B/c they vary, tax shelter promoters will opinions “shop” around to law firm until the promoter finds a lawyer to give the opinion Why have one? The search for legal opinions “more-likely-than-not” Practical pressures Difficulties really comes down to the malpractice standard; you “It opine the likelihood …” 51%/49% Tax bar faces pressure re: what type of opinion letters to put together Ie. to garner more work from corps like Merrill Lynch, etc. The law ABA’s Formal Opinion 85-352 When a tax professional a position, has to have a faith “good belief” in that reporting position means a possibility” of successful “Good “realistic litigation PROF: can’t quantify this § 6662 penalty “Accuracy-related” understatement” & authority” “Substantial “substantial See the OJ case re: casualty losses Affidavit by the preparer, so TP not hit with this penalty Treasury’s Circular 230 possibility” or & “Realistic “non-frivolous” “disclosure” § 6694(a) Penalty On tax preparers themselves if there was not a “realistic possibility” of their position, they knew it, and didn’t disclose it Would apply to the tax plan promoters, too Riffle: look to your own moral compass Only gives letters when he is well beyond 55% certain Capital Gains Statutory rules re: capital gains/losses § 1222 or exchange” of asset” “Sale “capital capital gain” “Net What is a asset” “capital § 1221 Property but does not include … Inventory and related does not count as a capital asset b/c when you sell inventory, it generate ordinary income Several categorical exceptions Denying capital gains for the ordinary operations of a trade or business § 1(h) Complex set of rules for calculating max rate
B/c they vary, tax shelter promoters will “shop” opinions around to law firm until the promoter finds a lawyer to give the opinion Why have one? The search for “more-likely-than-not” legal opinions Practical pressures Difficulties “It really comes down to the malpractice standard; you opine the likelihood …” 51%/49% Tax bar faces pressure re: what type of opinion letters to put together Ie. to garner more work from corps like Merrill Lynch, etc. The law ABA’s Formal Opinion 85-352 When a tax professional a position, has to have a “good faith belief” in that reporting position “Good means a “realistic possibility” of successful litigation PROF: can’t quantify this § 6662 “Accuracy-related” penalty “Substantial understatement” & “substantial authority” See the OJ case re: casualty losses Affidavit by the preparer, so TP not hit with this penalty Treasury’s Circular 230 “Realistic possibility” or “non-frivolous” & “disclosure” § 6694(a) Penalty On tax preparers themselves if there was not a “realistic possibility” of their position, they knew it, and didn’t disclose it Would apply to the tax plan promoters, too Riffle: look to your own moral compass Only gives letters when he is well beyond 55% certain Capital Gains Statutory rules re: capital gains/losses § 1222 “Sale or exchange” of “capital asset” “Net capital gain” What is a “capital asset” § 1221 Property but does not include … Inventory and related does not count as a capital asset b/c when you sell inventory, it generate ordinary income Several categorical exceptions Denying capital gains for the ordinary operations of a trade or business § 1(h) Complex set of rules for calculating max rate