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Amendments to circular 230.

EXECUTIVE SUMMARY

* Section 10.35(c) is critical in establishing the facts, in relating the law to the facts and in evaluating significant Federal tax issues.

* Section 10.37 is important for tax practitioners issuing written advice that is not a covered opinion.

* Practitioners should carefully consider the new and amended terms and standards established by the modifications to Circular 230.

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This two-part article analyzes additions and amendments to the Circular 230 regulations adopted in 2004 and 2005. Part II examines the requirements for covered opinions and other written advice.

This two-part article reviews the recent amendments to the Treasury Circular 230 (24) regulations, which govern tax practice before the IRS by CPAs, attorneys, enrolled agents, enrolled actuaries and appraisers. (25)

Part I, in the January 2006 issue, analyzed best practices and the definitions relevant to covered opinions. Part II, below, focuses on the requirements for covered opinions and other written advice, as well as compliance provisions and the establishment of an advisory committee to the Office of Professional Responsibility (OPR).

Requirements

Exhibit 1 on p. 92 is a summary of the requirements for covered opinions under the amended Circular 230 regulations.</p> <pre> Exhibit 1: Requirements for covered opinions Section 10.35(c)(1)--Factual matters: * Practitioners must use reasonable efforts to identify and ascertain

the relevant facts, including future events, if a transaction is

prospective or proposed. An opinion must identify and consider all

facts that the practitioner determines relevant. * Practitioners must not base an opinion on any unreasonable factual assumptions, including assumptions as to future events. The opinion must identify in a separate section all factual assumptions relied on by the practitioner. * Practitioners must not base an opinion on any unreasonable factual

representations, statements or findings of the taxpayer or any other

person. The opinion must identify in a separate section all factual

representations, statements or findings of the taxpayer relied on by the practitioner. Section 10.35(c)(2)--Relate law to facts: * Opinions must relate applicable law (including potentially applicable

judicial doctrines) to relevant facts. * Practitioners must not assume favorable resolution of any significant Federal tax issue except as provided in Section 10.35(c)(3)(v) and (d), or otherwise base an opinion on any unreasonable legal assumptions, representations or conclusions. * Opinions must not contain internally inconsistent legal analyses or conclusions. Section 10.35(c)(3)--Evaluation of significant Federal tax issues: * Opinions must consider all significant Federal tax issues, except as provided in Section 10.35(c)(3)(v) and (d). * Opinions must provide a practitioner's conclusion as to the likelihood that a taxpayer will prevail on the merits as to each

significant Federal tax issue considered in the opinion. * If the practitioner is unable to reach a conclusion as to one or more of those issues, the opinion must state that. * Opinions must describe reasons for conclusions, including facts and analysis supporting conclusions, or describe reasons that the practitioner is unable to reach a conclusion as to one or more issues. * If the practitioner fails to reach a conclusion at a confidence level of at least more likely than not as to one or more significant Federal tax issues considered, the opinion must include appropriate disclosure(s) required under Section 10.35(e). * Practitioners must not take into account the possibility that a tax return will not be audited, an issue will not be raised on audit or an issue will be resolved through settlement if raised. Marketed opinions only: * Opinions must provide the practitioner's conclusion that the taxpayer will prevail on the merits at a confidence level of at least more likely than not as to each significant Federal tax issue. * If the practitioner is unable to reach a more-likely-than-not

conclusion as to each significant Federal tax issue, the practitioner must not provide o marketed opinion, but may provide written advice that satisfies the requirements of Section 10.35(b)(5)(ii). Limited scope opinions only: * Practitioners may provide an opinion that considers less than all significant Federal tax issues if: 1. The practitioner and the taxpayer agree that the scope of the opinion and the taxpayer's potential reliance on the opinion for purposes of avoiding penalties that may be imposed on the taxpayer are limited to the Federal tax issue(s) addressed in the opinion; 2. The opinion is not advice described in Section 10.35(b)(2)(i)(A), (B) or (b)(5) above; and

3. It includes appropriate disclosure(s) required under Section

10.35(e). * Practitioners may make reasonable assumptions regarding favorable resolution of a Federal tax issue, provided the opinion identifies in a separate section all issues for which the practitioner assumed a favorable resolution. Section 10.35(c)(4)---Overall conclusion: * Opinions must provide a practitioner's overall conclusion as to the

likelihood that the Federal tax treatment of the transaction or matter that is the subject of the opinion is the proper treatment

and the reasons for that conclusion. * If the practitioner is unable to reach an overall conclusion, the opinion must state that the practitioner is unable to reach an overall conclusion and describe the reasons for the practitioner's inability to reach a conclusion. Marketed opinions only: * Opinions must provide a practitioner's overall conclusion that the Federal tax treatment of the transaction or matter that is the subject of the opinion is the proper treatment at a confidence

level of at least more likely than not. </pre> <p>Factual Matters

Section 10.35(c)(1), Factual matters, is critical in establishing the facts. An opinion cannot be based on unreasonable factual assumptions, and practitioners must consider all the facts they deem relevant. This would seem to tie their efforts to due diligence under Section 10.22. Practitioners should also examine case law on unreasonable factual assumptions and the efforts to be undertaken to establish which facts are relevant. Thus, documentation is critical in demonstrating compliance with the requirements to ascertain the facts. An examination of tax shelter case law will reveal situations in which courts have held that a practitioner did not act with due diligence in ascertaining the facts. Additional guidance may be found in Interpretation No. 1-2, "Tax Planning," of Statements on Standards for Tax Services (SSTS) No. 1, Tax Return Positions, (26) which contains examples of tax planning and tax shelter situations.

One sentence in the new regulations has the potential to provide very useful guidance in fully understanding some troublesome parts of this law. The preamble (27) states, "[t]he final regulations provide that a practitioner providing a covered opinion, including a marketed opinion, must not assume that a transaction has a business purpose or is potentially profitable apart from tax benefits, or make an assumption with respect to a material valuation issue." Section 10.35(c)(1)(ii) states, "it is unreasonable to assume that a transaction has a business purpose or that a transaction is potentially profitable apart from tax benefits." This might be interpreted to mean that it is unreasonable to assume that any transaction has a business purpose (i.e., the business purpose must always be clearly established).

Likewise, it is unreasonable to assume that a transaction is potentially profitable; potential profitability must always be clearly established. Further, if a transaction is not expected to be profitable apart from its tax benefits, an opinion rendered on such a transaction would not be permitted. In other words, if covered opinions cannot assume that the business purpose of a transaction is to secure tax benefits, and if the only potential profitability expected to arise from a transaction is the tax benefits, then no covered opinion may be issued.

Relating Law to Facts

Section 10.35(c)(2) states, "the opinion must relate the applicable law (including potentially applicable judicial doctrines) to the relevant facts." This is a very broad and comprehensive statement. What is "applicable law"? What about "potentially applicable judicial doctrines"? Such doctrines are critical, given the discussions in numerous tax shelter cases over the past decade that addressed business purpose, sham transactions and economic substance. (28) A review of these and similar cases (especially on economic substance) is critical. Congress has persistently considered defining economic substance statutorily, but has not yet adopted such a rule. (29) The phrase "potentially applicable judicial doctrines" is troubling for practitioners, because what is potentially applicable may not be as clear when a practitioner is preparing an opinion, as compared to when the opinion comes under OPR scrutiny. Who is to determine what is potentially applicable? Will CPAs have to obtain an outside review of all opinions to determine whether "all" potentially applicable judicial doctrines have been considered?

Depending on a transaction's materiality, practitioners may want to consider whether they are competent to advise clients on how legal doctrines, such as economic substance, apply to transactions. Importantly, they must demonstrate that they consulted the professional tax literature or received an opinion from another competent tax professional.

An example of what not to do (and what would be forbidden) under Section 10.35's covered opinions may be found by examining Long-Term Capital Holdings. (30) This decision was a victory for the IRS. It is very detailed and provides a good discussion of problems with tax opinions considered inadequate by the district court and that would be inadequate under Section 10.35. A summary of this case would be a useful tool for training staff. It could be the basis for a discussion of what constitutes a covered opinion under Section 10.35 (even though that was not the issue in the case).

Evaluating Federal Tax Issues

What is a significant tax issue? Section 10.35 provides no guidance on how to determine whether every significant tax issue has been covered in an opinion. Will it be necessary, for example, to have either an internal or external review of the situation described in the advice, to ensure that "every" significant tax issue is covered? This would be expensive, especially when there are informal communications (e.g., normal business and tax planning advice), as well as uncertainty as to whether a covered opinion exists.

One commentator concluded (31) that the concept behind a limited scope opinion is that routine advice and answers do not need to rise to the level of time-consuming, expensive and full-blown formal opinions. These opinions may allow a practitioner and a taxpayer to agree that the opinions provide penalty protection. However, a limited scope opinion may not include marketed opinions, listed transactions, or situations in which the transaction's principal purpose concerns tax evasion or avoidance. It is also difficult to determine when such a limited scope opinion might be applicable, as there is little guidance on what constitutes "the principal purpose" and "any partnership or other entity, any investment plan or arrangement, or any other plan or arrangement." These phrases are not adequately defined. This precludes issuing a limited scope opinion, because of doubt as to whether this language applies.

Section 10.35(c)(4)--Overall Conclusion

Section 10.35(c)(4) is an omnibus provision. It requires practitioners, after satisfying the requirements for each covered opinion in written advice, to collectively consider the overall conclusion, to ensure that it also separately satisfies Section 10.35's requirements. This is analogous to an auditor's obligation under International Standards on Auditing 320.7 concerning materiality issues arising from an audit engagement. First, an auditor has to deal with each material issue separately. Then, another assessment is required to determine whether the materiality threshold has been collectively reached, before the auditor can render an opinion on the client's financial statements.

Section 10.35(d)--Competency

The concept of practitioner competency was already built into Circular 230; see Exhibit 2 above. It requires practitioners to be knowledgeable in "all of the aspects of Federal tax law relevant to the opinion," which is unrealistic. Additionally unrealistic is a practitioner relying on another practitioner's opinion, unless the practitioner responsible for the overall opinion "knows or should know" the unreliability of the other practitioner's opinion. The verb "knows" implies actual knowledge, while "should know" is undefined and could vary with the circumstances. Documentation of due diligence regarding an opinion of another individual (e.g., a member of one's own firm or an external consultant) will help protect against charges that the practitioner is not competent. Due diligence is already required by Section 10.22 and by professional ethical responsibilities outlined in the SSTSs (including the two interpretations). (32)</p> <pre> Exhibit 2: Section 10.35(d)-Competence to provide an opinion and reliance on the opinions of others Practitioners must be knowledgeable in all aspects of Federal tax law relevant to the opinion being rendered. * Practitioners may rely on the opinion of another practitioner as to one or more significant Federal tax issues, unless the practitioner knows or should know the opinion of the other practitioner should not be relied on; * If the practitioner relies on the opinion of another practitioner, the relying practitioner's opinion must identify the other opinion and set forth the conclusions reached in the other opinion. Caution concerning final opinion analysis: Practitioners must be satisfied that the combined analysis of the opinions, taken as a whole, and the overall conclusion, if any, satisfy the requirements of this section. </pre> <p>Section 10.35(e)--Required Disclosures

Section 10.35(e) includes disclosure requirements for all opinions, and special rules for marketed opinions, limited scope opinions and opinions that fail to reach a more-likely-than-not conclusion, see Exhibit 3 on p. 93.</p> <pre> Exhibit 3: Section 10.35(e)-Required disclosure Section 10.35(e)(1)---All opinions: * Opinions must prominently disclose the existence of any compensation arrangement or referral agreement between the practitioner and a promoter. Section 10.35(e)(2)--Marketed opinions: * Opinions must prominently disclose that they were written to support the promotion or marketing of the transaction(s) or matter(s)

addressed in the opinion; and * Taxpayers should seek advice based on their particular circumstances from an independent tax advisor. Section 10.35(e)(3)--Limited scope opinions: * Opinions must prominently disclose that they are limited to the one or more Federal tax issues addressed; * Additional issues may exist that could affect the Federal tax treatment of the transaction or matter that is the subject of

the opinion and the opinion does not consider or provide a conclusion as to any additional issues; and * As to any significant Federal tax issues outside the limited scope of the opinion, the opinion was not written, and cannot be used by the taxpayer, to avoid penalties. Section 10.35(e)(4)--Opinions that fail to reach a more-likely-than-not-conclusion: * Opinions must prominently disclose that they do not reach a conclusion at a confidence level of at least more likely than not as to one or more significant Federal tax issues; and * As to those significant Federal tax issues, the opinion was not written, and cannot be used by the taxpayer, to avoid penalties. Section 10.35(e)(5)--Advice regarding required disclosures: * Practitioners may not provide advice to any person that is contrary to or inconsistent with the required disclosure. </pre> <p>Section 10.35(f)--Effect of opinion

Despite an opinion's formal adherence to Section 10.35(c)-(e), Section 10.35(f) requires a separate determination of the opinion's persuasiveness regarding the tax issues in question, as well as the taxpayer's good faith reliance on the opinion; see Exhibit 4 at left. Thus, Section 10.35(f) gives the government two final, undefined standards to determine whether any covered opinion meets Section 10.35's requirements. According to several commentators, even if an opinion meets the detailed standards of Section 10.35(a)-(e) (discussed above), its persuasiveness and the taxpayer's good faith reliance will be "determined separately under applicable provisions of the law and Regulations, including particularly sections 6662, 6664, and new 6707A." (33) Thus, it is imperative for CPA tax practitioners to examine these Code sections, including changes made by the American Jobs Creation Act of 2004.</p> <pre> Exhibit 4: Section 10.35(f)--Effect of an opinion that meets these standards * Opinions meeting the requirements of Section 10.35 satisfy the practitioner's responsibilities; but * An opinion's persuasiveness with regard to the tax issues in question and the taxpayer's good faith reliance on the opinion will be determined separately under applicable provisions of the law and regulations. * Written advice that is not a covered opinion under this section is subject to Section 10.37. </pre> <p>Section 10.36--Procedures to Ensure Compliance

AICPA comments (34) on the December 2003 proposed amendments to Circular 230 centered on steps that tax advisors could take to ensure compliance with the best practices described in Section 10.33. This would involve adherence to an appropriate quality-control guide or similar document. The AICPA issued a Tax Practice Quality Control Guide in 2002 to assist CPA tax practitioners. It is also considering whether to prepare other guidance for its members on quality control in tax practice and how firms may best adhere to quality-control standards and comply with Sections 10.35 and 10.37. The comment letter also encouraged the Service to note that the scope and formality of any such guide must be scaled to the size of the particular practitioner's practice. Additionally, the comments called for Section 10.36 to encourage firms to adopt either internal or external review programs.

According to Section 10.36(a), "any practitioner who has (or practitioners who have or share) principal authority and responsibility for overseeing a firm's practice of providing advice concerning Federal tax issues must take reasonable steps to ensure that the firm has adequate procedures in effect for all members, associates, and employees for purposes of complying with Section 10.35"; see Exhibit 5 on p. 94. The practitioner or group of practitioners covered by Section 10.36 would only be subject to discipline if "through willfulness, recklessness, or gross incompetence," there are no adequate procedures in place and one or more associates, firm members or employees "are, or have, engaged in a pattern or practice, in connection with their practice with the firm, of failing to comply with [section] 10.35."</p> <pre> Exhibit 5: Section 10.36--Procedures to ensure compliance Practitioners who have or share principal authority and responsibility for overseeing a firm's practice of providing advice concerning Federal tax issues must take reasonable steps to ensure that the firm has adequate procedures in effect for all members, associates and employees for purposes of complying with Section 10.35. Practitioners with principal oversight authority for these adequate procedures will be subject to discipline for foiling to comply with the requirements if they: * Through willfulness, recklessness or gross incompetence do not take reasonable steps to ensure that the firm has adequate procedures to comply with Section 10.35, and one or more individuals who are members of, associated with or employed by, the firm are, or have, engaged in a pattern or practice, in connection with their practice with the firm, of failing to comply with Section 10.35; or * Know or should know that one or more individuals who are members of, associated with or employed by, the firm are, or have, engaged in a pattern or practice, in connection with their practice with the firm, that does not comply with Section 10.35 and they, through willfulness, recklessness or gross incompetence, fail to take prompt action to correct noncompliance. </pre> <p>Second, the practitioner(s) will be subject to Section 10.36 if they know or should know that one or more firm members, employees or associates have, or are now, engaged in a pattern or practice that is not in compliance with Section 10.35 and that the practitioner(s) charged with Section 10.36 responsibilities "through willfulness, recklessness, or gross incompetence, fail[s] to take prompt action to correct the noncompliance." Unfortunately, the Service has not provided guidance on reasonable steps or adequate procedures for Section 10.36 purposes.

The terms "willfulness," "recklessness" and "gross incompetence" are connected with Sections 10.51(1) and 10.52(a)(1) and (2). These procedures (and compliance) seemingly cover all of a firm's members, because they include employees, which could include other professionals (e.g., an in-house appraiser) or nonprofessional personnel. However, the assertion of potential disciplinary charges would only be permitted in more extreme cases involving recklessness, willfulness and gross incompetence tied to a pattern of misconduct or practice. This language implies, of course, that an isolated error or practice, detected by the practitioner(s) responsible for Section 10.36 compliance and promptly corrected, would not be subject to Circular 230 discipline. It seems to target the most egregious conduct (which is consistent with the material discussed in Sections 10.35 and 10.37), rather than typical misconduct due to error or ignorance. Unfortunately, Section 10.36 contains no guidance on adequate procedures, nor a timeframe for prompt action to ensure compliance by those within the firm.

Section 10.37--Requirements for Other Written Advice

Section 10.37 (see Exhibit 6 above) is also important, because many CPA tax practitioners will not be issuing covered opinions that meet the more-likely-than-not standard required under Section 10.35, and the Sec. 6662 standard for tax shelters. Section 10.37 is fraught with peril, because Section 10.35(f) states, "a practitioner who provides written advice that is not a covered opinion ... is subject to the requirements of Section 10.37." Potential problems immediately arise, as it may not be possible to ascertain whether a particular piece of written advice is covered by Section 10.35 or 10.37. Further, practitioners will have to be careful about any opt-out for penalty protection under Section 10.35.</p> <pre> Exhibit 6: Section 10.37--Requirements for other written advice Practitioners must not give written advice, including electronic communications, concerning one or more Federal tax issues if they: * Base written advice on unreasonable factual or legal assumptions; * Unreasonably rely on representations, statements, findings or agreements of the taxpayer or any other person; * Do not consider all relevant facts that they know or should know; or * In evaluating a Federal tax issue, take into account the possibility that the: 1. Tax return will not be audited; 2. Issue will not be raised on audit; or 3. Issue will be resolved through settlement if raised. For an opinion the practitioner knows or has reason to know will be used or referred to by a person other than the practitioner (or a person who is a member of, associated with or employed by the practitioner's firm) in promoting, marketing or recommending to one or more taxpayers a partnership or other entity, investment plan or arrangement a significant purpose of which is the avoidance or evasion of any tax imposed by the Internal Revenue Code (IRC), the determination of whether the practitioner has failed to comply with this section will be made based on a heightened standard of care. </pre> <p>Practitioners also need to remember that Section 10.37 (unlike the Section 10.35 significant purpose provisions) applies not only to significant tax issues, but also covers "one or more Federal tax issues...." Also, like Section 10.35, it covers all Federal taxes, not just income taxes. A practitioner will not be able to provide a client with a written opinion if it is based on unreasonable legal or factual assumptions (including those about future events). However, "unreasonable" is not defined for Section 10.37 purposes.

Also, a practitioner must not unreasonably rely on representations, agreements, assumptions or statements of the taxpayer, or any other person in the written advice. All relevant facts that the practitioner knows, or should know about, must be considered; further, he or she must not take "into account the possibility that a tax return will not be audited, that an issue will not be raised on audit, or that an issue will be resolved through settlement if raised." The phrase "knows or should know" is vague at best; there is no guidance about the level of due diligence that the advisor must engage in to ascertain the representations, agreements, assumptions or statements that may be relied on as a basis for the written advice. A practitioner may look, however, to Section 10.34(c) for guidance. It states, in part, that:

[A] practitioner ... may rely in good faith without verification upon information furnished by the client. The practitioner may not, however, ignore the implications of information furnished to, or actually known by, the practitioner, and must make reasonable inquiries if the information as furnished appears to be incorrect, inconsistent with an important fact or another factual assumption, or incomplete.

The language "should know" is not adequate, because it would seem to allow for the Service to second-guess the practitioner after the fact, when the written advice might be examined as part of an audit. Tax practitioners might want to consult International Accounting Standard 38.BC97, which discusses the issue of hindsight.

The discussion on the audit lottery in Section 10.37 is consistent with the coverage of the topic in SSTS No. 1, which states in part that an AICPA member should not prepare or sign a return or recommend a tax return position that the member knows "exploits the audit selection process of a taxing authority." But, if a member has a good faith belief that more than one tax return position meets the standards of SSTS No. 1, then that member "may include a discussion of the likelihood that such position might or might not cause the taxpayer's tax return to be examined and whether the position would be challenged in an examination." SSTS No. 1 thus provides a supplementary gloss on the ambiguous language contained in Section 10.37.

Finally, "all facts and circumstances, including the scope of the engagement and the type and specificity of the advice sought by the client will be considered in determining whether a practitioner has failed to comply with this section." Unfortunately, this statement will potentially allow the OPR to reach its own conclusions based on an ambiguous (and unexplained) facts-and-circumstances test. Thus, practitioners should maintain detailed records about how the advice was created and communicated to the client.

Marketing advice: Marketing advice not covered by Section 10.35 falls within the ambit of Section 10.37(a). The language regarding marketed opinions would again (as under Section 10.35) protect written advice by the practitioner or someone who is associated with, employed by or is a member of the practitioner's firm. But if the written advice involves marketing by someone other than a protected person (e.g., the practitioner or someone in the firm) and is used for marketing, promoting or recommending to other taxpayers a plan, partnership, arrangement or investment plan tied to a significant purpose of tax evasion or avoidance, "the determination of whether a practitioner has failed to comply with this section will be made on the basis of a heightened standard of care because of the greater risk caused by the practitioner's lack of knowledge of the taxpayer's particular circumstances." This language does not provide the practitioner with any realistic guidance about what constitutes a heightened standard of care, because there are no examples. Practitioners should examine case law about marketed opinions in the tax shelter area for examples that might be analogous to those potentially covered by Section 10.37.

Section 10.38--Establishment of Advisory Committees

The advisory committees, authorized under Section 10.38, will not be permitted to participate in specific disciplinary matters regarding individual practitioners. Instead, an advisory committee "may review and make general recommendations regarding professional standards or best practices for tax advisors, including whether hypothetical conduct would give rise to a violation of Sections 10.35 or 10.36"; see Exhibit 7 on p. 95.</p> <pre> Exhibit 7: Section 10.38--Establishment of advisory committees The director of the OPR is authorized to establish one or more advisory committees to promote and maintain the public's confidence in tax advisors. Membership: * At least five individuals authorized to practice before the IRS; and * Balanced among attorneys, accountants and enrolled agents. The advisory committee may review and make general recommendations regarding professional standards or best practices for tax advisors. </pre> <p>Conclusion

Many facets of Circular 230 represent uncharted territory for practitioners. They include undefined critical terminology and significantly higher standards of tax practice, without the benefit of precedents or other research interpretation. Thus, tax advisers should exercise caution and carefully review the new or modified terms and the higher standards to which they are now held, as the law took effect on June 21, 2005. Exhibit 8 on pp. 96-97 is an application chart useful in identifying specific requirements of Circular 230.

[ILLUSTRATION OMITTED]

It will be important for both Treasury and professional organizations, like the AICPA, to provide guidance and to educate practitioners on how to comply with revised Circular 230. As adherence to Circular 230 is complex and the potential for sanctions so potentially catastrophic, clarity and timeliness in providing guidance is essential.

Editor's note: Dr. Gardner is a member of the AICPA Tax Division's Tax Executive Committee. Authors' note: The authors wish to thank the reviewers for their insightful comments.

John C. Gardner, Ph.D., CPA

Professor of Accountancy

University of Wisconsin--La Crosse

La Crosse, WI

Barbara J. Eide, Ph.D., CPA

Associate Professor of Accountancy

University of Wisconsin--La Crosse

La Crosse, WI

Joseph T. Kastantin, MBA, CPA

Associate Professor of Accountancy

University of Wisconsin--La Crosse

La Crosse, WI

(24) Treasury Circular 230, Regulations Governing the Practice of Attorneys, Certified Public Accountants, Enrolled Agents, Enrolled Actuaries, and Appraisers Before the Internal Revenue Service (hereafter, "Circular 230").

(25) See REG-122379-02 (12/30/03).

(26) Available at www.aicpa.org/download/tax/2003_10_interp1-2_ssts1.pdf.

(27) TD 9165 (12/17/04).

(28) See, e.g., Rice's Toyota World, Inc., 752 F2d 89 (4th Cir. 1985), aff'g, rev'g and rem'g 81 TC 184 (1983); and ACM Partnership, 157 F3d 231 (3d Cir. 1998), aff'g, rev'g and rem'g TC Memo 1997-115.

(29) See Rector, "A Review of the Economic Substance Doctrine," 10 Stan. J Law, Bus. & Fin. 173 (Autumn 2004); Sheppard, "News Analysis: Drafting Economic Substance, Part 3," 106 Tax Notes 1020 (2/1/05); and Korb, "Korb Gives Speech on Economic Substance Doctrine," 2005 TNT 16-22 (1/26/05).

(30) Long-Term Capital Holdings, 330 FSupp2d 122 (DC CT 2004), aff'd, 2d Cir., 9/27/05; for a good discussion of the case, see Walsh, "Opinion Letters Offer Scant Shelter from Tax Shelter Penalties," 74 Practical Tax Strategies 196 (April 2005), and Lipton, "Reliance on Tax Opinions: The World Changes Due to Long-Term Capital Holdings and the AJCA," 101 J Tax'n 344 (December 2004).

(31) See Sheppard, "News Analysis: Shelter Penalties: Or Else What? (Part 2)," 106 Tax Notes 141 (1/10/05).

(32) See AICPA Tax Executive Committee, SSTS Nos. 1-8 and Interpretation Nos. 1-1, "Realistic Possibility Standard" (August 2000) and 1-2, "Tax Planning" (October 2003), of SSTS No. 1, Tax Return Positions.

(33) See Lipton, Walton and Dixon, "The World Changes: Broad Sweep of New Tax Shelter Rules in AJCA and Circular 230 Affect Everyone," 102 J Tax'n 146 (March 2005).

(34) AICPA Comments on Proposed Regulations, REG-122379-02 Regarding Modifications to Treasury Circular 230, approved by the Tax Executive Committee and submitted to the Internal Revenue Service, Feb. 12, 2004.
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Title Annotation:part 2
Author:Kastantin, Joseph T.
Publication:The Tax Adviser
Date:Feb 1, 2006
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