Tax Accrual Papers Protected by Work Product Doctrine
In a case that may be just as
significant for civil procedure and discovery as it is for tax matters, a
federal district court has recently decided against the IRS where it had
attempted to obtain a taxpayer’s tax accrual workpapers from its financial
services subsidiary.
The court, in United States v. Textron Inc. (DC-R.I., 8/29/07), denied the
government’s petition to enforce an IRS summons to obtain the taxpayer’s tax
accrual workpapers. Essentially, the court concluded that the work product
privilege protected the requested documents.
Subsidiary Provides Services
The taxpayer’s subsidiary provides commercial lending and financial services
and relies on the taxpayer’s attorneys, private law firms and outside
accounting firms for advice regarding tax matters. The IRS, in the course of
its investigation of alleged tax avoidance transactions, sought all of the
taxpayer’s tax accrual workpapers for the tax year 2001. The taxpayer
refused to produce the workpapers and insisted that they were privileged.
Motion Denied
The court observed that the workpapers sought by the IRS would have little
bearing on the calculation of the taxpayer’s tax liability. It is factual
information, not counsel’s opinion, the court held, that matters in a
determination of any tax liability. According to the court, work product,
and especially opinion work product, did not contain the necessary factual
information that should have been relevant to the IRS in arriving at the
taxpayer’s tax liability.
This newsletter is provided by
Somerset for our clients and other interested persons upon request.
Since technical information is presented in generalized fashion, no
final conclusion on these topics should be made without further review.
For additional information on the issues discussed, please contact
Steve Riddle,
Tom
Thieme,
Rex Collins or
Doug
Ayres
of our
Litigation & Valuation Team.
This document is not intended or written to be used, and cannot be used,
for the purpose of avoiding tax penalties that may be imposed on the
taxpayer.
Somerset CPAs,
P.C.
3925 River Crossing Parkway, Third Floor
Indianapolis, Indiana 46240
317.472.2200 • 800.469.7206 • FAX 317.208.1200
www.somersetcpas.com
