by Tom Ochsenschlager, CPA, J.D.
In Schaeffler v. United States, Case No. 1:13-cv-04864 (S.D.N.Y. May 28, 2014), the U.S. District Court for the Southern District of New York took a narrow view of the taxpayer’s right to assert privilege regarding an opinion letter it had received from its accountants. The court found that the memorandum did not satisfy the requirements of the attorney-client privilege generally available for communications from a federally authorized tax practitioner because, under the facts of the case, the “opinion” had been shared with a financial institution that had an economic but not a “legal” interest in the transaction.
The court also found the “opinion” was not privileged under the work product doctrine because there was no specific reference to litigation in the memorandum. In effect, the court took the position that the memorandum would be privileged only if it had been in response to current or anticipated litigation.
Although the court has delayed the IRS’s access to the opinion pending Schaeffler’s appeal to the Second Circuit, in the meantime we should be certain that opinion letters are not shared with anyone outside the client regardless of their economic interest in the transaction and that the opinion letter is drafted with language referring to the possibility that the IRS may litigate the issue.