Sec. 6700 could make tax advice you give subject to shelter penalties

When tax shelters first burst on the public scene in the 1970s, the IRS and Congress moved to take action to shut down the promoters of the tax schemes and punish them for fraudulent activities.  One of the solutions was IRC Sec. 6700, which established penalties for tax shelter promoters.  As a new wave of shelters has emerged in recent years, that provision of the Code is being revived and strengthened by the IRS, and tax professionals of all kinds could get tangled in the web of IRS enforcement activity, according to Brian R. Lynn of Caplin & Drysdale Chartered in Washington, DC.

Court interpretations since Sec. 6700 was created have found that Congress meant to declare that some “opinions” can be “wrong” and thus seen as fraudulent activity.  Lynn notes that the courts and the IRS have done little to separate “huckster” activity from the work of lawyers and accountants who are working in areas of the Code that are subject to interpretation and debate.  That could subject tax professionals to the penalties outlined in Sec. 6700.

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This story is from the CCH’s monthly Focus on Tax newsletter, which provides advise and guidance on federal and state tax issues for tax and accounting professionals.

Read this article from CCH’s Journal of Taxation of Financial Products.

AUTHOR

Wolters Kluwer Tax and Accounting

Wolters Kluwer Tax and Accounting is a leading provider of software solutions and local expertise that helps tax, accounting, and audit professionals research and navigate complex regulations, comply with legislation, manage their businesses and advise clients with speed, accuracy and efficiency. Wolters Kluwer Tax and Accounting is part of Wolters Kluwer N.V. (AEX: WKL), a global leader in information services and solutions for professionals in the health, tax and accounting, risk and compliance, finance and legal sectors. We help our customers make critical decisions every day by providing expert solutions that combine deep domain knowledge with specialized technology and services. Wolters Kluwer reported 2016 annual revenues of €4.3 billion. The company, headquartered in Alphen aan den Rijn, the Netherlands, serves customers in over 180 countries, maintains operations in over 40 countries and employs 19,000 people worldwide. Wolters Kluwer shares are listed on Euronext Amsterdam (WKL) and are included in the AEX and Euronext 100 indices. Wolters Kluwer has a sponsored Level 1 American Depositary Receipt program. The ADRs are traded on the over-the-counter market in the U.S. (WTKWY).

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