Paul L. Caron

Monday, May 24, 2010

Supreme Court Denies Cert in Textron Tax Work Papers Case

The Supreme Court today denied certiorari in United States v. Textron, Inc., No. 07-2631 (1st Cir. Aug. 13, 2009) (en banc), which held that Textron's tax accrual work papers were not protected under the work product doctrine and thus had to be turned over to the IRS in its tax shelter investigation.

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So what? Other attorneys might have reason to howl, but Textron was meaningless to tax attorneys before cert was denied. Once the IRS unleashed the "uncertain tax position" (UTP) self-audit system, who needs tax work papers? UTP changes the tax return from a method of voluntary self-assessment to "voluntary" (those of you who've been in the armed forces know what I mean) self-audit.

Taxpayers who might have needed attorney-client or work product protections in tax matters will have to do a "tell all" story to the IRS about any tax position that doesn't have a MLTN opinion behind it, and if you have a MLTN or should opinion, do you really care if the IRS sees it. If anything, it should demonstrate the correctness of your position and good faith and dealing on the taxpayer's part by giving the IRS the legal opinion.

Textron is a hollow victory for the IRS (perhaps in all but the most extreme cases) once UTP starts in 2010. The IRS won't need your tax work papers or your attorney's work product--you'll already have turned over everything to the IRS and help create a road map to audit you and similarly situated taxpayers.

It is like an annual voluntary TCMP audit performed by the taxpayer on itself.

So, sorry to all you non-tax lawyers who saw privilege eviscerated, but the IRS rendered Textron obsolete even before the ink on the cert petition was dry.

Posted by: tax guy | May 24, 2010 7:53:08 PM