Limitations on the Reliance Upon Professional Tax Advice

August 17, 2010Articles The Legal Intelligencer
In a recent case, the U.S. Tax Court rejected the claim of a sophisticated corporate taxpayer that the reliance upon professional tax advice should constitute a defense to the imposition of a 20 percent accuracy-related penalty in connection with the reporting of a corporate transaction. This decision highlights the limits the IRS and the courts impose on the taxpayer’s ability to avoid penalties based upon claims the taxpayer relied upon professional tax advice. It also emphasizes the requirements that must be satisfied before reliance upon professional tax advice can be used as a defense to an accuracy-related penalty.