Tax Notes Today Quotes Mark Allison: Good-Faith Defense Waives Attorney-Client Privilege

Tax Notes Today spoke with Mark D. Allison concerning the U.S. Tax Court ruling in AD Investment 2000 Fund LLC v. Commissioner. The Tax Court agreed with the IRS that taxpayers forfeit the protection of attorney-client privilege on tax opinion letters from a law firm if they seek to avoid accuracy-related penalties by asserting affirmative defenses of good faith and state of mind. For the complete article, please visit Tax Notes Today's website (subscription required).
 
Excerpt taken from the article "Good-Faith Defense Waives Attorney-Client Privilege" by Andrew Velarde and Matthew R. Madara for Tax Notes Today.
 
"I don't think the Tax Court had ever articulated [this position] like this before," said Mark D. Allison of Caplin & Drysdale. "Taxpayers need to appreciate that when they are putting their belief [and] knowledge into play in litigation, it isn't merely the specific advice or analysis they're relying on that's going to be relevant to the court's analysis." Any advice or analysis the taxpayers received or prepared, whether or not it supports their position, will come into play, he said.
 
"Most people probably thought that if you are not relying on particular advice that you would never have to produce it or put it in play," Allison said. "It was always a risk in the past even if it was never stated quite this clearly."
 
Allison said it would have been interesting to see what the Tax Court would have decided if the taxpayer asserted that the opinion letters were attorney work product. The differentiation between the attorney work product and attorney-client privileges is important in other cases, he said, noting that the work product privilege allows the court to make selective decisions about producing privileged information.