Academic journal article Journal of Accountancy

Privilege Claims under Fire

Academic journal article Journal of Accountancy

Privilege Claims under Fire

Article excerpt

Despite some legal setbacks, the IRS has signaled it will continue to press for a strict reading of the work product privilege that protects taxpayer documents from discovery. With Action on Decision 2007-004, the IRS said it will not acquiesce in the Sixth Circuit's holding in U.S. v. Roxworthy that favored Yum! Brands' withholding of tax opinions prepared for the fast-food company by KPMG. The IRS said it would continue to challenge what it considers to be unjustified assertions of work product privilege in ali circuits, including the Sixth. Likewise, IRS Chief Counsel Donald Korb has criticized as flawed a decision last summer by the U.S. District Court in Rhode Island in favor of Textron Inc.'s assertion of the privilege with respect to tax accrual workpapers (see "Tax Matters," JofA, Nov. 07, page 80).

In U.S. v. Roxworthy, 98 AFTR2d 2006-5964 (2006), the Sixth Circuit joined four other circuits in adopting the "because of' test as the standard for determining whether documents were prepared "in anticipation of litigation," a critical element of the work product privilege. Courts applying the test have examined (1) whether a document was created because of a party's subjective anticipation of litigation, as contrasted with an ordinary business purpose, and (2) whether that subjective anticipation of litigation was objectively reasonable. …

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