The New “Partnership Representative”

By Megan L. Brackney

Tax Controversy Corner, January - February 2017

Under the new Bipartisan Budget Act of 2015 (the “BBA”), there are significant changes to the partnership audit rules. Like TEFRA, the BBA requires partnership-level resolution of partnership income, gain, loss, deduction, and credits.

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United States v. Adlman: Defining the scope of the Kovel Privilege and Work Product Doctrine

By Juliet L. Fink

The CPA Journal, January 2017

Although the attorney-client privilege has long been recognized under common law, there is no corresponding taxpayer-accountant privilege [other than a limited privilege for “tax advice” in some non-criminal matters under Internal Revenue Code (IRC) section 7525]. Criminal and civil tax cases, however, often involve complex accounting principles that may necessitate the engagement of an accountant to aid the attorney in giving effective advice to the client.

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Can the Code Sec. 6700 Tax Shelter Promoter Penalty Apply to Everyday Tax Advice?

By Bryan C. Skarlatos and Megan L. Brackney

Journal of Tax Practice & Procedure, October - November 2016

Tax practitioners often give tax advice on things like how to structure an investment in a business venture, sell an asset, plan for retirement or pass wealth to the next generation. Sometimes a practitioner’s tax advice turns out to be wrong and the IRS assesses a tax deficiency against the taxpayer.

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How Not to Waive Privilege When Consulting Non-Attorney Experts or Professionals

By Caroline Rule 

ABA Section of Litigation, Criminal Litigation Newsletter, December 2016

Frequently, defense counsel in criminal investigations and prosecutions - particularly in tax-related prosecutions, but also in many other complex matters - cannot provide effective assistance to his or her client without consulting a non-attorney expert or professional, such as an accountant. The Second Circuit's seminal decision in United States v. Kovel, 296 F2d 918 (2d Cir. 1961), established that, if the non-attorney expert or professional is engaged by an attorney to assist the attorney in representing a client, and the services of the non-attorney expert or professional are necessary to translate, interpret, or explain client communications so that the attorney fully understands them, then communications between the attorney, the client, and the non-attorney expert or professional (hereafter, the "Kovel expert") are protected under the attorney client privilege. 

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Complying with U.S. Requirements for Foreign Pension Plans

By Cassandra Vogel

The CPA Journal, November 2016

The migration of workers into and out of the United States is a fact of the modern interconnected world. Consequently, many U.S. taxpayers acquire an interest in a foreign pension plan or other deferred compensation arrangement during time spent working abroad. Because of the beneficial tax treatment of these plans in the originating country, a taxpayer might easily—but incorrectly—assume that there are no U.S. tax implications or reporting requirements for these foreign plans. It is a mistake to overlook a taxpayer’s interest in a foreign pension plan for U.S. tax purposes, and thus it is important to be well versed in the rules relating to foreign pensions, as well as how to bring previously non-compliant individuals into compliance.

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Filing a Qualified Amended Return to Avoid Accuracy Penalties

By Megan L. Brackney

NEITHER THE INTERNAL REVENUE CODE (“I.R.C.”) nor Treasury Regulations requires taxpayers to file amended returns. However, the ethical rules of Circular 230, the NAEA, and the AICPA call for tax practitioners to advise their clients about errors or omissions in their tax filings. Once you have advised your client about an error, the client likely will ask you “should I correct the error, and, if so, how?” Under certain circumstances, a qualified amended return, or “QAR,” may provide a method for correcting an error without penalties.

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Repeal of the TEFRA Entity Level Audit Rules Under the Bipartisan Budget Act of 2015

By Jerald David August

The Bipartisan Budget Act of 2015, which President Obama signed into law on November, 2015, repealed the complex and much-criticized TEFRA partnership entity-level audit (ELA) rules, including the electing large partnership rules. On December 18, 2015, Congress passed, and President Obama signed into law, the Protecting Americans from Tax Hikes (PATH) Act of 2015. This act sets forth certain corrections to the new audit rules.

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Tips For Navigating New York City's Integrity Disclosure Forms

By Claude M. Millman 

New York City’s Vendor Information Exchange System (VENDEX) is an annoyance for organizations dependent on city funding. While it’s tempting to treat VENDEX compliance as clerical, it warrants attention from top executives. Perfect VENDEX compliance can be difficult, and complacency can lead to the filing of false data. 

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Applying Civil Penalties for Willful Violations of FBAR Requirements

By Caroline Rule 

Will the Fifth Circuit Clarify the IRS’s Burden of Proof?

District courts and other authorities disagree on whether the IRS must prove willfulness by a preponderance of the evidence or by clear and convincing evidence when seeking a civil penalty for willful failure to file a Report of Foreign Bank and Financial Accounts (FBAR). A pending appeal, Gubserv. Comm’r [No. 16-40948 (5th Cir.)], may ultimately lead to the first Federal Court of Appeals authority on the issue.

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A Message from the Chair of the NYU Tax Controversy Forum

By Bryan C. Skarlatos

The tax law is famously complex. When asked how many pages are in the current version of Treasury Regulations, a former senior IRS official once responded that it could not be determined because the tax law changed so frequently. One of the anomalies of our self-assessment system is that every citizen and resident is responsible for understanding and implementing this extremely complex law when they file their tax returns each year. 

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