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Along my professional career, I have been asked many times to provide “a general idea” of the tax consequences of a particular problem. I always decline.

Usually, the request also comes with a statement that is usually couched in these, or similar terms:  “it will only take you a few minutes”.

Let’s talk about the issues this raises, and why, in the almost twenty years I have been licensed to practice law, I have yet to opine verbally on a tax matter.

When it comes to transactions, most people come to tax attorneys because they are facing a choice in courses of action.  In their gut, they know that whatever choice they make may have a tax consequence.  What will that be?  The outcome is usually very important, for large amounts of money, tax penalties, and interest may be at stake.  Sometimes, it’s a person’s liberty that may hang in the balance.

Persons who are unfamiliar with the complexities and intricacies of the law of taxation lamentably assume that a “general answer” will suffice.  As many of my colleagues will attest, there are rules, but then there can be exceptions to the exceptions to the exceptions. Oftentimes, the “general answer” will be wrong for the facts, and relying on the “general answer” will likely lead to a bad outcome.

From the outset, there are challenges unique to tax law.  Defining the facts on which a tax opinion will be based on, is a skill in itself.  In taxation, all relevant facts must be explored and developed.  Sometimes, a particular fact is simply not known or cannot be ascertained.  If it is relevant, it must still be accounted for.  Clients may not fully be aware that a particular fact is very relevant to their matter!

Tax opinions begin with a complete recitation of all the relevant facts on which the opinion is based.  Good opinions also warn that any deviation in the facts may render the opinion invalid.  The task of collecting all the pertinent facts therefore resides in the hands of the attorney drafting the opinion.

Then there’s the issue of finding the applicable law and applying it to the facts.  There’s the Internal Revenue Code, all its regulations, Revenue Rulings, Private letter Rulings, Chief Counsel Memoranda, Revenue Procedures, instructions on tax forms, cases from the U.S. Tax Court, every single federal district court in the United States (94 of them), the Court of Claims, the 12 Courts of Appeal for the Circuits, and the U.S. Supreme Court.  There’s also tax treaties that may come into play.  And it is seldom I see a tax problem that also does not have a state and local angle.  Repeat for each of the states, and some local jurisdictions too.  To make it even more exciting, tax law changes constantly.  Tax attorneys and others in the industry must spend inordinate amounts of time just to stay on top of the latest ruling, court case, or development.  That takes time, effort and energy.  Some clients may not know about or wish to begin to understand.

Some problems are income tax cases.  Some involve estate, gift, generation skipping transfer, franchise, net worth, excise, employment taxes, real and personal property taxation….some involve multiple states, several countries…it can get hairy quickly.

And it should of course, only take “a few minutes”.  It really does not.  While some really wish for free advice and do not want to pay a fee, others just may not fully appreciate the enormity of the training, education and experience needed to get these things right.

If the opinion is not right, the client will come knocking, lawsuit in hand, because the client relied to his or her detriment in what he or she were told.  That’s why written opinions provide the clearest assurance to both client and attorney.

You wish for solid tax advice? Retain one of us.  You want general advice? Buy a book.


 


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