Page 269 - The TEFRA Partnership Audit Rules Repeal:

ALI CLE Live Video Webcast / “The TEFRA Partnership Audit Rules Repeal: Partnership and Partner Impacts” June 7, 2016, Jerald David August and Terence Floyd Cuff
pursuant to statutory authority, the privilege of a witness, person, government, State, or political subdivision thereof shall be governed by the principles of the common law they may be interpreted by the courts of the United States in the light of reason and experience.”151 WIGMORE ON EVIDENCE defines the attorney- client privilege as existing “(1) where legal advice of any kind is sought (2) from a professional legal advisor in his capacity as such, (3) the communications relating to that purpose, (4) made in confidence (5) by the client, (6) are at his instance permanently protected (7) from disclosure by himself or by the legal adviser, (8) except the protection be waived.”152 Privilege additionally can extend to agents of the attorney who have been hired to aid the attorney in giving legal advice.153
The privilege can attach to both written and oral communications. The scope of this privilege thus should parallel the scope of attorney-client privilege. The privilege thus should be limited by the boundaries of attorney-client privilege. This privilege could become important in consolidated partnership audits.
Section 7525 applies to any noncriminal tax matter before the Internal Revenue Service or any noncriminal proceeding in federal court. The privilege does not apply to written communications with a federally authorized tax practitioner in connection with the promotion of direct or indirect participation of a corporation in a tax shelter. Similarly, Circular 230 in its current form does not apply to the partnership representative.
Several of the questions are “who is the taxpayer?” and “who is the federally authorized tax practitioner?”
The partnership and not the partnership or the partnership representative normally should be the taxpayer, the client. Communications between the partnership, the partnership’s accountants, and the partnership’s attorneys should qualify for privilege if the conversations are confidential and other requirements of privilege are satisfied. This may suggest that the accountant’s client should be the partnership and perhaps not the partnership representative. Where the partnership representative engages counsel or accountants, it should be clear that the partnership representative is acting in its capacity as agent for the partnership and that the true client is the
151 Federal Rules of Evidence § 501.
152 8 WIGMORE, EVIDENCE IN TRIALS AT COMMON LAW § 2292, at 554 (John T. McNaughton ed., rev. ed. 1961).
153 See United States v. Schmidt, 360 F. Supp. 339, 347 (M.D. Pa. 1973); United States v. Kovel, 296 F.2d 918, 922 (2d Cir. 1961); Bauer v. Orser, 258 F. Supp. 338 (D.N.D. 1966).
© Terence Floyd Cuff and Jerald David August, 2016
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