Probability, Professionalism, and Protecting Taxpayers
Dennis J. Ventry Jr.
University of California, Davis - School of Law
Bradley T. Borden
Brooklyn Law School
April 21, 2014
Tax Lawyer, Vol. 68, No. 3, 2014
UC Davis Legal Studies Research Paper No. 377
Brooklyn Law School, Legal Studies Paper No. 385
Lawyers are not mathematicians. Nor are they statisticians or economists. Yet they regularly make probability assessments pertaining to the outcome of pleadings, motions, hearings, litigation strategies, written and oral opinions, and business transactions. Moreover, they make these predictions in a sea of uncertainty, subject to conditions and interdependent variables largely beyond their ken or control. Even more daunting, while some lawyers render these estimates without tangible fear of negative professional implications or discipline thanks to ethical rules that tolerate debased levels of confidence (e.g., not frivolous and colorable), others within the profession must meet considerably higher standards of care while suffering harsher and more palpable penalties, including monetary fines, censure, suspension, and disbarment. These tremulous souls are known as tax lawyers.
This Article analyzes the affirmative and disciplinary duties imposed on tax lawyers that require them to make probability assessments about the merits of a client’s tax position or tax-favored transaction, and to reflect those estimates with numerical precision. It describes how the Treasury Department, Congress, and the American Bar Association (often in concert, occasionally at odds) forged this obligatory standard of care over the last three decades with the shared goal of facilitating accurate advice, accurate tax returns, and compliance with the law. The resulting regulatory standard of care for tax lawyers (which swept aside the old regime of self-regulation) monitors flawed methodological processes, while also minimizing psychological biases and misaligned incentives that can distort professional judgment. In this way, the standard of care for tax lawyers - particularly its emphasis on improving accuracy and reducing errors by updating subjective beliefs with new, relevant information - reflects a branch of probabilistic decision theory known as Bayesian reasoning.
Number of Pages in PDF File: 78Accepted Paper Series
Date posted: April 23, 2014 ; Last revised: July 18, 2014
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