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Vices and Virtues of an Objective Reporting Standard

7 Pages Posted: 1 Mar 2007  

Dennis J. Ventry Jr.

University of California, Davis - School of Law


Changes to the taxpayer substantial understatement penalty lay at the heart of the protracted controversy over practice standards in the 1980s. Practitioners objected to Treasury Department efforts to align professional standards with reporting requirements for taxpayers. Proposed amendments to Circular 230, released in 1986, would have prohibited practitioners from advising or recommending a reporting position or preparing or signing a tax return unless they could determine that the section 6661 substantial understatement penalty would not apply. Practitioners recoiled. Prevailing ethical guidelines of the major professional organizations merely required tax practitioners to render advice in good faith evidenced by a realistic possibility of success if litigated; prevailing guidelines did not require them to insure against potential tax liabilities. This article examines the love-hate relationship between the substantial understatement penalty and practitioners in the mid to late 1980s.

Suggested Citation

Ventry, Dennis J., Vices and Virtues of an Objective Reporting Standard. Tax Notes, Vol. 12, p. 1085, September 18, 2006. Available at SSRN:

Dennis Ventry (Contact Author)

University of California, Davis - School of Law ( email )

UC Davis School of Law
400 Mrak Hall Drive
Davis, CA 95616-5201
United States
530-752-4566 (Phone)

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