PRIVILEGE ISSUES IN THE ESTATE PLANNING ARENA
STEPHANIE LOOMIS-PRICE
Winstead PC 1100 JP Morgan Chase Tower
600 Travis Houston, Texas 77002
(713) 650-2750 Fax: (713) 650-2400
[email protected] ©Stephanie Loomis-Price 2012. All rights reserved.
State Bar of Texas 36
th ANNUAL
ESTATE PLANNING AND PROBATE COURSE
June 27-29, 2012 San Antonio
CHAPTER 16
Shareholder
Wealth Preservation
Houston 713.650.2750 Direct 713.650.2600 Fax [email protected]
Stephanie Loomis-Price primarily handles federal gift and estate tax litigation, including disputes and litigation with the Internal Revenue Service, as well as state fiduciary controversy work. She has assisted clients in numerous cases in the United States Tax Court, the United States Court of Federal Claims and the United States Court of Appeals for the Fifth, Eighth, and Eleventh Circuits. She also counsels clients regarding complex estate administration. Stephanie currently serves as probate editor of the quarterly Real Estate, Probate and Trust Law Reporter published by the State Bar of Texas, and on Council for the Real Property, Trusts and Estates section of the American Bar Association, as well as Co-Chair of the Continuing Legal Education Committee of the same organization.
Prior to entering private practice, Stephanie served as a law clerk to the Honorable Lawrence S. Margolis of the United States Court of Federal Claims in Washington, D.C.
Board Certified in Estate Planning and Probate Law, Stephanie is a Fellow of the American College of Trust and Estate Counsel.
In matters regarding increased estate tax asserted by Internal Revenue Service:
• Estate of Samuel P. Black, Jr.- successful defense of estate against IRS attempt to apply I.R.C. § 2036 to ignore family limited partnership for estate tax purposes (Estate of Black, et at. v. Commissioner, 133 T.C. No. 15 (Dec. 14, 2009).)
• Estate of Wayne C. Bongard- successful defense of estate against IRS in Tax Court case where IRS sought to apply I.R.C. § 2036 to ignore existence of limited liability company for estate tax purposes (Estate of Bongard v. Commissioner, 124 T.C. 95 (2005).)
• Estates of Eugene and Allene R. Stone- successful defense of estate against IRS in Tax Court cases where IRS sought to apply I.R.C. § 2036 to ignore the existence of five family limited partnerships (Estate of Stone, et at. v. Commissioner, 86 T.C.M. (CCH) 551 (2003).)
• Estate of Beatrice Dunn- successful Fifth Circuit appeal and reversal of Tax Court decision regarding valuation of closely held corporation (Estate of Dunn v. Commissioner, 301 F.3d 339 (5th Cir. 2002).)
• Estate of Helen Bolton Jameson -successful representation in Fifth Circuit appeal involving unrealized capital gains discount when valuing stock in closely held C-corporation (Estate of Jameson v. Commissioner, 267 F.3d 366 (5th Cir. 2001 ).)
In matters regarding increased gift tax asserted by Internal Revenue Service:
• Tom and Kim Holman- successful defense of taxpayers in gift tax case involving IRS assertion of step transaction/indirect gift (Holman v. Commissioner, 130 T.C. No. 12 (2008).)
• Charles T. McCord, Jr., and MaryS. McCord- successful defense of taxpayers in case of first impression regarding tax effect of gifts of limited partnership interests made by way of dollarbased defined value formula (Succession of McCord, eta/. v. Commissioner, 461 F. 3d 614 (5th Cir. 2006).)
In matters regarding attorney-client and related privileges:
• Estate of Nellie Segerstrom- successful representation of the estate in federal district court in response to an IRS summons of attorney-client privileged documents, and defense of the estate in Tax Court in an $18 million dispute with the IRS regarding the estate tax value of real estate partnerships (Estate of Segerstrom v. United States, 87 A.F.T.R.2d 2001-1153 (N.D. Cal. 2001).)
Georgetown University Law Center • J.D., 1998 • cum laude • Managing Editor, Georgetown Journal of Legal Ethics
The Johns Hopkins University • M.S., Applied Behavioral Science, 1996
Austin College • B.A., International Studies and Spanish, 1989
Fellow, American College of Trust and Estate Counsel
• Probate Editor of the quarterly Real Estate, Probate and Trust Law Reporter, State Bar of Texas, Real Estate, Probate and Trust Law Section
• American Bar Association, Tax Section; Real Property, Trusts and Estates Law Section; Past Chair, Tax Litigation and Controversy Committee; Co-Chair, Continuing Legal Education Committee; Member, Council; Member, Planning Committee
• Board Certified in Estate Planning and Probate Law, Texas Board of Legal Specialization
• Best Lawyers in America, 2010
• 2009 Judge Thomas Gibbs Gee Award for Outstanding Pro Bono Service
• 2008 Excellence in Writing Award, Probate & Property
• Texas Rising Star, Texas Monthly, 2006
• Lawyer on the Fast Track, H Texas, 2004
• Texas Super Lawyers, Texas Monthly 2010
• Texas, 1998
• U.S. Tax Court
• U.S. Court of Federal Claims
• U.S. District Court, Northern District of Texas
• U.S. Court of Appeals, Fifth, Eighth and Eleventh Circuits
• 9/25/2010- Informal Interview? Or Daunting Deposition?: Case Study on Preparing and Presenting Witnesses for IRS Interviews, American Bar Association Joint Tax/Real Property, Trust & Estates Section Fall 2010 Meeting, Toronto, Canada
• 6/14/2010- WANTED! Family Limited Partnerships (Dead or Alive?), Wells Fargo Private Bank, eCLE
• 5/7/2010- Appealing to a Higher Authority: Taking Your Case to IRS Appeals, American Bar Association's Spring Symposia, Philadelphia, Pennsylvania
• 4/29/2010- Privileges and Partnerships: Preparing for IRS Probes, Attorneys for Family Held Enterprises 2010 Annual Conference, Chicago, Illinois
• 4/9/2010 -What is in the Founder's Drawers? What is in Yours? Transactional Considerations in Creation and Succession of Family Limited Partnerships and Other Trust and Estate Entities, Texas Bar CLE's 16th Annual Advanced Estate Planning Strategies Course, Santa Fe
• 3/5/2010- Best Practices in FLP Planning: Pavlov's Response to IRC 2036, The California State Bar's Estate & Gift Tax Committee Conference, San Francisco, California
• 2/18/2010- Funding Estate Tax Liabilities: Exploring Graegin, § 6165, and § 6161, AU ABA Advanced Estate Planning Techniques, Maui, Hawaii
• 2/10/2010- Planning Through Death: Family Limited Partnerships Are Alive and Kicking, All Childrens' Hospital Foundation, The 1ih Annual Estate, Tax, Legal & Financial Planning Seminar, St. Petersburg, Florida
• 1/11/2010- We Could Tell You, But Then We'd Have to Kill You Privileges, Planning & Partnerships, Southern Nevada Estate Planning Council Conference, Las Vegas
• 12/15/2009- The Bucket List for Limited Partnerships: Planning for IRS Audit Before Death, LCPA 2009 Louisiana Tax Conference, New Orleans
• 12/8/2009- Black, White & Grae(gin): Borrowing to Pay Estate Taxes, American Bar Association eCLE
• 10/29/2009- Practice Pointers for Drafting Discovery in Fiduciary Fights, Texas Bar CLE's 20th Annual Estate Planning & Probate Drafting Course, Dallas, Texas
• 10/20/2009- UN-Certainties of Death and Taxes: Defending Estate Tax Returns with Closely Held Interests, 46th Annual Hawaii Tax Institute, Waikiki, Hawaii
• 9/25/2009- Nuts & Bolts: How to Read a Valuation Report, ABA Joint Fall CLE Meeting, Chicago, Illinois
• 1/17/2008- FLPs: Don't Leave Home Without One (but leave your home outside of it!), 42nd Heckerling Institute on Estate Planning, University of Miami, Orlando, Florida
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TABLE OF CONTENTS
I. ANTICIPATE YOUR POTENTIAL AUDIENCE DURING PLANNING STAGE ............................................. 1 A. Preparation for the Transfer Tax Audit or Dispute Begins at the Estate Planning Level ................................ 1 B. Understand the IRS‟s Broad Summons Power ................................................................................................ 1 C. Put Your Client in a Position to Produce Correspondence or Documents in Your File if it is in the
Client‟s Best Interest to Do So ........................................................................................................................ 1 D. Understand and Preserve All Privileges .......................................................................................................... 2
II. ATTORNEY-CLIENT COMMUNICATIONS AND WORK PRODUCT ........................................................... 2 A. Attorney-Client Privilege ................................................................................................................................ 2
1. Definition ................................................................................................................................................. 2 2. Two-Way Communications ..................................................................................................................... 2 3. Not Necessarily the Facts ........................................................................................................................ 2 4. Confidence ............................................................................................................................................... 2 5. Bills and Invoices .................................................................................................................................... 3 6. Not Business Advice ............................................................................................................................... 3 7. Dual Purpose ........................................................................................................................................... 3 8. Loan Officer/Lawyer ............................................................................................................................... 3 9. Tax Opinions ........................................................................................................................................... 3 10. Return Preparation May Not Be Privileged ............................................................................................. 3 11. How Do You Talk to an Entity? .............................................................................................................. 4 12. Crime/Fraud Exception ............................................................................................................................ 4 13. Beware Of Waiver ................................................................................................................................... 4
B. Work Product Doctrine.................................................................................................................................... 5 1. Definition ................................................................................................................................................. 5 2. Scope ....................................................................................................................................................... 5 3. Categories ................................................................................................................................................ 5 4. “Anticipation of Litigation.” .................................................................................................................... 5 5. What About Proposed Transactions?....................................................................................................... 6 6. Protection Is Not Absolute ...................................................................................................................... 6 7. Audit or Tax Return Work Papers Generally Are Not Protected ............................................................ 6 8. “Because Of” vs. Primary Purpose Test .................................................................................................. 6
C. The Physician-Patient Privilege ...................................................................................................................... 6 D. Tax Practitioner‟s Privilege ............................................................................................................................. 7
1. Definitions ............................................................................................................................................... 7 2. Obvious Limitations of Section 7525 ...................................................................................................... 7
III. PRIVILEGES IN THE APPRAISAL PROCESS ................................................................................................... 8 A. The Attorney Should Hire the Appraiser ......................................................................................................... 8
IV. THE KOVEL ACCOUNTANT: SOLUTION? ..................................................................................................... 8 1. Control ..................................................................................................................................................... 9 2. Clarification that Accountant‟s Work Is Not Pure Return Preparation ................................................... 9 3. Ownership ................................................................................................................................................ 9 4. Purpose .................................................................................................................................................... 9
B. Discuss the Methodology and Results of the Appraiser‟s Work With the Appraiser Before the Appraiser Drafts the Report............................................................................................................................. 9
V. THE EFFECT OF ASSERTING THE ATTORNEY-CLIENT PRIVILEGE ON THE BURDEN OF PROOF IN DISPUTED CASES ............................................................................................................................. 9
VI. CONCLUSION ..................................................................................................................................................... 10
EXHIBIT ....................................................................................................................................................................... 11
PRIVILEGE ISSUES IN THE ESTATE PLANNING ARENA (POWERPOINT PRESENTATION) ...................... 13
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PRIVILEGE ISSUES IN THE ESTATE
PLANNING ARENA
I. ANTICIPATE YOUR POTENTIAL
AUDIENCE DURING PLANNING STAGE
A. Preparation for the Transfer Tax Audit or
Dispute Begins at the Estate Planning Level
The typical knee-jerk reaction to a request for documents or correspondence (particularly documents in a lawyer‟s file) is to assert all applicable privileges and refuse to produce the documents. However, the attorney-client privilege and the attorney work product privilege may not protect all contents in your file. More importantly, the production of carefully drafted estate planning correspondence or similar documents in response to such a request can actually help you state your case with the examiner or in litigation. With that goal in mind, as you are working on a client‟s estate plan, assume that every document prepared by the estate planning lawyer, the client, the accountant, or any other person involved in the estate planning process may be reviewed by an IRS agent, appeals officer, district counsel, or ultimate finder of fact in tax litigation.
Preparation for the transfer tax audit or dispute truly begins at the estate planning level. When writing letters or internal memoranda, think about how that document will look to an IRS agent, an appeals officer, or the ultimate finder of fact in tax litigation. Have you focused on all relevant reasons for the transaction? Or only the estate and gift tax savings that might be achieved through the transaction? Advise your client and the client‟s advisors, such as accountants or stockbrokers who are involved in the estate planning process, that their files may be subject to production in a tax audit or in litigation, or perhaps the client will wish to waive the relevant privileges and voluntarily produce those files.
B. Understand the IRS’s Broad Summons Power
The IRS has broad summons powers that can be used to summons documents or compel testimony from a taxpayer, the taxpayer‟s representative, or a third party. For the purpose of “ascertaining the correctness of any return, making a return where none has been made, [or] determining the liability of any person for any internal revenue tax,” the IRS is authorized (i) to examine any books, papers, records, or other data that may be relevant or material to such inquiry, and (ii) to summon the person liable for tax or required to perform the act, or any officer or employee of such person, or any person having possession, custody, or care of books of account containing entries relating to the business of the person liable for tax or required to perform the act, or any other person the
IRS may deem proper to produce such books, papers, records, or other data. I.R.C. § 7602(a).
Subject to any applicable privileges, the IRS can summon the taxpayer, the taxpayer‟s attorney, the taxpayer‟s accountants, and other third parties to produce books, papers, records, or other data and to testify on matters relevant or material to the IRS‟s inquiry. This summons power includes lawyers, accountants, and others involved in the planning process. It also includes doctors or other health care providers. The range of discoverable documents is also very broad and generally includes all documents in any form (including, for example, computer files and emails).
To enforce a summons, the IRS must show that the summons: (1) was issued for a legitimate purpose; (2) seeks information relevant to that purpose; (3) seeks information that is not already within the IRS‟s possession; and (4) satisfies all administrative steps required by the United States Code. United States v. Powell, 379 U.S. 48, 57-58 (1964). However, the IRS‟s broad summons power remains subject to traditional privileges and limitations. United States v. Euge, 444 U.S. 707, 714 (1980). Thus, if the attorney-client privilege attaches to documents requested by the IRS, the IRS has no right to issue a summons to compel their production.
C. Put Your Client in a Position to Produce
Correspondence or Documents in Your File if
it is in the Client’s Best Interest to Do So The assertion of the privileges at the audit or tax
court level leads to an inference that the taxpayer is hiding something. Arguing that a document should be shielded from discovery by an examining agent or district counsel because it is either subject to the attorney-client privilege or was prepared in anticipation of litigation may have evidentiary implications. See, e.g., Estate of Shoemaker v.
Comm’r, 47 T.C.M. (CCH) 1462, 1464 n.7 (1984) (“Prior to trial, respondent sought discovery of estate planning files of Mr. Parsons‟ law firm pertaining to decedent. The attorney-client privilege was asserted and sustained by us, although we invited attention to the possibility that an unfavorable inference could be drawn from this assertion of the privilege.”).
In cases in which the IRS questions the motives or business purpose for forming a closely held entity, the best evidence of those motives can come from the correspondence prepared in connection with the transaction at issue. Well-drafted contemporaneous correspondence outlining the business and financial reasons (i.e., the non-tax reasons) for the transaction can serve as wonderful evidence to rebut an argument from the IRS that an entity lacks business purpose or was created as “a device solely to avoid taxes.” See,
e.g., John J. Wells, Inc. v. Comm’r, 47 T.C.M. (CCH)
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1114, 1116 (1984) (“While obviously the true facts can never be known with complete certainty by an outsider, . . . we base our conclusion upon our view of the spoken testimony and how that testimony, coupled with the documentary evidence, comports with human experience.”). Of course, certain documents may be withheld from production due to one or more applicable privileges. Thus, every estate planner should have a solid understanding of the relevant privileges.
D. Understand and Preserve All Privileges
Perhaps more importantly, the production of carefully drafted estate planning correspondence or similar documents in response to such an IRS request can actually help the taxpayer state your case with the examiner or in litigation. With that goal in mind, while a planner works on a client‟s estate plan, he or she must assume that every document prepared by the estate planning lawyer, the client, the accountant, or any other person involved in the estate planning process may be reviewed by an IRS agent, appeals officer, IRS counsel, or the finder of fact in tax litigation (perhaps a judge or even a jury).
As noted above, the IRS‟s summons power is limited to non-privileged material. Whether or not a privilege exists in the context of an IRS examination is a question of federal law. Jaffee v. Redmond, 518 U.S. 1 (1996); Fed. R. Evid. 501. There are four types of privileges of which estate planners should be aware: (i) the attorney-client privilege; (ii) the attorney work product doctrine; (iii) the tax practitioner‟s privilege; and (iv) various medical privileges.
II. ATTORNEY-CLIENT COMMUNICATIONS
AND WORK PRODUCT
A. Attorney-Client Privilege The attorney-client privilege exists to encourage
the complete and truthful exchange of all sensitive information between a lawyer and his or her client, by ensuring that the confidential information will remain in confidence. Like the Fifth Amendment protection against compelled self-incrimination, the policy recognizes that encouraging complete and honest disclosures to the lawyer is more important than requiring lawyers to testify against their clients.
1. Definition
Professor Wigmore‟s definition of the attorney-client privilege is set forth in VIII Wigmore, Evidence § 2292:
a. where legal advice of any kind is sought; b. from a professional legal adviser in his
capacity as such;
c. the communications relating to that purpose; d. made in confidence; e. by the client; f. are at his instance permanently protected; g. from disclosure by himself or by the legal
adviser; h. subject to waiver.
2. Two-Way Communications
The privilege also works in the other direction: it protects communications from the lawyer to the client. Alexander v. Fed. Bureau of Investigation, 198 F.R.D. 306, 309 (D.D.C. 2000) (“The attorney-client privilege must protect „a client‟s disclosures to an attorney,‟ and „the federal courts extend the privilege also to an attorney‟s . . . communications to a client, to ensure against inadvertent disclosure, either directly or by implication, of information which the client has previously confided to the attorney‟s trust.‟”) (quoting Coastal States Gas Corp. v. Dept. of Energy, 617 F.2d 854, 862 (D.C. Cir. 1980)).
3. Not Necessarily the Facts
The privilege attaches to the communication and does not necessarily insulate the underlying facts against disclosure. Rhone-Poulenc Rorer, Inc. v. Home Indem. Co., 32 F.3d 851, 862 (3d Cir. 1994).
4. Confidence
Above all else, the communication must be made in confidence and intended to remain in confidence. A communication between a client and a lawyer may not be privileged if it is made “in the presence of a third party” who is outside of the privilege umbrella. United States v. Evans, 113 F.3d 1457, 1462 (7th Cir. 1997). Specifically, no privilege attaches to any letter that shows a “cc” or “bcc” to someone outside the attorney-client relationship, and adding a “cc” to a lawyer extends no privilege to a letter to a third party. Andritz Sprout-Bauer, Inc. v. Beazer E., Inc., 174 F.R.D. 609, 633 (M.D. Pa. 1997) (“What would otherwise be routine, non-privileged communications . . . do not attain privileged status solely because . . . counsel is „copied in‟ on correspondence or memoranda.”); United States v. Davis, 636 F.2d 1028, 1041 (5th Cir. 1981) (“[D]ocuments created outside the attorney-client relationship should not be held privileged in the hands of the attorney unless otherwise privileged in the hands of the client. . . .”). However, communications with third parties, such as accountants or financial advisors, made to “assist the attorney in rendering advice to the client” also are generally protected. See, e.g., Segerstrom v. United
States, 2001 WL 283805 (N.D. Cal., Feb. 06, 2001). How to ensure that communications with third parties
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such as accountants can be cloaked with the attorney-client privilege is discussed below.
5. Bills and Invoices
Danger arises when IRS agents ask for invoices relating to all payables, and attorneys‟ invoices describing all manner of confidential information are produced without thought given to privilege issues. Generally, receipt and payment of a lawyer‟s bill are not privileged. United States v. Ellis, 90 F.3d 447, 450-51 (11th Cir. 1996) (“receipt of attorney‟s fees normally [is] not [a] privileged matter”); Chaudhry v. Gallerizzo, 174 F.3d 394, 402 (4th Cir. 1999). The descriptions in the invoices are, however, privileged – provided that privilege is not waived. Clarke v. Am. Commerce Nat‟l Bank, 974 F.2d 127, 129 (9th Cir. 1992) (“[C]orrespondence, bills, ledgers, statements, and time records which also reveal the motive of the client in seeking representation, litigation strategy, or the specific nature of the services provided . . . fall within the privilege.”).
6. Not Business Advice
The attorney-client privilege only extends to communications relating to soliciting and receiving legal advice – as opposed to general business advice. In re Grand Jury Subpoena Duces Tecum Dated Sept. 15, 1983, 731 F.2d 1032, 1037 (2d Cir. 1984) (“[T]he privilege is triggered only by a client‟s request for legal, as contrasted with business, advice.”); Olender v. United States, 210 F.2d 795, 806-07 (9th Cir. 1954) (holding that communications with lawyer who merely fills out form deeds and deposits client‟s money at bank not deemed to be confidential attorney-client communications).
7. Dual Purpose
What about dual purpose communications involving legal and business communications? The minority view is that any non-legal purpose precludes the privilege, but the better view looks to the dominant purpose. See, e.g., Neuder v. Battelle Pac. Nw. Nat‟l Lab., 194 F.R.D. 289, 292 (D.D.C. 2000) (“Where business and legal advice are intertwined, the legal advice must predominate for the communication to be protected.”); Pippenger v. Gruppe, 883 F. Supp. 1201, 1207 (S.D. Ind. 1994) (holding conversations “conducted „primarily for the purpose of securing legal opinions and legal services,‟ are not subject to discovery”).
8. Loan Officer/Lawyer
A rebuttable presumption may arise where the lawyer works in the General Counsel‟s Office, as opposed to the finance department. Boca Investerings P‟ship v. United States, 31 F. Supp. 2d 9, 12 (D.D.C.
1998) (“There is a presumption that a lawyer in the legal department or working for the general counsel is most often giving legal advice, while the opposite presumption applies to a lawyer . . . who works for the Financial Group or some other seemingly management or business side of the house.”).
9. Tax Opinions
Tax advice and tax opinions by counsel are arguably privileged. United States v. Tel. & Data Sys, Inc., No. 02C0030, 2002 WL 2023767, at *3 (W.D. Wis. Jul. 16, 2002); Wojdak v. First W. Gov‟t Sec., No. 83-1076, 1991 WL 160249, at *1 (E.D. Pa. Aug. 16, 1991) (finding that draft tax opinions were protected by attorney-client privilege because they “were for the purpose of giving legal advice to a client, and were expressly treated by the sender and the recipient as confidential”).
10. Return Preparation May Not Be Privileged
In many cases, lawyers may serve as the preparer of tax returns. A question arises as to what extent the work performed by the lawyer/preparer may fall under the attorney-client privilege. Courts have disagreed on whether tax return preparation by a lawyer is privileged.
a. Not Legal Advice?
Some courts have held that the preparation of a tax return is not the rendering of legal advice. See United States v. Davis, 636 F.2d 1028 (5th Cir. 1981); United States v. Gurtner, 474 F.2d 297 (9th Cir. 1973); Canaday v. United States, 354 F.2d 849 (8th Cir. 1966); In re Grand Jury Investigation (Schroeder), 842 F.2d 1223 (11th Cir. 1987). But see Colton v. United States, 306 F.2d 633, 637 (2d Cir. 1962) (“There can, of course, be no question that the giving of tax advice and the preparation of tax returns . . . are basically matters sufficiently within the professional competence of an attorney to make them prima facie subject to the attorney-client privilege.”).
b. Not Confidential
Other courts acknowledge an element of legal advice in the preparation of a return, but deny privilege based on a lack of expectation of confidentiality or a waiver. United States v. Lawless, 709 F.2d 485, 487 (7th Cir. 1983) (noting that no expectation of confidentiality in information to be included on return); In Re Grand Jury Subpoena Duces Tecum (Dorokee), 697 F.2d 277 (10th Cir. 1983); United States v. Cote, 456 F.2d 142 (8th Cir. 1972) (holding that disclosure waives privilege not only as to disclosed data but also as to details underlying the information on the return); United
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States v. El Paso Co., 682 F.2d 530 (5th Cir. 1982) (holding waiver by inclusion on return).
c. Contrary Position
Yet other courts have held such information privileged. Although the IRS has argued that information provided to an attorney for the purpose of preparing tax returns is outside the scope of the privilege, various courts of appeal have rejected this contention, holding that material provided in the context of return preparation may also have been for the rendition of legal advice and may be protected by the privilege. See, e.g., United States v. Abrahams, 905 F.2d 1276, 1282-83 (9th Cir. 1990), partially overruled on other grounds, United States v. Jose, 131 F.3d 1325, 1329 (9th Cir. 1997); United States v. Bornstein, 977 F.2d 112, 116-17 (4th Cir. 1992); United States v. Davis, 636 F.2d 1028, 1043 (5th Cir. 1981).
d. Distinguish Between Advice and Information
Disclosed on Return In light of the inconsistency among jurisdictions,
advisors should consider whether to separate files for a given client based on whether the primary purpose of the engagement was for tax preparation or for legal advice.
11. How Do You Talk to an Entity?
Special problems arise when the client is an entity. When the client is a corporation, a divergence exists between federal law and the law of some states. Since the Supreme Court‟s holding in Upjohn Co. v. United States, 449 U.S. 383, 392-97 (1981), counsel‟s communications with any corporation employees (though not shareholders) may be privileged under federal law, while some states still limit the privilege between counsel and the “control group” of employees. Even communications between counsel and former employees of the corporate client are generally treated as privileged. In re Allen, 106 F.3d 582, 605-06 (4th Cir. 1997). And, communications between counsel for the corporate parent and counsel for the subsidiary are generally privileged. In re Westinghouse Elec. Corp. Uranium Contracts Litig., 76 F.R.D. 47, 58 (W.D. Pa. 1977).
Beware that disclosure of privileged corporation communications to shareholders may constitute a waiver. Cf., Garner v. Wolfinbarger, 430 F.2d 1093, 1103-04 (5th Cir. 1970). By contrast, communications with and disclosures to the general partners of a partnership client are generally privileged. Abbott v. Equity Group, 1988 WL 86826 (E.D. La. 1988).
12. Crime/Fraud Exception The privilege attaches to communications
relating to completed crimes, but not ongoing or future crimes and frauds. This “crime-fraud” exception to the privilege requires a prima facie showing (as opposed to mere suspicion) that (i) the client is in the process of planning or committing a crime or civil fraud, and (ii) the attorney-client communication furthers that crime or fraud, generally by giving direction to it. In re Grand Jury Subpoena, 223 F.3d 213, 217 (3d Cir. 2000). Note that the exception applies even if the lawyer doesn‟t know about the crime or fraud. In re Grand Jury Proceedings, 604 F.2d 798, 802 (3d Cir. 1979).
13. Beware Of Waiver
Any action inconsistent with the maintenance of a privilege may constitute waiver and that waiver may extend to the entire subject matter. Bernardo v. Comm‟r, 104 T.C. 677, 682 (1995), citing In re Sealed Case, 676 F.2d 793, 807 n. 44 (D.C. Cir. 1982). At least in the Tax Court, the party asserting the privilege bears the burden of proving that he has not waived it. Hartz Mountain Indus., Inc. v. Comm‟r, 93 T.C. 521, 525 (1989). Even though the privilege always belongs to the client and the lawyer is not free to waive it without client authorization, a third party is entitled to enforce a waiver based on the actions of that same lawyer as an agent with apparent authority. Id.
Under the precedent of the D.C. Circuit – which governs evidentiary rulings in all Tax Court cases – even an inadvertent waiver by the lawyer (or the Kovel CPA) generally constitutes an enforceable waiver. In re Sealed Case, 676 F.2d at 793. And that waiver generally extends to the entire subject matter. Bernardo, 104 T.C. at 684-85. But see Long-Term Capital Holdings v. United States, 2003 WL 1548770 (D. Conn. 2003) (Disclosure of gist of “more-likely-than-not” tax opinion to auditors did not constitute waiver as to entire opinion.).
Also beware of “witness waiver.” Adverse parties are entitled to inspect anything shown to a witness at any time to refresh his recollection for the purpose of testifying. Fed. R. Evid. 612; Fed. R. Civ. P. 26; Nutramax Labs., Inc. v. Twin Labs, Inc., 183 F.R.D. 458, 468-72 (D. Md. 1998); Bailey v. Meister Brau, Inc., 57 F.R.D. 11, 13 (N.D. Ill. 1972); In re Pioneer Hi-Bred Int‟l Inc., 238 F.3d 1370, 1375 (Fed. Cir. 2001) (“[D]ocuments and information disclosed to a testifying expert in connection with his testimony are discoverable by the opposing party, whether or not the expert relies on the documents and information in preparing his report.”).
Furthermore, the advice of counsel cannot be used as a sword and then cloaked with a privilege. Columbia Pictures Television, Inc. v. Krypton Broad.
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of Birmingham, Inc., 259 F.3d 1186, 1196 (9th Cir. 2001) (“The privilege which protects attorney-client communications may not be used both as a sword and a shield. Where a party raises a claim which in fairness requires disclosure of the protected communication, the privilege may be implicitly waived.”); In re G-I Holdings, Inc., 218 F.R.D. 428 (D.N.J. 2003) (holding that privilege is waived in its entirety by raising “reliance upon tax counsel” as “reasonable cause” penalty defense under I.R.C. § 6664).
Finally, the client may wish to waive privileges in order to assert the defense that any underpayment of tax was made in good faith and due to reasonable cause. Reliance on the advice of tax advisors constitutes reasonable cause and good faith if, under all of the circumstances, such reliance was reasonable, and the taxpayer acted in good faith. In order to demonstrate reasonable reliance, the taxpayer may need to disclose what might otherwise be privileged information. Accordingly, each case should be viewed individually to determine whether the client might benefit from disclosure. This disclosure could include producing to the IRS all legal opinions and correspondence from the advisors – a possibility that few lawyers may consider when preparing opinion letters or other correspondence.
B. Work Product Doctrine
The work product of an attorney or his staff in anticipation of litigation is protected from disclosure. Hickman v. Taylor, 329 U.S. 495 (1947); Fed. R. Crim. P. 16(b)(2); Fed. R. Civ. P. 26(b)(3). In fact, the attorney work product doctrine is not a privilege, although some courts (and many practitioners) refer to it as one. Unlike the attorney-client privilege, its purpose does not lie in protecting confidential communications; its purpose is to encourage lawyers to thoroughly prepare for litigation (whether pending or not) through investigation of the good and the bad, without fear of being forced to aid his adversary at the expense of his client. In addition to its focus upon anticipated litigation, this doctrine also differs from the attorney-client privilege in that its protection can be pierced (in very limited circumstances) through no fault of the lawyer or his client.
1. Definition
The doctrine is defined by the narrow scope of its exception in this passage from the Federal Rules of Civil Procedure:
[A] party may obtain discovery of documents and tangible things otherwise discoverable under subdivision (b)(1) of this rule and prepared in anticipation of litigation
or for trial by or for another party or by or for that party‟s representative (including the other party‟s attorney, consultant, surety, indemnitor, insurer, or agent) only upon a showing that the party seeking discovery has substantial need of the materials in the preparation of the party‟s case and that the party is unable without undue hardship to obtain the substantial equivalent of the materials by other means. In ordering discovery of such materials when the required showing has been made, the court shall protect against disclosure of the mental impressions, conclusions, opinions, or legal theories of an attorney or other representative of a party concerning the litigation.
FED. R. CIV. P. 26(B)(3). 2. Scope
Note that the protection extends beyond just the work prepared by the attorney to work prepared by the client and the client‟s employees, agents, etc. at the direction of the lawyer. In re Perrigo Co., 128 F.3d 430, 437 (6th Cir. 1997).
3. Categories
The rule contemplates two types of work product: factual and opinion or “core” work product. Under unusual circumstances, factual work product is discoverable as described in the above-quoted Rule. See also In re Allen, 106 F.3d 582, 607 (4th Cir. 1997). By comparison, opinion work product “enjoys a nearly absolute immunity and can be discovered only in very rare and extraordinary circumstances.” Cox v. Adm‟r U.S. Steel & Carnegie, 17 F.3d 1386, 1422 (11th Cir. 1994), modified on reh‟g by 30 F.3d 1347 (11th Cir. 1994) (quoting In re Murphy, 560 F.2d 326, 366 (8th Cir. 1977).
4. “Anticipation of Litigation.”
To qualify for the protection, it is not necessary that the litigation have already been filed or be certain. Statements of the required level of anticipation vary. See, e.g., Energy Capital Corp. v. United States, 45 Fed. Cl. 481, 485 (2000) (“Litigation must at least be a real possibility at the time of preparation.”); A. Michael‟s Piano, Inc. v. Fed. Trade Comm., 18 F.3d 138, 146 (2d Cir. 1994) (holding that document must be created “with an eye toward litigation”); Schiller v. N.L.R.B., 964 F.2d 1205, 1208 (D.C. Cir. 1992) (holding that document must be created “in anticipation of foreseeable litigation”); United States v. Rockwell Int‟l, 897 F.2d 1255, 1266 (3d Cir. 1990) (holding that document must be created “because of
Privilege Issues in the Estate Planning Arena Chapter 16
6
the prospect of litigation”); Binks Mfg. Co. v. Nat‟l Presto Indus., Inc., 709 F.2d 1109, 1119-20 (7th Cir. 1983) (stating that party asserting privilege must show that “some articulable claim, likely to lead to litigation, [has] arisen”).
5. What About Proposed Transactions?
The fact that the work product relates to a proposed transaction is just one factor that suggests it was not prepared in anticipation of litigation and is not, in and of itself, dispositive. United States v. Adlman, 68 F.3d 1495, 1500-01 (2d Cir. 1995) (finding that corporate officer obtained tax memorandum regarding proposed reorganization from accountant/lawyer at Arthur Andersen).
6. Protection Is Not Absolute
Work product is not absolutely immune from disclosure, and some work product may be obtained by an adverse party upon a showing of substantial need. Upjohn Co. v. United States, 449 U.S. 383 (1981).
7. Audit or Tax Return Work Papers Generally Are
Not Protected Accountant‟s work papers and work product
generally are not protected, and any immunity for the work product of an investigative accountant must be derived from the attorney‟s work product privilege. United States v. Arthur Young & Co., 465 U.S. 805 (1984).
8. “Because Of” vs. Primary Purpose Test
Litigation need not be imminent or even the primary reason the documents were prepared, for the work product doctrine to apply. As long as the facts demonstrate that the documents were prepared “because of” anticipated litigation, the doctrine attaches. United States v. Adlman, 134 F.3d 1194, 1203-05 (2d Cir. 1995).
C. The Physician-Patient Privilege
IRS requests for information increasingly seek access to medical records of a decedent and interviews with treating physicians. Under state law, a doctor-patient privilege often protects such information. However, where the IRS is seeking to enforce a summons issued under federal statutory authority, federal privilege rules generally apply. See, e.g., United States v. Moore, 970 F.2d 48, 50 (5th Cir. 1992).1 The Fifth Circuit has held that there is no
1 When Congress adopted the final version of the new Federal Rules Evidence in 1975, it rejected the nine enunciated privileges in the proposed rules (which included a physician-patient privilege) in favor of a single rule
physician-patient privilege under federal law. Id. No other circuit has adopted the privilege. Although the Supreme Court has not yet directly addressed the issue, the Court has determined that federal courts should recognize a psychotherapist-patient privilege under Federal Rule of Evidence 501. Jaffee v. Redmond, 518 U.S. 1, 10 (1996). In Jaffee, the Supreme Court held that confidential communications between a licensed psychotherapist and a patient in the course of diagnosis or treatment are protected from compelled disclosure under Rule 501. In reaching its holding, the Court noted that:
Like the spousal and attorney-client privileges, the psychotherapist-patient privilege is „rooted in the imperative need for confidence and trust.‟ Trammel, 445 U.S. at 51, 63 L. Ed. 2d 186, 100 S.C. 906. Treatment by a physician for physical ailments can often proceed successfully on basis of a physical examination, objective information supplied by the patient, and the results of diagnostic tests. Effective psychotherapy, by contrast, depends upon an atmosphere of confidence and trust in which the patient is willing to make a frank and complete disclosure of facts, emotions, memories, and fears. Because of the sensitive nature of the problems for which individuals consult psychotherapists, disclosure of confidential communications made during counseling sessions may cause embarrassment or disgrace. Id. at 10. While the Jaffee Court did not rule on the applicability of a physician-patient privilege, the cited language shows that medical records based primarily upon physical examination and other objective information supplied by the patient or that result from diagnostic tests may not be considered privileged.
authorizing federal courts to apply “the principles of common law. . . in the light of reason and experience” in determining whether a privilege exists under the common law. Const. Rep. No. 93-1597, Statement by House Subcommittee Chairman, Dec. 18, 1974, as reprinted in 1974 U.S.C.C.A.N. 7108, 7110. The Senate Report accompanying the adoption of the Rules indicates that Rule 501 “should be understood as reflecting the view that the recognition of a privilege based on a confidential relationship . . . should be determined as a case-by-case basis.” S. Rep. No. 93-1277 (1974), as reprinted in 1974 U.S.C.C.A.N. 7058, 7059.
Privilege Issues in the Estate Planning Arena Chapter 16
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D. Tax Practitioner’s Privilege I.R.C. § 7525(a)(1), enacted in 1998, extends the
same common law protection of confidentiality to a communication between a taxpayer and any “federally authorized tax practitioner” involving tax advice that would have been privileged if it were a communication between a taxpayer and an attorney. This privilege may be asserted only in non-criminal tax matters before the Internal Revenue Service or any non-criminal tax proceeding in federal court brought by or against the United States.
1. Definitions a. Federally Authorized Tax Practitioner
The term “federally authorized tax practitioner” means any individual who is authorized to practice before the IRS if such practice is subject to federal regulation under 31 U.S.C. § 330. In other words, the phrase includes CPAs, enrolled agents, and enrolled actuaries.
b. Tax Advice
The term “tax advice” means any advice given within the scope of the individual‟s authority to practice before the IRS. In other words, it includes tax advice and tax representation.
c. Exception for Tax Shelters
The privilege does not apply to written communications between tax practitioners and directors, shareholders, officers, employees, agents, or representatives of a corporation in connection with the promotion of the direct or indirect participation in any corporate tax shelter as defined in Section 6662(d)(2)(C)(ii).
d. Effective Date
The privilege may be asserted only as to communications made on or after July 22, 1998.
2. Obvious Limitations of Section 7525 a. Uncovered Return Preparers
By its terms, new Section 7525 is applicable only to communications between a taxpayer and a “federally authorized tax practitioner.” This phrase includes CPAs, enrolled agents, and enrolled actuaries. Other accountants, bookkeepers, and possibly agents of otherwise qualified federally authorized tax practitioners do not appear to be included.
b. State, Local & Foreign Tax Matters
The phrase “tax advice” is defined with reference to practice before the Internal Revenue Service or in a proceeding before a federal court.
(i) Query: Are state and foreign tax matters automatically excluded by this definition?
The new provisions apparently do not cover state
court foreclosure actions where one issue might be the priority of the federal tax lien.
c. Scope
The extension of privilege to “any non-criminal tax proceeding in Federal Court brought by or against the United States” in Section 7525(a)(2)(B) was inserted by the Senate (or the conference committee) and was designed to be broader than the House version, which had only covered tax litigation.
(i) Non-Criminal
The statute is specifically inapplicable in criminal proceedings before the Internal Revenue Service and in criminal proceedings in a Federal Court. Note that today‟s privileged communication loses its Section 7525 privilege by the IRS commencing a criminal investigation tomorrow. (ii) Bankruptcy Covered
Bankruptcy is not a non-criminal federal court matter “by or against the United States” until an adversary proceeding is filed. (iii) All Bankruptcy Covered?
Does the new provision cover all bankruptcy cases in which the United States is a party, or just cases in which a determination of tax liability is involved?
d. Tax Shelters
The statute carves out written communications between practitioners and representatives of a corporation in connection with the promotion of the direct or indirect participation of such corporation in any tax shelter.
(i) Ambiguous at Best
Although reference is made to Section 6662, the definition of tax shelter in that section is far from precise.
(ii) Legal Advice Still Privileged as to Shelters
The tax shelter exception originally was designed to remove privilege from attorneys who advised regarding tax shelters as well. In the conference committee bill, lawyers were carved out of the exception. Senate judiciary committee chair Orrin Hatch and House judiciary committee chair Henry Hyde pressured the conference committee to drop all references to the attorney-client privilege in the corporate tax shelter exception. The district court for
Privilege Issues in the Estate Planning Arena Chapter 16
8
the District of Columbia has also issued several important decisions in the tax shelter litigation. In United States v. KPMG LLP ̧237 F. Supp. 2d 35, 38-39 (D. D.C. 2002), citing United States v. Frederick, 182 F.3d 496 (7th Cir. 1999), the court determined that the Section 7525 privilege did not extend to KPMG opinion letters issued to its client because such letters were prepared in connection of preparing a tax return. In a subsequent decision, the court determined that some of the documents KPMG claimed to be protected by Section 7525 were in fact so protected. United States v. KPMG LLP, No. 02-0295, 2003 WL 22336072 (D.D.C. Oct. 10, 2003); see also United States v. BDO Seidman, LLP ̧ 225 F. Supp. 2d 918 (N.D. Il. 2002), aff‟d, 337 F.3d 802 (7th Cir. 2003) (holding name of clients not privileged under Section 7525); Black & Decker Corp. v. United States, 219 F.R.D. 87 (D. Md. 2003) (holding accounting firm‟s advice not privileged because such accounting firm‟s communications with company were not delivered to facilitate communications between company and its attorney).
e. Tax Return Preparation May Not Be Covered
The privilege for tax advice is the same as if the professional were an attorney. This means, among other things, that if the privilege does not protect communications if made to an attorney, it likewise does not protect those same communications to a tax practitioner, such as tax return preparation communications.
III. PRIVILEGES IN THE APPRAISAL
PROCESS Transactional lawyers should be aware that their
work product may qualify for privilege protections as well; it is not necessary that litigation be certain. The required level of anticipation varies by court, but it is clear that in many jurisdictions, a court action need not be imminent. For example, courts have extended work-product doctrine protection even to proposed transactions. Recently, one district court found that the work product doctrine applied to tax accrual work papers of a company, as the company‟s counsel believed that certain transactions entered into by the company would eventually be challenged by the IRS. United States v. Textron, C.A. No. 06-198T, 2007 WL 2458325 (D. RI Aug. 28, 2007).
A. The Attorney Should Hire the Appraiser
In the transfer tax area, valuation appraisals often serve as the basis for a taxpayer‟s position on the value of transferred property. Working with appraisers is an everyday event for most transaction planning attorneys. On the other hand, working with appraisers can be something of a rarity for most
clients, many of whom have dealt with appraisers only in the purchase of real estate.
In most cases, the attorney, rather than the client, should hire the appraiser for a planning transaction. The attorney can offer guidance both to the client and to the appraiser on how similar transactions have been handled in the past by the IRS and the courts. Having the attorney hire the appraiser will also provide the taxpayer with an argument that any unused reports or correspondence are privileged, as the appraisal was intended to assist the attorney in rendering legal advice.
However, if the appraiser ultimately proposes a report used by the taxpayer, any documents in the appraiser‟s file, including correspondence, notes, or appraisal drafts may be subject to disclosure to the IRS. Once again, consider whom the audience may ultimately be and understand that the appraiser‟s file may be reviewed by the examining agent, an appeals officer, district counsel, or the ultimate finder of fact in tax litigation. In all cases, the planning lawyer should have an oral discussion with the appraiser after he or she determines the value range but before he or she prepares a first draft of a written report so that differences of opinion or relevant law may be discussed freely. In large and/or complex valuation cases, the planning lawyer may want to consider engaging two appraisers: one to aid the lawyer in his or her analysis of the appraisal (whose work will not be disclosed), and one whose appraisal will ultimately be disclosed to the IRS. IV. THE KOVEL ACCOUNTANT: SOLUTION?
Because of the limits of the tax practitioner privilege, the attorney (not the taxpayer) should consider engaging the accountant to make certain that the accountant‟s work product in assisting the attorney will remain confidential. This engagement is often referred to as a “Kovel Agreement,” named after a landmark case on this issue. See United States v. Kovel, 296 F.2d 918, 921 (2d Cir. 1961); see also United States v. Cote, 456 F.2d 142, 144 (8th Cir. 1972); Cavallaro v. United States, 284 F.3d 236, 246 (1st Cir. 2002). Moreover, if the tax case becomes a criminal matter or if non-IRS matters arise, the communications may not remain privileged unless the attorney has hired the accountant. Communications made to an accountant who is assisting an attorney in providing legal services (not accounting services) to a client are protected by the attorney-client privilege.
To ensure that the accountant is assisting the attorney in providing legal services, a written engagement letter can serve as helpful evidence to preserve the privilege. Such an engagement letter should include terms that focus on the following factors:
Privilege Issues in the Estate Planning Arena Chapter 16
9
1. ControlThat the accountant is engaged by the attorney and working under the attorney‟s direction.
2. Clarification that Accountant‟s Work Is Not Pure Return PreparationThat the work is for the purpose of rendering legal advice, not simply for the preparation of tax returns. For example, the accountant is assisting the attorney in determining whether delinquent federal income tax returns should be prepared and filed and what positions to take on those returns.
3. OwnershipThat the work of the accountant belongs to the attorney.
4. PurposeThat any communications to the accountant are made solely for the purpose of enabling the attorney to provide legal advice to the client.
B. Discuss the Methodology and Results of the
Appraiser’s Work With the Appraiser Before
the Appraiser Drafts the Report Hiring a qualified appraiser is only the first part
of the job. Examine the underlying assumptions, analysis, and conclusions of the appraiser and ensure that they are logical. Appraisers can and do make mistakes. Discuss with the appraiser his or her methodology of his or her examination before the appraiser commits the findings to writing. This doesn‟t mean you should “coach” the appraiser or tell the appraiser the answer that you want; it does mean that you should satisfy yourself that the appraiser‟s assumptions and analysis are correct. If you have questions or concerns regarding the appraiser‟s assumptions or analysis, you should discuss those concerns with the appraiser before the appraiser begins drafting the report. If your concerns cannot be satisfied, consider choosing another appraiser. If you decide to engage a second appraiser before the first appraiser has reduced his findings to writing, there will be no documents from that appraiser to produce in response to an examining agent‟s request for “copies of all appraisals.”
V. THE EFFECT OF ASSERTING THE
ATTORNEY-CLIENT PRIVILEGE ON THE
BURDEN OF PROOF IN DISPUTED CASES
In certain cases, the taxpayer can shift the burden of proof in transfer tax cases from the taxpayer to the government in the Tax Court. See I.R.C. § 7491. Section 7491 provides:
(a) Burden Shifts Where Taxpayer
Produces Credible Evidence.–
(1) GENERAL RULE.–If, in any court proceeding, a taxpayer introduces credible evidence with respect to any factual issue relevant to ascertaining the liability of the taxpayer for any tax imposed by subtitle A or B, the Secretary shall have the burden of proof with respect to such issue.
(2) LIMITATIONS.–Paragraph (1) shall apply with respect to an issue only if –
(A) the taxpayer has complied
with the requirements under this title to substantiate any item;
(B) the taxpayer has maintained all records required under this title and has cooperated with reasonable requests by the Secretary for witnesses, information, documents, meetings, and interviews; and
(C) in the case of a partnership, corporation, or trust, the taxpayer is described in section 7430(c)(4)(A)(ii).
Subparagraph (C) shall not apply to any qualified revocable trust (as defined in section 645(b)(1)) with respect to liability for tax for any taxable year ending after the date of the decedent‟s death and before the applicable date (as defined in section 645(b)(2)).
(3) COORDINATION.– Paragraph (1) shall not apply to any issue if any other provisions of this title provides for a specific burden of proof with respect to such issue.
I.R.C. § 7491 (EMPHASIS ADDED).
To shift the burden of proof, the taxpayer must comply with the substantiation requirements of the Internal Revenue Code and keep all required records. In addition, the taxpayer must have cooperated with “reasonable requests”2 by the IRS for “witnesses, information, documents, meetings, and interviews” and must present “credible evidence” in court on the
2 The question yet to be addressed by the courts is whether a request that seeks privileged information can ever be “reasonable.”
Privilege Issues in the Estate Planning Arena Chapter 16
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factual matters at issue. If all of these conditions are met, I.R.C. § 7491 provides that the burden of proof shifts to the IRS.
The Tax Court recently determined that a taxpayer did not fail to reasonably cooperate simply because it filed a motion to quash a summons that the IRS had issued to obtain certain documents during discovery. The Court found that the taxpayer:
had a good faith belief that some of the documents respondent sought were irrelevant, sealed, or contained sensitive . . . business information and filed a motion to quash the summons to protect its rights. Once the court denied the estate‟s motion to quash the summons, the estate provided the documents respondent requested. Respondent has not argued that respondent‟s investigation was impaired by any lack of documentation.
ESTATE OF KOHLER V. COMM’R, 92 T.C.M. (CCH) 48, 52 (2006).
If the taxpayer complies with I.R.C. § 7491, the IRS has another layer of litigation hazards to consider, which could aid in resolving more cases before trial.
VI. CONCLUSION
In sum, there are numerous protections of communications among advisors and between advisors and their clients. To best protect those communications from discovery or, if produced, from misinterpretation, it is important to understand the differences among those protections and to ensure that the communications are documented in the context of the broader goals of the clients, such that tax and non-tax tax reasons for the transaction are clearly indicated. Keeping these protections in mind at all times can assist the client‟s advisors in rendering advice to the taxpayer and in accomplishing the client‟s goals. And, although privileges generally are thought to protect communications with the attorneys, anticipating that at some point the client might find it advantageous to waive these privileges and, as a result, deliberately documenting communications that could be helpful in the event of a tax audit or dispute could be the lynchpin for the client‟s case.
Privilege Issues in the Estate Planning Arena Chapter 16
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EXHIBIT
Internal Revenue Service Department of the Treasury
Date: In Reply Refer to:
Person to Contact:
Contact Telephone Number:
Fax Number:
Re:
Dear
The United States Gift Tax Return you filed for the year _____ is being audited by
this office. We need the information listed below furnished or made available for our
inspection within the next three (3) weeks:
1. Copies of donor’s Federal Income Tax Returns (1040) for the year before, the year
of and the year after the gift referenced above.
2. Copies of all 709’s filed with appraisals, acts of donation and other supporting
documentation. This includes 709’s filed by your spouse.
3. If any assets subject to any of the above referenced gifts have been sold or
agreements to sell have been entered into subsequent to date of donation please
provide complete details, including contracts, deeds and closing statements.
4. A list of donations of any kind, other than customay holiday and birthday gifts of
small value, made during your life time regardless of whether a Gift Tax Return
Form 709 was filed.
5. If the object of any of the above donations was an interest in any closely held
corporation, partnership, limited liability company or other business organization, we
need the following:
a) All documents relating to the creation of the entity (including bills)
from any attorney, accountant or firm involved in recommending the
creation of the entity or in drafting the necessary documents. If a claim
is made that any of these documents are privileged, identify each
privileged document by date, source, audience, and reason for the
privilege.
b) Articles of organization and operating agreement, with any amendments.
c) All documents that were prepared to meet state law requirements on the
formation and operation of the entity.
d) All financial statements and tax returns prepared and/or filed since
inception.
e) All of the entities’ bank and other records (i.e., general ledger, cash
receipts and disbursements journals, check registers, etc.) which reflect
the amount and nature of all deposits and distributions, including
distributions to owner/members, for the period since the entity was formed
to the current period.
f) Minutes of all meetings; if none, indicate the dates of all meetings and
the business discussed.
g) Evidence showing how the value of each entity asset was arrived at as of
the date:
1. it was contributed to the entity;
2. of each gift of a interest in the entity;
provide all appraisals and supporting workpapers.
h) Evidence as to how the entity was valued as a whole as well as fractional
interest. Provide all appraisals if not already furnished.
i) Evidence to substantiate all initial and subsequent capital contributions
and the source of all contributions by owners other than the donor.
j) For any entity asset that has been sold or offered for sale since the
formation of the entity, provide evidence which documents the sale or
attempted sale (i.e., sales agreement, listing agreement, etc.).
k) For each entity asset, explain/provide:
1. evidence that the entity owns the asset;
2. when the donor acquired the asset;
Privilege Issues in the Estate Planning Arena Chapter 16
12
3. how the asset was used by the donor since its acquisition and how
the entity has used the asset since; and
4. who managed the asset prior to and after its contribution, explain
in detail what management consisted of and how it changed after the
entity was formed.
l) Brokerage statements reflecting the ownership and activity of the
securities and mutual funds contributed to the entity for the period
beginning one year prior to the formation of the entity and continuing
through the current date, and copies of any other tax returns and
financial statements which reflect the activity of the entity’s assets, if
different from the foregoing.
m) For each gift or transfer of an interest, provide:
1. evidence that the interest was legally transferred under state law
and under the terms of any agreement among the owner/members.
2. any assignment of any interest along with the terms of the
assignment;
3. the amount and source of any consideration paid along with an
explanation as to how the amount was arrived at.
n) Provide the following with respect to the donor, all other original
members and any recipients of gifts or transfers of interests:
1. date of birth;
2. education and occupation;
3. experience and expertise in dealing with real estate, financial
affairs and investments;
4. extent of the donor’s investments as of the date of the formation of
the entity, including a summary of assets that were not contributed
to the entity; provide tangible evidence thereof; and
5. any personal financial statements and credit applications which were
prepared in connection with loan applications after the LLC was
created.
o) Indicate whether the entity is currently in existence, and, if so, provide
the current ownership interests.
p) Provide a summary of any other transfers of business interests not
reflected in the gift tax returns filed.
q) A statement describing the donor’s state of health at the time of the
formation of the entity and for the six month period prior thereto,
including a description of any serious illnesses. Please also provide the
names, addresses and telephone numbers of all doctors who would have
knowledge of the donor’s state of health during this period to the present
date and provide these doctors with authorization to respond to the
Service’s future requests for information, including a copy of the medical
records, in necessary.
r) A copy of the Donor’s will, revocable trust, and any executed power of
attorney, if not submitted with the return.
s) A statement indicating the identity of the parties recommending the use of
the LLC or partnership, when the recommendations were made, and the
reasons set forth in support of using such an entity.
t) Names, addresses, and current telephone numbers of the representatives of
the Donor/Estate, all donees/beneficiaries, all partners or members,
accountants/bookkeepers, and brokers/investment advisors.
Each item should be responded to either by furnishing the requested documentation; a
written response, if called for, under the signature of the donor or a written
explanation as to why the information will not be provided.
Should you have any questions call or write to me at he above number and address. A
Form 2848 is enclosed for your execution if you wish to appoint your attorney or CPA
to represent you.
Very truly yours,
Enclosures:
IRS Publication 1
Form 2848 Power of Attorney
Privilege Issues in the Estate Planning Arena Chapter 16
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5
Privilege Issues in the Estate Planning Arena Chapter 16
18
1089
131
WIN
STEA
D
Wh
o is
Pri
vile
ged
?
• La
wye
r as
cou
nsel
or o
r pl
anne
r
• T
hird
pa
rtie
s-
secr
etar
y, a
ccou
ntan
t, o
r fin
anci
al a
dvis
or
IF
com
mun
icat
ed f
or p
urpo
se o
f fac
ilita
ting
rend
ition
of l
egal
adv
ice
• E
ven
pros
pect
ive
clie
nts
who
rea
sona
bly
belie
ve t
hat t
hey
are
seek
ing
lega
l adv
ice
-C
ourt
s de
fine
"clie
nt"
bro
adly
6
Privilege Issues in the Estate Planning Arena Chapter 16
19
WIN
ST
EA
D
Wh
at is
a P
rivi
leg
ed C
om
mu
nic
atio
n?
• D
iscl
osur
e o
f
-co
nfid
entia
l com
mun
icat
ions
-be
twee
n pr
ivile
ged
pers
ons
(atto
rney
and
clie
nt)
-fo
r pu
rpos
e of
faci
litat
ing
rend
ition
of l
egal
adv
ice
1089
131
7
Privilege Issues in the Estate Planning Arena Chapter 16
20
WIN
STEA
D W
hat
th
e P
rivi
leg
e M
ay N
ot
Co
ver
• no
n-cl
ient
fam
ily m
embe
rs
• st
ock
brok
ers,
acc
ount
ants
, an
d ot
her
third
par
ties
-if
no
t mad
e to
"a
ssis
t the
att
orne
y in
ren
derin
g ad
vice
to t
he
clie
nt"
• w
ork
pape
rs o
f the
att
orne
y (u
nles
s w
ork
pro
duct
)
• co
rres
pond
ence
with
thi
rd p
artie
s
• un
derly
ing
fact
s
• bi
lls a
nd i
nvoi
ces
• bu
sine
ss a
dvic
e
• du
al p
urpo
se a
dvic
e
• ta
x op
inio
ns
• at
torn
eys
as t
ax r
etur
n pr
epar
ers,
ret
urn
prep
arat
ion
mat
eria
ls
• N
OT
E:
crim
e fr
aud
exce
ptio
n
1089
131
8
Privilege Issues in the Estate Planning Arena Chapter 16
21
1089
131
WIN
ST
EA
D A
tto
rney
as
Tax
Ret
urn
Pre
par
er
• A
dvic
e re
nder
ed in
con
nect
ion
with
ta
x re
turn
pre
para
tion
may
n
ot
be c
ove
red
-
See
Uni
ted
Sta
tes
v. F
rede
rick,
182
F.3
d 49
6, 5
00 (
1999
)
• w
ork
pap
ers
crea
ted
by a
ttor
ney
for
use
in p
repa
ratio
n o
f ta
x re
turn
-"D
ua
l p
urp
ose
" do
cum
ents
pre
pare
d fo
r ta
x re
turn
and
lit
igat
ion
• D
ue to
rel
atio
nshi
p to
the
ta
x re
turn
Ori
gina
l Opi
nion
:
• A
ud
it re
pres
enta
tion
wa
s n
ot c
ove
red
9
---
-------
--------
Privilege Issues in the Estate Planning Arena Chapter 16
22
1089
131
WIN
ST
EA
D
Fre
der
ick
Co
urt
am
end
ed i
ts o
pin
ion
• If
"ver
ifyin
g th
e ac
cura
cy o
f a r
etur
n,"
repr
esen
tatio
n is
"a
cco
un
tan
t's w
ork
" ' -
wh
eth
er
done
by
an a
ccou
ntan
t or
a la
wye
r
• If
law
yer
deal
s "w
ith i
ssue
s o
f sta
tuto
ry in
terp
reta
tion
or c
ase
law
th
at th
e re
venu
e ag
ent
may
hav
e ra
ised
" in
aud
it, "
law
yer
is d
oing
la
wye
r's
wo
rk a
nd t
he a
ttor
ney-
clie
nt p
rivile
ge m
ay a
ttac
h"
• B
ewar
e:
-ev
en i
f a d
ocum
ent
is p
rivile
ged,
tha
t pr
ivile
ge c
an b
e w
aive
d
10
Privilege Issues in the Estate Planning Arena Chapter 16
23
1089
131
WIN
STEA
D
Bew
are
Wai
ver
• In
Ta
x C
ourt
, p
art
y as
sert
ing
pri
vile
ge
has
bu
rde
n t
o pr
ove
no
wa
tve
r
• In
ad
vert
en
t wa
ive
r m
ay
be i
mp
ute
d t
o cl
ient
• "W
itne
ss w
aiv
er"
• M
ay
cho
ose
to
wai
ve,
bu
t b
ew
are
su
bje
ct m
att
er
wa
ive
r
• W
he
n t
o w
aiv
e?
-2
03
6
-D
efe
nse
of r
ea
son
ab
le c
au
se a
nd g
ood
faith
• re
lian
ce o
n a
div
ce o
f ta
x a
dvi
sors
• e.
g.,
tax
opin
ion
lett
er
11
Privilege Issues in the Estate Planning Arena Chapter 16
24
1089
131
WIN
ST
EA
D
Th
e A
tto
rney
Wo
rk P
rod
uct
Do
ctri
ne
• D
efin
ition
-M
ater
ials
pre
pare
d "i
n· a
ntic
ipat
ion
of l
itiga
tion"
• di
ffer
ent
stan
dard
s fo
r "a
ntic
ipat
ion"
-re
al p
ossi
bilit
y
-co
mm
unic
ated
"w
ith a
n ey
e to
war
d lit
igat
ion"
-in
ant
icip
atio
n o
f "fo
rese
eabl
e" li
tiatio
n
-lik
ely
to l
ead
to l
itiga
tion
-B
y a
part
y or
the
pa
rty'
s re
pres
enta
tive
• P
urpo
se
-C
reat
es a
zon
e o
f priv
acy
for
stra
tegi
c lit
igat
ion
plan
ning
-P
reve
nts
one
part
y fr
om p
iggy
back
ing
on a
noth
er's
wo
rk
• D
iffic
ult t
o ar
gue
that
an
esta
te p
lann
ing
att
orn
ey'
s in
tern
al m
emos
o
r w
ork
pap
ers
wer
e pr
epar
ed "
in a
ntic
ipat
ion
of s
ubse
quen
t lit
igat
ion"
12
Privilege Issues in the Estate Planning Arena Chapter 16
25
WIN
STEA
D
Th
e A
tto
rney
Wo
rk P
rod
uct
Do
ctri
ne
• T
wo
typ
es
-O
pini
on "
core
" w
ork
pro
duct
, no
t su
bje
ct to
dis
cove
ry
-F
actu
al w
ork
pro
duct
, su
bje
ct to
dis
cove
ry o
nly
upon
sho
win
g o
f • su
bsta
ntia
l ne
ed
• un
able
to s
ecu
re e
lse
wh
ere
with
ou
t un
due
hard
ship
1089
131
13
Privilege Issues in the Estate Planning Arena Chapter 16
26
1089
131
WIN
ST
EA
D
Med
ical
Pri
vile
ges
• F
eder
al v
ersu
s st
ate
priv
ilege
s
-D
octo
r ve
rsus
Psy
coth
erap
ist
priv
ilege
• Ja
ffee
v. R
ed
mo
nd
-P
sych
othe
rapy
is "
roo
ted
in t
he i
mpe
rativ
e ne
ed f
or
conf
iden
ce a
nd t
rust
"
-P
hysi
cal
illn
ess-
Req
uire
s a
phys
ical
exa
min
atio
n,
obje
ctiv
e in
form
atio
n su
pplie
d by
the
pat
ient
, an
d th
e re
sults
of d
iagn
ostic
test
s
14
Privilege Issues in the Estate Planning Arena Chapter 16
27
1089
131
WIN
ST
EA
D
Th
e T
ax P
ract
itio
ner
's P
rivi
leg
e
• I.R
.C.
§ 75
25
-E
xten
ds t
he a
ttor
ney-
clie
nt p
rivi
lege
to c
onfid
entia
l co
mm
unic
atio
ns b
etw
een
taxp
ayer
s an
d ta
x pr
actit
ione
rs
-S
ame
"co
mm
un
ica
tion
[s]
betw
een
taxp
aye
r an
d an
att
orn
ey"
-in
non
-cri
min
al m
atte
rs b
roug
ht b
y o
r ag
ains
t the
U.S
. g
ove
rnm
en
t
• E
xcep
tions
:
-cr
imin
al m
atte
rs
-ta
x sh
elte
rs
-no
n-fe
dera
l m
atte
rs (
such
as
bank
rupt
cy)
15
Privilege Issues in the Estate Planning Arena Chapter 16
28
1089
131
WIN
STEA
D
Th
e T
ax P
ract
itio
ner
's P
rivi
leg
e
• W
arni
ng:
Doe
s n
ot g
rant
the
wo
rk p
rod
uct
pro
tect
ion
to n
on
atto
rney
adv
isor
s
• A
dditi
onal
war
ning
: 75
25 p
rivile
ged
com
mun
icat
ion
lose
s pr
ivile
ge
prot
ectio
n if
IRS
com
men
ces
crim
inal
inv
estig
atio
n
16
Privilege Issues in the Estate Planning Arena Chapter 16
29
1089
131
WIN
STEA
D Pu
t Y
ou
r C
lien
t in
a P
osi
tio
n t
o P
rod
uce
C
orr
esp
on
den
ce o
r D
ocu
men
ts in
Yo
ur
File
if
It Is
in
the
Cli
ent'
s B
est
Inte
rest
To
Do
So
• B
est e
vide
nce
of p
urpo
se o
ften
com
es f
rom
the
cor
resp
onde
nce
prep
ared
in c
onne
ctio
n w
ith t
he t
rans
actio
n
-C
orre
spon
denc
e ou
tlini
ng t
he b
usin
ess
and
finan
cial
rea
sons
(t
he n
on-t
ax r
easo
ns)
17
Privilege Issues in the Estate Planning Arena Chapter 16
30
1089
131
WIN
ST
EA
D
Pri
vile
ges
in
the
Ap
pra
isal
Pro
cess
: K
ove
l A
cco
un
tan
t/A
pp
rais
er
• A
ttor
ney
shou
ld h
ire t
he a
ppra
iser
/acc
ount
ant
• A
ppra
iser
/acc
ount
ant
is w
orki
ng a
t at
torn
ey's
dire
ctio
n
• C
larif
y th
at w
ork
is n
ot p
ure
retu
rn p
repa
ratio
n
• C
larif
y th
at w
ork
of a
ccou
ntan
t/ap
prai
ser
belo
ngs
to a
ttor
ney
• C
lear
ly s
tate
tha
t pu
rpos
e o
f eng
agem
ent
is t
o as
sist
att
orne
y in
re
nder
ing
lega
l ad
vice
to c
lient
18
Privilege Issues in the Estate Planning Arena Chapter 16
31
1089
131
WIN
STEA
D
Eff
ect
of A
sser
tin
g t
he
Pri
vile
ge
on t
he
Bu
rden
o
f P
roo
f
• I.R
.C.
§ 74
91
-W
here
tax
paye
r ha
s ke
pt a
ll re
cord
s re
quire
d by
Cod
e
-A
nd h
as c
oope
rate
d w
ith r
easo
nabl
e re
ques
ts b
y th
e S
ecre
tary
for
witn
esse
s, i
nfor
mat
ion,
doc
umen
ts,
mee
tings
, an
d in
terv
iew
s
-A
nd i
s no
t pa
rtne
rshi
p, c
orpo
ratio
n, o
r tr
ust
• R
eque
st f
or p
rivile
ged
mat
eria
ls s
houl
d no
t be
con
side
red
reas
onab
le r
eque
st
• F
iling
Mot
ion
to Q
uash
Sum
mon
s do
es n
ot n
eces
saril
y in
dica
te
lack
of c
oope
ratio
n
19
Privilege Issues in the Estate Planning Arena Chapter 16
32
c <( w IV)
z ~
C1) 0 c: C1) ·--c :::l <( t... :::l 0 >-
C1) .. ns c. ·-0 ·-.. c: <(
0 N
"' ...... (J')
co 0 ......
Privilege Issues in the Estate Planning Arena Chapter 16
33
1089
131
WIN
ST
EA
D
Topi
c(s)
W
ork
Prod
uct D
octr
ine:
V
alua
tion:
20
36:
2036
, Pro
mis
sory
Not
es:
Mar
ital
Ded
uctio
n M
ism
atch
, 203
6:
Agg
rega
tion:
In
dire
ct G
ift:
Agg
rega
tion:
20
36:
Def
ined
Val
ue:
Gif
t on
Form
atio
n, 2
703:
Pr
omis
sory
Not
es:
2036
: A
nnua
l Exc
lusi
on G
ifts:
W
ork
Prod
uct D
octr
ine:
V
alua
tion:
Pr
omis
sory
Not
es:
Indi
rect
Gif
t: V
alua
tion:
A
nnua
l Exc
lusi
on G
ifts:
R
ecyc
ling
of V
alue
: In
dire
ct G
ift:
Def
ined
Val
ue:
2036
: 27
03, I
ndir
ect G
ift:
2036
: In
dire
ct G
ift:
2036
, Equ
itabl
e R
ecou
pmen
t: 27
01:
2036
, Pro
mis
sory
Not
es:
2036
: 27
04:
Rel
evan
t C
ites
Cita
tion
Uni
ted
Stat
es v
. A
dlm
an,
68 F
.3d
1495
(2d
Cir.
199
5)
Ast
lefo
rd v.
Com
m 'r
, 95
T.C
.M. (
CC
H)
1497
(200
8)
Est
ate
of B
igel
ow v
. C
omm
'r,
89 T
.C.M
. (C
CH
) 954
(200
5), a
ff'd
, 50
3 F .
3d 9
55 (
9th
Cir.
2007
) E
stat
e o
f Bla
ck v
. C
omm
'r,
133
T.C
. 15
(200
9)
Est
ate
of B
onga
rd v
. C
omm
'r,
124
T.C.
95
(200
5)
Est
ate
of B
onne
r v.
Uni
ted
Stat
es,
84 F
.3d
196
(5th
Cir.
199
6)
Est
ate
of B
osca
v.
Com
m 'r
, 76
T.C
.M. (
CC
H)
62 (
1998
) E
stat
e o
f Bri
ght v
. C
omm
'r,
658
F.2d
999
(5th
Cir.
198
1)
Uni
ted
Stat
es v
. B
yrum
, 40
8 U
.S. 1
25 (
1972
) E
stat
e o
f Chr
isti
anse
n v.
Com
m 'r
, 13
0 T.
C.
1 (2
008)
, aff
d,
586
F.3d
106
1 (8
th C
ir. 2
009)
C
hurc
h v.
Uni
ted
Stat
es,
85 A
.F.T
.R.2
d 80
4 (W
.D. T
exas
200
0), a
ff'd
, 26
8 F.
3d 1
063
(5th
Cir.
2001
) (un
publ
ishe
d op
inio
n)
Est
ate
of D
unca
n v.
Com
m 'r
, 10
2 T.
C.M
. (C
CH
) 421
(20
11)
Est
ate
of E
rick
son
v. C
omm
'r,
93 T
.C.M
. (C
CH
) 11
75 (
2007
) F
ishe
r v.
Uni
ted
Stat
es,
2010
WL
9354
91 (
S.D
. Ind
. Mar
. 11
, 201
0), a
ppea
l doc
kete
d, N
o. 1
:08-
cv-0
908-
LJM
-TA
B (7
th Ci
r.)
Uni
ted
Stat
es v
. F
rede
rick
, 18
2 F.
3d 4
96 (7
th C
ir. 1
999)
E
stat
e o
f Gal
lagh
er v
. C
omm
'r,
101
T.C
.M. (
CC
H)
170
(201
1)
Est
ate
ofG
raeg
in v
. C
omm
'r,
56 T
.C.M
. (C
CH
) 387
(198
8)
Gro
ss v
. C
omm
'r,
96 T
.C.M
. (C
CH
) 18
7 (2
008)
E
stat
e o
fGiu
stin
a v
. C
omm
'r,
101
T.C
.M. 1
676
(201
1)
Hac
kl v
. C
omm
'r,
118
T.C
. 279
(20
02),
aff'd
, 33
5 F.
3d 6
64 (7
th C
ir. 2
003)
E
stat
e o
f Har
per
v. C
omm
'r,
83 T
.C.M
. (C
CH
) 16
41 (
2002
) H
ecke
rman
v.
Uni
ted
Stat
es,
2009
WL
2240
326
(W.O
. Was
h.)
Hen
drix
v.
Com
m 'r
, 10
1 T.
C.M
. (C
CH
) 16
42 (2
011)
E
stat
e of
Hil
lgre
n v.
Com
m 'r
, 87
T.C
.M. (
CC
H)
1008
(200
4)
Hol
man
v.
Com
in 'r
, 13
0 T.
C. 1
70 (
2008
), af
f'd,
601
F.3
d 76
3 (8
th C
ir. 2
010)
E
stat
e o
fHu
rfo
rdv.
Com
m 'r
, 96
T.C
.M. (
CC
H) 4
22 (
2008
) Jo
nes
v. C
omm
'r,
116
T.C
. 121
(20
01)
Est
ate
of J
orge
nsen
v.
Com
m 'r
, 97
T.C
.M. (
CC
H)
1328
(200
9), a
ffd
, 43
1 Fe
d. A
ppx.
544
(9th
Cir.
20 11
) E
stat
e o
f Kar
maz
in v
. C
omm
'r,
T.C.
Doc
ket N
o. 2
127-
03 (
settl
ed p
rior t
o di
strib
utio
n)
Kel
ler
v. U
nite
d St
ates
, 20
09 W
L 26
0161
1 (S
.D. T
ex ..
Aug
ust 2
0, 2
009)
, app
eal d
ocke
ted,
No.
V-0
2-62
(5th
Cir.
argu
ed M
ar. 1
9, 2
012)
K
elly
v.
Com
m 'r
, 10
3 T.
C.M
. (C
CH
) 13
93 (
2012
) K
err
v. C
omm
'r,
113
T.C.
449
(199
9), a
ffd
, 29
2 F.
3d 4
90 (5
th Ci
r. 20
02)
21
Privilege Issues in the Estate Planning Arena Chapter 16
34
1089
131
WIN
ST
EA
D
2036
: D
efin
ed V
alue
: V
alua
tion/
App
raisa
l: 20
36:
Priv
ilege
s:
Val
uatio
n:
2036
: In
dire
ct G
ift:
2036
, Ind
irec
t Gift
: V
alua
tion:
D
efin
ed V
alue
: A
ggre
gatio
n:
2036
: 20
36:
2036
, Pro
miss
ory
Not
es:
Igno
ring
Ent
ity:
Val
uatio
n:
Spol
iatio
n:
Def
ined
Val
ue:
Indi
rect
Gift
, Ste
p T
rans
actio
n:
Ann
ual E
xclu
sion
Gift
s:
Def
ined
Val
ue:
Dis
cove
ry D
ue D
ilige
nce:
V
aria
nce
Doc
trin
e:
2036
: 20
36:
Priv
ilege
s:
2036
: 20
36:
2036
: Pr
ivile
ges:
In
dire
ct G
ift:
Rel
evan
t C
ites
(co
nt'd
)
Kim
bell
v. U
nite
d St
ates
, 244
F. S
upp.
2d 7
00 (N
.D. T
ex. 2
003)
, vac
ated
and
rem
ande
d, 3
71 F
.3d 2
57 (5
th C
ir. 2
004)
U
nite
d St
ates
v. K
ing,
545
F.2d
700
(lOt
h Ci
r. 19
76)
Koh
ler
v. C
omm
'r, 9
2 T.
C.M
. (CC
H) 4
8 (2
006)
Es
tate
of K
orby
v. C
omm
'r, 8
9 T.
C.M
. (CC
H) 1
150
(200
5), a
ff'd,
471
F.3d
848
(8th
Cir.
200
6)
Uni
ted
Stat
es v
. Kov
el,
296
F.2d
918
(2d
Cir.
1961
) La
ppa
v. C
omm
'r, 8
6 T.
C.M
. (CC
H) 3
33 (2
003)
Li
ljest
rand
v. C
omm
'r,
102
T.C
.. M. (
CCH)
440
(201
1)
Lint
on v
. U
nite
d St
ates
, 63
8 F.
Supp
. 2d
1277
(W.D
. Was
h. 20
09),
rev
'din
par
t and
rem
ande
d, 6
30 F
.3d
1211
(9th
Cir.
2011
) Es
tate
of M
alki
n v.
Com
m 'r
, 98
T.C.
M. (
CCH)
225
(200
9)
McC
ordv
. C
omm
'r, 1
20 T
.C. 3
58 (2
003)
, rev
'd, 4
61 F
.3d6
14 (5
thCi
r. 20
06)
Succ
essi
on o
f McC
ord
v. C
omm
'r, 4
61 F
.3d 6
14 (5
th C
ir. 2
006)
, rev
'g 1
20 T
.C. 3
58 (2
003)
Es
tate
of M
ellin
ger
v. C
omm
'r,
112
T.C.
26
(199
9)
Esta
te o
f Mill
er v
. Com
m 'r
, 98
T.C.
M. (
CCH)
159
(200
9)
Esta
te o
f Mir
owsk
i v.
Com
m 'r
, 95
T.C.
M. (
CCH)
127
7 (2
008)
Es
tate
of M
urph
y v.
Uni
ted
Stat
es, 2
009
WL
3366
099
(W.D
. Ark
.) Es
tate
of M
urph
y v.
Com
m 'r
, 60
T.C.
M. (
CCH)
645
(199
0)
Pera
cchi
o v.
Com
m 'r
, 86
T.C.
M. (
CCH)
412
(200
3)
Phoe
nix
Four
s, In
c. v.
Stra
tegi
c Re
sour
ces
Cor
p., 2
006
WL
1409
413
(S.D
.N.Y
.) Pe
tter
v. C
omm
'r,
98 T
.C.M
. (CC
H) 5
34 (2
009)
Pi
erre
v. C
omm
'r,
133
T.C.
24
(200
9), s
upp.
by,
Pier
re v
. C
omm
'r, 9
9 T.
C.M
. (CC
H) 1
436
(201
0)
Pric
e v.
Com
m 'r
, 99
T.C.
M. (
CCH)
199
5 (2
010)
Pr
octe
r v.
Com
m 'r
, 15
1 F.
2d 6
03 (4
th Ci
r. 19
45)
Qua
lcom
m In
c. v.
Broa
dcom
Cor
p., 2
008
WL
6693
2 (S
.D. C
al.)
Real
Est
ate
Land
Titl
e an
d Tr
ust C
o. v
. U
nite
d St
ates
, 309
U.S
. 13
(194
0)
Esta
te o
f Rec
tor
v. C
omm
'r, 9
4 T.
C.M
. (CC
H) 5
67 (2
007)
Es
tate
of R
eich
ardt
v. C
omm
'r, 1
14 T
.C. 1
44 (2
000)
U
nite
d St
ates
v.
Rich
ey,
632
F.3d
559
(9th
Cir.
2011
) Es
tate
of R
osen
v. C
omm
'r, 9
1 T.
C.M
. (CC
H) 1
220
(200
6)
Esta
te o
fSch
auer
ham
er v
. Com
m 'r
, 73
T.C.
M. (
CCH)
285
5 (1
997)
Es
tate
of S
chut
t v.
Com
m 'r
, 89
T.C
.M. (
CCH)
135
3 (2
005)
Sc
ott v
. Bet
h Is
rael
Med
ical
Cen
ter,
Inc.,
847
N.Y
.S.2d
436
(N.Y
. Sup
. 200
7)
Send
a v.
Com
m 'r
, 88
T.C
.M. (
CCH)
8 (2
004)
, affd
, 43
3 F.
3d 1
044
(8th
Cir.
200
6)
22
Privilege Issues in the Estate Planning Arena Chapter 16
35
1089
131
WIN
STE
AD
Indi
rect
Gift
: 20
36, M
arita
l Ded
uctio
n M
ism
atch
: Pr
ivile
ges:
27
04:
2036
, Und
ivid
ed In
tere
st:
Prom
isso
ry N
otes
: 20
36:
2036
: 20
36:
2036
: W
ork
Prod
uct D
octri
ne:
2036
: 20
36:
Def
ined
Val
ue:
IRS
Settl
emen
t Gui
delin
es:
Inve
stm
ent C
o. R
ules
: In
vest
men
t Co.
Rul
es:
Inve
stm
ent C
o. R
ules
: Fi
duci
ary
Liab
ility
: TE
FRA
: Es
tate
Tax
Lie
n:
Bur
den
of P
roof
: Su
mm
ons P
ower
s:
Fidu
ciar
y Li
abili
ty:
Wai
ver:
Rel
evan
t C
ites
(co
nt'd
)
Shep
herd
v. C
omm
'r,
115
T.C.
376
(200
0), a
ff'd,
283
F.3
d 12
58 (1
1th
Cir.
2002
) E
stat
e o
f Shu
rtz
v. C
omm
'r, 9
9 T.
C.M
. (CC
H)
1096
(201
0)
Sim
s v.
Lake
side
Sch
ool,
2007
WL
2745
367
(W.D
. Was
h.)
Est
ate
of S
mith
v.
Uni
ted
Stat
es,
2012
WL
5915
06 (F
ed. C
L)
Est
ate
of S
tew
art v
. Com
m 'r
, 92
T.C.
M. (
CCH
) 357
(200
6), v
acat
ed a
nd re
man
ded,
617
F.3
d 14
8 (2
d Ci
r. 20
10)
Est
ate
of S
tick
v. C
omm
'r,
100
T.C.
M. (
CCH
) 19
4 (2
010)
E
stat
e o
f Alle
ne W
Sto
ne v
. C
omm
'r,
86 T
.C.M
. (CC
H) 5
51 (
2003
) E
stat
e o
f Joa
nne
Ston
e v.
Com
m 'r
, 10
3 T.
C.M
. (CC
H)
1237
(201
2)
Est
ate
ofSt
rang
i v.
Com
m 'r
, 11
5 T.
C. 4
78 (2
000)
, aff
'd in
par
t and
rev
'din
par
t, 29
3 F.
3d 2
79 (5
th C
ir. 2
002)
E
stat
e of
Stra
ngiv
. C
omm
'r, 8
5 T.
C.M
. (CC
H)
1331
(200
3), a
ff'd,
417
F.3
d468
(5th
Cir.
200
5)
Uni
ted
Stat
es v
. Te
xtro
n, 5
07 F
. Sup
p. 2
d 13
8 (D
.R.l.
200
7), a
.ffd
in p
art,
vaca
ted
in p
art,
and
rem
ande
d, 5
53 F
.3d
87 (1
st Ci
r. 20
09)
Est
ate
of T
hom
pson
v.
Com
m 'r
, 84
T.C
.M. (
CCH
) 374
(200
2), a
ff'd,
382
F.3
d 36
7 (3
d Ci
r. 20
04)
Est
ate
of T
urne
r v.
Com
m 'r
, 10
2 T.
C.M
. (CC
H) 2
14 (2
011)
W
andr
y v.
Com
m 'r
, 10
3 T.
C.M
. (CC
H)
1472
(201
2)
07 N
o. 0
20 B
NA
Tax
core
25;
http
://w
ww
.irs.
gov/
publ
irs-
utl/a
sg_p
enal
ties J
amil
y _lim
ited _
pshi
ps _}
ina/
reda
cted
10 _
20 _0
6.pd
f LR
.C. §
351
I.R.C
. § 36
8 LR
.C. §
721
LR.C
. § 22
04
LR.C
. § 60
3l(A
) LR
.C. §
6324
LR
.C. §
7491
LR
.C. §
760
2(a)
31
U.S
.C. §
3713
FE
D. R
. EV
ID.
502
23
Privilege Issues in the Estate Planning Arena Chapter 16
36
1089
131
WIN
ST
EA
D
IRS
Cir
cula
r 23
0 D
iscl
aim
er:
U
nd
er
ap
plic
ab
le T
rea
sury
re
gu
lati
on
s, t
his
ad
vice
is
no
t in
ten
de
d o
r w
ritt
en
to
be
use
d,
an
d
can
no
t b
e u
sed
, fo
r th
e p
urp
ose
of
avo
idin
g a
ny
pe
na
ltie
s.
If y
ou
w
ou
ld l
ike
an
op
inio
n u
po
n w
hic
h y
ou
ca
n r
ely
to
avo
id p
en
alt
ies,
p
lea
se c
on
tact
the
se
nd
er
to d
iscu
ss.
24