Reasonable Basis and Ethical Standards Before 1980

Abstract:     
The organized bar facilitated the professional misconduct of tax lawyers beginning in the 1960s by setting low ethical standards for tax practice. ABA Formal Opinion 314, issued in 1965, promulgated guidelines governing advice to clients in the preparation of tax returns. The ambit of Opinion 314 quickly widened to represent the prevailing ethical standards not only for advice to clients in return preparation, but generally for lawyers in their relationship with the IRS. In advising a return position, the lawyer could freely urge the statement of positions most favorable to the client so long as there was "reasonable basis" for those positions. The "reasonable basis" standard, according to commentators, permitted lawyers to "support the use of any colorable claim," and to advise "noncompliance with scienter."

This article examines the debased reasonable basis standard in historical context. In the process, it evaluates the flaw of tying tax ethics to legal ethics rather than positive law. It also discusses the appropriateness of controversy norms to modern legal processes; the role of the modern tax lawyer as advocate versus adviser; and the IRS as adversary or partner in tax compliance efforts.

Number of Pages in PDF File: 9

Accepted Paper Series