors Found on Tax Return

VI. Scenario V – IRS Makes Error in Client’s Favor

VII. Scenario VI – Duty of Diligence

VIII. Scenario VII - Discovery

IX. Questions/Answer

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Introduction and Framework

• Relevant sources of guidance and law for tax practitioners − Circular 230

Issued under the authority of 31 U.S.C. §330 (2004), which authorizes the promulgation of regulations to govern practice before the Treasury Department

First regulations issued in 1886, revised numerous times Latest iteration was June 2014

− ABA Model Rules & State Analogues Look to ABA and state ethics opinions (ABA does not possess disciplinary

authority) ABA Tax Section Standards of Tax Practice Statements Commentary on model rules

− Internal Revenue Code (“IRC”) penalty provisions: Sections 6694, 6695, 6701, and 7701

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Best Practices

• Circular 230, §10.33: Tax advisors should provide clients with the highest quality representation concerning Federal tax issues by adhering to best practices in providing advice and in preparing or assisting in the preparation of a submission to the Internal Revenue Service.

• In addition to compliance with the standards of practice provided elsewhere in this part, best practices include the following: − Communicating clearly with the client regarding the terms of the

engagement. For example, the advisor should determine the client's expected purpose for and use of the advice and should have a clear understanding with the client regarding the form and scope of the advice or assistance to be rendered.

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Best Practices

• Circular 230, §10.33, cont. Best practices include: − Establishing the facts, determining which facts are relevant, evaluating

the reasonableness of any assumptions or representations, relating the applicable law (including potentially applicable judicial doctrines) to the relevant facts, and arriving at a conclusion supported by the law and the facts.

− Advising the client regarding the import of the conclusions reached, including, for example, whether a taxpayer may avoid accuracy-related penalties under the Internal Revenue Code if a taxpayer acts in reliance on the advice.

− Acting fairly and with integrity in practice before the Internal Revenue Service.

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ABA Model Rules of Professional Conduct

• The Model Rules consist of standards of conduct and comments. They are advisory and serve as the model for the ethics rules adopted by most states. − Model Rule 1.1 (Competence) − Model Rule 1.3 (Diligence) − Model Rule 1.4 (Communication)

• Tax Court Rule 201(a): “General: Practitioners before the Court shall

carry on their practice in accordance with the letter and spirit of The Model Rules of Professional Conduct of the American Bar Association.”

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Reporting Ethical Concerns

• All young attorneys should determine the process within their organization for reporting ethical concerns and for seeking advice on issues.

• Process for Reporting Ethical Concerns − Addressing the issue with your supervising attorney − Determining steps to report ethical concerns if your supervising

attorney disagrees or does not adequately address your concerns − Reporting matters to your organization’s Office of General Counsel − Reporting matters to a state bar association or other governing

authority

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Scenario I – Production of Documents

• Your client is under audit and the IRS has requested information or documents that, while not currently damaging to your client, could uncover a new and damaging issue. Further, you suspect the IRS is on a fishing expedition, as the requested documents do not really pertain to the issues currently under examinations. − What choice do you have in responding to the IDR? − What if the client informs you that these requested documents do not

exist, even though you remember seeing them several years ago? − What if you remember that another practitioner also represented the

client a few years ago and you strongly suspect he would have retained copies of these documents?

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Producing vs. Protecting Client Information

• Circular 230, §10.20(a)(1): A practitioner must, on a proper and lawful request by a duly authorized officer or employee of the Internal Revenue Service, promptly submit records or information in any matter before the Internal Revenue Service unless the practitioner believes in good faith and on reasonable grounds that the records or information are privileged.

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Producing vs. Protecting Client Information • Circular 230, §10.20(a)(2): Where the requested records or information are not in the possession of, or subject to the control of, the practitioner or the practitioner's client, the practitioner must promptly notify the requesting Internal Revenue Service officer or employee and the practitioner must provide any information that the practitioner has regarding the identity of any person who the practitioner believes may have possession or control of the requested records or information.

• The practitioner must make reasonable inquiry of his or her client regarding the identity of any person who may have possession or control of the requested records or information, but the practitioner is not required to make inquiry of any other person or independently verify any information provided by the practitioner's client regarding the identity of such persons. See also Circular 230, §10.20(b).

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Scenario II – Prior Work/Conflicts of Interest

• Two years ago, Corporation X received a tax opinion from your law firm analyzing the tax consequences of a transaction. The law firm structured, negotiated, and assisted with closing the transaction. Today, the IRS initiates an audit of the Corporation X for the same tax year of the transaction. Corporation X wants to hire the same law firm to handle the audit and any resulting litigation that handled the transaction. − Does the law firm have a conflict? Is it waivable?

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Questions/Points for Discussion:

• Can you take the new matter? Does the firm have a “material limitation” conflict because of its prior work?

• How is the question of a material limitation conflict affected by the potential of a “reliance on counsel” defense? Or whether the IRS asserts penalties? Or the likelihood that a firm lawyer will be a witness in the case?

• What is required to get this conflict waived with the client’s consent? Is that advisable?

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ABA Model Rules of Professional Conduct, Rule 1.7 Conflict Of Interest: Current Clients (a) Except as provided in paragraph (b), a lawyer shall not represent a client if the

representation involves a concurrent conflict of interest. A concurrent conflict of interest exists if: (1) the representation of one client will be directly adverse to another client; or (2) there is a significant risk that the representation of one or more clients will be

materially limited by the lawyer's responsibilities to another client, a former client or a third person or by a personal interest of the lawyer.

(b) Notwithstanding the existence of a concurrent conflict of interest under paragraph (a), a lawyer may represent a client if: (1) the lawyer reasonably believes that the lawyer will be able to provide competent

and diligent representation to each affected client; (2) the representation is not prohibited by law; (3) the representation does not involve the assertion of a claim by one client against

another client represented by the lawyer in the same litigation or other proceeding before a tribunal; and

(4) each affected client gives informed consent, confirmed in writing.

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Circular 230, Section 10.29, Conflicting Interest (a) Except as provided by paragraph (b) of this section, a practitioner shall not represent a client before the Internal Revenue Service if the representation involves a conflict of interest. A conflict of interest exists if — (1) The representation of one client will be directly adverse to another client; or (2) There is a significant risk that the representation of one or more clients will be materially limited by the practitioner’s responsibilities to another client, a former client or a third person, or by a personal interest of the practitioner. (b) Notwithstanding the existence of a conflict of interest under paragraph (a) of this section, the practitioner may represent a client if — (1) The practitioner reasonably believes that the practitioner will be able to provide competent and diligent representation to each affected client; (2) The representation is not prohibited by law; and (3) Each affected client waives the conflict of interest and gives informed consent, confirmed in writing by each affected client, at the time the existence of the conflict of interest is known by the practitioner. The confirmation may be made within a reasonable period of time after the informed consent, but in no event later than 30 days. (c) Copies of the written consents must be retained by the practitioner for at least 36 months from the date of the conclusion of the representation of the affected clients, and the written consents must be provided to any officer or employee of the Internal Revenue Service on request.

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ABA Model Rules of Professional Conduct, Rule 1.9 Duties To Former Clients

(a) A lawyer who has formerly represented a client in a matter shall not thereafter represent another person in the same or a substantially related matter in which that person's interests are materially adverse to the interests of the former client unless the former client gives informed consent, confirmed in writing.

(b) A lawyer shall not knowingly represent a person in the same or a substantially related matter in which a firm with which the lawyer formerly was associated had previously represented a client (1) whose interests are materially adverse to that person; and (2) about whom the lawyer had acquired information protected by Rules 1.6 and 1.9(c) that is material to

the matter;

unless the former client gives informed consent, confirmed in writing. (c) A lawyer who has formerly represented a client in a matter or whose present or former

firm has formerly represented a client in a matter shall not thereafter: (1) use information relating to the representation to the disadvantage of the former client except as these

Rules would permit or require with respect to a client, or when the information has become generally known; or

(2) reveal information relating to the representation except as these Rules would permit or require with respect to a client.

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ABA Model Rules of Professional Conduct, Rule 1.10(a) Imputation Of Conflicts Of Interest: General Rule (a) While lawyers are associated in a firm, none of them shall knowingly represent a client

when any one of them practicing alone would be prohibited from doing so by Rules 1.7 or 1.9, unless (1) the prohibition is based on a personal interest of the disqualified lawyer and does not

present a significant risk of materially limiting the representation of the client by the remaining lawyers in the firm; or

(2) the prohibition is based upon Rule 1.9(a) or (b) and arises out of the disqualified lawyer’s association with a prior firm, and (i) the disqualified lawyer is timely screened from any participation in the matter and is

apportioned no part of the fee therefrom; (ii) written notice is promptly given to any affected former client to enable the former client

to ascertain compliance with the provisions of this Rule, which shall include a description of the screening procedures employed; a statement of the firm's and of the screened lawyer's compliance with these Rules; a statement that review may be available before a tribunal; and an agreement by the firm to respond promptly to any written inquiries or objections by the former client about the screening procedures; and

(iii) certifications of compliance with these Rules and with the screening procedures are provided to the former client by the screened lawyer and by a partner of the firm, at reasonable intervals upon the former client's written request and upon termination of the screening procedures.

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ABA Model Rules of Professional Conduct, 3.7 Lawyer As Witness (a) A lawyer shall not act as advocate at a trial in which the lawyer is likely to be a

necessary witness unless: (1) the testimony relates to an uncontested issue; (2) the testimony relates to the nature and value of legal services rendered in the case; or (3) disqualification of the lawyer would work substantial hardship on the client.

(b) A lawyer may act as advocate in a trial in which another lawyer in the lawyer's firm is likely to be called as a witness unless precluded from doing so by Rule 1.7 or Rule 1.9.

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Scenario III – Client Lies to the IRS

A) The client previously made a statement to the IRS during an audit

that you now know to be false.

B) What if you submitted on behalf of your client a document to the IRS you now know to contain false information.

− What must you do?

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Duty of Confidentiality

• ABA Model Rule 1.6 − A lawyer generally may not reveal client confidences without consent. − Under this general rule, the lawyer would be prohibited from disclosing

the prior falsehood.

• Circular, § 10.21 Knowledge of client’s omission. A practitioner who, having been retained by a client with respect to a matter administered by the Internal Revenue Service, knows that the client has not complied with the revenue laws of the United States or has made an error in or omission from any return, document, affidavit, or other paper which the client submitted or executed under the revenue laws of the United States, must advise the client promptly of the fact of such noncompliance, error, or omission. The practitioner must advise the client of the consequences as provided under the Code and regulations of such noncompliance, error, or omission.

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Duty of Confidentiality

• Circular, § 10.22 - Diligence as to accuracy. (b) Reliance on others. Except as modified by §§10.34 and 10.37, a practitioner will be presumed to have exercised due diligence for purposes of this section if the practitioner relies on the work product of another person and the practitioner used reasonable care in engaging, supervising, training, and evaluating the person, taking proper account of the nature of the relationship between the practitioner and the person.

• Circular, § 10.34 - Standards with respect to tax returns and documents, affidavits and other papers. (d) Relying on information furnished by clients. A practitioner advising a client to take a position on a tax return, document, affidavit or other paper submitted to the Internal Revenue Service, or preparing or signing a tax return as a preparer, generally may rely in good faith without verification upon information furnished by the client. The practitioner may not, however, ignore the implications of information furnished to, or actually known by, the practitioner, and must make reasonable inquiries if the information as furnished appears to be incorrect, inconsistent with an important fact or another factual assumption, or incomplete.

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Duty of Confidentiality

• Hence, the lawyer must first encourage the client to disclose or ask for permission to disclose himself.

• If the client declines, the lawyer may consider whether one of the exceptions of Model Rule 1.6 apply. − Is the injury to be suffered substantial? − Will the correction mitigate an injury that has resulted from the commission of

a crime or fraud? − Rule 1.6 would appear to preclude disclosing a mere innocent or even negligent

error subsequently discovered, without consent, unless the failure to disclose works a continuing fraud on the IRS.

• Must the lawyer withdraw: − Can he continue to represent the client without perpetuating the error?

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Scenario III – Client Lies to the IRS

A) The client previously made a statement to the IRS during an audit

that you now know to be false.

B) What if you submitted on behalf of your client a document to the IRS you now know to contain false information. − What must you do?

Would your answer change if the client made the statement during a deposition for a matter pending in Tax Court?

Would your answer change if the client was providing testimony in court?

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Model Rule 3.3 – Candor Toward the Tribunal (a) A lawyer shall not knowingly:

(1) make a false statement of fact or law to a tribunal or fail to correct a false statement of material fact or law previously made to the tribunal by the lawyer;

(2) fail to disclose to the tribunal legal authority in the controlling jurisdiction known to the lawyer to be directly adverse to the position of the client and not disclosed by opposing counsel; or

(3) offer evidence that the lawyer knows to be false. If a lawyer, the lawyer’s client, or a witness called by the lawyer, has offered material evidence and the lawyer comes to know of its falsity, the lawyer shall take reasonable remedial measures, including, if necessary, disclosure to the tribunal. A lawyer may refuse to offer evidence, other than the testimony of a defendant in a criminal matter, that the lawyer reasonably believes is false.

(b) A lawyer who represents a client in an adjudicative proceeding and who knows that a person intends to engage, is engaging or has engaged in criminal or fraudulent conduct related to the proceeding shall take reasonable remedial measures, including, if necessary, disclosure to the tribunal.

(c) The duties stated in paragraphs (a) and (b) continue to the conclusion of the proceeding, and apply even if compliance requires disclosure of information otherwise protected by Rule 1.6.

(d) In an ex parte proceeding, a lawyer shall inform the tribunal of all material facts known to the lawyer that will enable the tribunal to make an informed decision, whether or not the facts are adverse.

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Model Rule 3.4 – Fairness to Opposing Party A lawyer shall not: (a) unlawfully obstruct another party' s access to evidence or unlawfully alter, destroy or conceal a

document or other material having potential evidentiary value. A lawyer shall not counsel or assist another person to do any such act;

(b) falsify evidence, counsel or assist a witness to testify falsely, or offer an inducement to a witness that is prohibited by law;

(c) knowingly disobey an obligation under the rules of a tribunal except for an open refusal based on an assertion that no valid obligation exists;

(d) in pretrial procedure, make a frivolous discovery request or fail to make reasonably diligent effort to comply with a legally proper discovery request by an opposing party;

(e) in trial, allude to any matter that the lawyer does not reasonably believe is relevant or that will not be supported by admissible evidence, assert personal knowledge of facts in issue except when testifying as a witness, or state a personal opinion as to the justness of a cause, the credibility of a witness, the culpability of a civil litigant or the guilt or innocence of an accused; or

(f) request a person other than a client to refrain from voluntarily giving relevant information to another party unless:

(1) the person is a relative or an employee or other agent of a client; and (2) the lawyer reasonably believes that the person's interests will not be adversely affected by

refraining from giving such information.

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Duty of Candor vs. Duty of Confidentiality

• Once a false statement has been made:

− The lawyer should advise the client of her duty of candor to the tribunal and seek the client’s cooperation in withdrawing or correcting the false statements or evidence. The IRS is not considered a tribunal (See ABA Formal Op. 314 (1965))

− “If withdrawal from the representation is not permitted or will not undo the effect of the false evidence, the advocate must make such disclosure to the tribunal as is reasonably necessary to remedy the situation, even if doing so requires the lawyer to reveal information that otherwise would be protected by Rule 1.6.” Rule 3.3, Comment 10.

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Withdrawing

• Withdrawal may be necessary

− A lawyer shall withdraw from an ongoing representation if the representation will result in violation of the rules of professional conduct or other law. Model Rule 1.16(a).

− A lawyer may withdraw if the client persists in a course of action involving the lawyer’s services that the lawyer reasonably believes is criminal or fraudulent or the client has used the lawyer’s services to perpetrate a crime or fraud. Model Rule 1.16(b).

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Scenario IV – Errors Founds on Client’s Tax Return

• You have successfully represented your client through an appeals conference, or so you think. You received the closing agreement, containing a special provision for an installment agreement, and the client has signed (but the IRS has not yet countersigned). Further, you prepared and submitted Form 433 justifying the proposed installment agreement.

• Now you learn that the client not only failed to disclose a foreign bank account, but she also transferred assets for less than fair market value to her son in advance of the completion of Form 433.

− How can you respond? − Would your answer change if the IRS had already countersigned the

closing agreement?

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Circular 230

• §10.21: − The tax practitioner is required to: Advise the client promptly of the non-compliance, error

or omission Explain the possible consequences

− But the practitioner is not required to inform the IRS If disclosure is necessary to avoid perpetuating a fraud,

disclosure may be permitted or even required.

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Guidance

• Circular 230 §10.21: − Great care must be exercised in a subsequent audit not to make

statements that continue to propound a position that was previously taken in error. Failure to speak up in the course of an audit may be seen as implicit

endorsement of all statements made.

• Standards of Tax Practice 1999-1

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Filing Amended Returns to Correct Subsequently Discovered Errors

• A taxpayer “should” file an amended tax return and pay any tax due. Treas. Reg. §§ 1.451-1(a) and 1.461-1(a)(3).

• In Broadhouse v. Comm’r, T.C. Memo. 1955-328, the Tax Court held that the Treasury Regulations do not require a taxpayer to file an amended return to correct a subsequently discovered error.

• The Supreme Court addressed the issue in Badaracco Sr. v. Commissioner, 464 U.S. 386 (1984), holding that one has no legal obligation to file an amended return after an error or omission is discovered.

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Amended Returns

• If an amended return is filed, Circular 230 imposes a duty on the tax return preparer to rectify all known errors.

− Under §10.22, a practitioner must exercise due diligence as to accuracy

in preparing, approving, and filing tax returns. − A practitioner cannot prepare a return that amends only select errors.

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Future Returns

• What happens if the error from the prior year has an effect on the current year’s return? − The tax practitioner cannot incorporate the mistake into future returns.

See Circ. 230 §10.34; Model Rule 4.1; AICPA Statement 6.

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Scenario V – IRS Error in Client’s Favor

• Your client, Estate, is in the midst of an estate tax audit. The IRS draws its proposed adjustments from its expert’s valuation report. Right before the appeals conference, you discover that the IRS’s expert made several large mathematical errors that favor your client. − What must you do?

Does it matter if the error resulted from your own prior computations? Does it matter whether the error was purely mathematical vs. based on

the expert’s misunderstanding of the facts vs. misapplication of the law to the correct facts?

Would the answer change if the matter were before the Tax Court rather than Appeals?

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Mistakes by the IRS

• There are conflicting authorities.

• Standards of Tax Practice 1999-1 states that the tax lawyer should notify the IRS if the mistake is computational, but need not notify the IRS if the mistake is conceptual.

• 1999-1 recognizes that if the client objects to notifying the IRS of a computational mistake, the lawyer must act consistently with the duty of confidentiality under Model Rule 1.6. Therefore, in order to prevent a violation of Model Rule 8.4, which prohibits a lawyer from engaging in dishonest conduct, the lawyer may have to withdraw from the representation.

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Mistakes by the IRS

In ABA Informal Opinion 86-1518, a lawyer received a contract from opposing counsel that omitted a clause, benefitting the lawyer’s client. The opinion concluded that the lawyer should contact opposing counsel and correct the error, and need not even consult with his own client.

Dallas Bar Ass’n Op. 1984-4 concluded that where an administrative law judge’s decision made an incorrect computation, there was no duty to correct, at least where neither counsel nor client indicated the amount was correct and they did not become aware of the error until after the decision was rendered.

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Scenario VI - Duty of Diligence

• Your corporate client has a number of examinations of its affiliates open in both in the United States and in various foreign countries. As the IRS begins to conclude its examination, you realize that you need to file protective refund claims to reflect the result of those foreign examinations. However, you are quite sure you will not have final information (closing agreements, computations, etc.) necessary to detail the results of the foreign examinations.

• Can you file a “generic” refund claim with the IRS? • What ethical obligations exist with respect to refund claims in

particular?

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Return Positions

• Circular 230, §10.34: • (b)(1): A practitioner may not advise a client to take a

position on a document, affidavit, or other paper submitted to the IRS unless the position is not frivolous.

• (b)(2)(iii): A practitioner may not advise the client to submit any of the above if it contains or omits information in a manner that demonstrates an intentional disregard of a rule or regulation unless it is a good faith challenge to a rule or regulation.

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Return Positions

• Circular 230, §10.34(d): A practitioner may generally rely in good faith without verification upon information furnished by the client. The practitioner may not, however, ignore the implications of information furnished to, or actually known by, the practitioner, and must make reasonable inquiries if the information as furnished appears to be incorrect, inconsistent with an important fact or another factual assumption, or incomplete.

Scenario VII - Discovery During the course of discovery, you are requested to provide copies of certain documents that your client possesses. You locate the documents and these documents contain hand-written notes that are damaging to your client.

• Can you redact the notes before presenting to the IRS?

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Fairness to Opposing Party

A practitioner cannot: − Alter documents from the form in which they exist and produce the

altered documents as the originals. See Model Rule 3.4. Model Rule 3.4(a) and (b) A lawyer shall not: (a) unlawfully obstruct another party' s access to evidence or unlawfully alter,

destroy or conceal a document or other material having potential evidentiary value. A lawyer shall not counsel or assist another person to do any such act;

(b) falsify evidence, counsel or assist a witness to testify falsely, or offer an inducement to a witness that is prohibited by law;

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Scenario VII - Discovery • A practitioner can:

− Redact handwritten words on a copy of a document, keep the original with the handwritten notes, and advise the recipient that she has redacted handwritten

comments and produced the document as it was originally prepared;

– The IRS may require the unredacted version to be produced unless the notes are protected from disclosure.

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Questions or Comments?

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