Solving The Privilege-Penalty Predicament: Part 2

Law360, New York (June 27, 2017, 11:51 AM EDT) -- In 2014, in AD Investment, the U.S. Tax Court held that by asserting penalty defenses, two partnerships waived the attorney-client privilege. In the first part of this article, we examined the consequences of this ruling, and their effect on tax compliance and fairness in tax litigation.

In this installment, we offer a procedural solution to balance fairness to the IRS with fairness to the taxpayer, while fulfilling the congressional intent of using penalties to encourage voluntary compliance. Finally, we close with some best practices for taxpayers facing these issues.

The Solutions: Separate Trials and Efficient Discovery

As is often the case...

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