Friday, November 20, 2009

Audit Avoidance as Tax Crimes Issue (11/20/09)

Last night, I had my annual party for my current tax procedure class. We had a nice dinner with appropriate libations. We then settled into the living room and had a skit, in which members of the class played the roles of lawyer and family members in developing an aggressive tax plan for gifting stock in a close held corporation to a daughter with significant discounts. A key part of the plan as developed included how best to structure and present it on the gift tax returns so as to avoid audit of the valuation with the discounts. This type of planning is often called audit avoidance.

I thought readers of this blog might be interested in the materials for the skit as well as how two thoughtful lawyers discuss the issues raised by the skit. The articles are David M. Richardson, Audit Avoidance via Intent Modification -- Is Fred Corneel onto Something ... or Not, 2001 TNT 131-93; and Frederic G. Corneel, Audit Avoidance: A Response to David Richardson, 2001 TNT 131-91. Readers may find those articles in the materials for my class here. (Look for the link to Townsend Tax Procedure Materials (Fall 2008); the articles are at the end of these materials.) I also discuss these articles in my recent article John A. Townsend, Tax Obstruction Crimes: Is Making the IRS’s Job Harder Enough?, 9 HOUS. BUS. & TAX L.J. 260 (2009), here, at pp. 267 - 273. I think the articles by Richardson and Corneel are excellent presentations of the ethical issues in audit avoidance which, in its broad outlines, is a common feature of tax practice. And, although not the focus, their presentations do raise criminal concerns that should be considered by tax practitioners.


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