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Tax Advice Before the Return: The Case for Raising Standards and Denying Evidentiary Privileges

88 Pages Posted: 23 Aug 2006  

Linda M. Beale

Wayne State University Law School


Abusive tax shelters have shone an unappealing light on tax lawyers. Some commentators suggest that these abusive shelters are the work of a small tax shelter bar. This article argues that the same practitioner norms, interpretive approaches, and tax standards that make possible the role of the so-called tax shelter bar in designing mass-marketed shelters also encourage aggressive loophole exploitation in customized tax planning by the regular tax bar.

Recent changes have set the stage for a paradigm shift in tax compliance. A new reportable transaction regime increases transparency. The 2004 Jobs Act's stiffer penalties and heightened standards for penalty protection, at least in the context of reportable transactions that have a significant tax avoidance purpose, move the target towards better compliance. Significant changes to the rules governing practice before the Internal Revenue Service add momentum.

This article argues that the best way to stymie socially wasteful tax planning is to accelerate the paradigm shift. The statutory and ethical standards for positions taken or advised on returns should be raised. A taxpayer should not be able to take a position on a tax return, nor an advisor advise a position, unless it is considered to have a greater than fifty percent likelihood of success on the merits if litigated. To make returns fully transparent and facilitate enforcement, Congress should amend the law to eliminate the applicability to pre-return tax planning advice of the common law attorney-client privilege and work product protection.

Keywords: tax, evidentiary privileges, attorney-client privilege, work product, tax shelter, ethics, reportable transactions, standards, penalty protection, Circular 230

Suggested Citation

Beale, Linda M., Tax Advice Before the Return: The Case for Raising Standards and Denying Evidentiary Privileges. Virginia Tax Review, Vol. 25, p. 583, 2006; Wayne State University Law School Research Paper No. 07-06. Available at SSRN:

Linda M. Beale (Contact Author)

Wayne State University Law School ( email )

471 Palmer
Detroit, MI 48202
United States

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