Audits, Privileges, and Penalties Flashcards
What are the 8 elements needed for attorney client privilege?
- Where legal advice of any kind is sought
- From a professional legal advisor in his capacity
- The communication relating to that purpose
- Made in confidence
- By the client
- Are at his instance permanently protected
- From disclosure by himself or by the legal advisor
- Except if the protection be waived
If you’re not a lawyer but act like a lawyer, is there attorney client privilege?
Person gets privilege IF client REASONABLY BELIEVES THAT YOU’RE A LAWYER.
Do you need to pay someone to get attorney client privilege?
No.
What is proper legal advice?
- If you’re just asking accountant to create your return?
- Tax return question to communicate info to accountant?
- No, not legal advice
2. Yes, legal advice because advising about proper tax treatment
What is express waiver of attorney client privilege?
What is implied waiver of attorney client privilege?
Can there be a selective waiver?
Express Waiver: Caused by intentionally (or inadvertently) revealing privileged communications to a third party.
- You might want to waive to prevent penalties
Implied Waiver: Caused by putting otherwise-privileged topics into controversy.
No, privilege can’t be selectively waived.
What happened in US v. Kovel?
What rule was established by the case?
What was the holding?
Facts: The law firm advised the Assistant United States Attorney that since Kovel was an employee under the direct supervision of the partners, Kovel could not disclose any communications by the client of the result of any work done for the client, unless the latter consented; the Assistant answered that the attorney-client privilege did not apply to one who was not an attorney.
Rule: What is vital to the privilege is that the communication be made in confidence for the purpose of obtaining legal advice from the lawyer. IF WHAT IS SOUGHT IS NOT LEGAL ADVICE BUT ONLY ACCOUNTING SERVICE, OR IF THE ADVICE SOUGHT IS THE ACCOUNTANT’S RATHER THAN THE LAWYER’S, no privilege exists.
The KEY is that the “the PRESENCE of the accountant is NECESSARY, or at least highly USEFUL, for the EFFECTIVE CONSULTATION between the CLIENT and the LAWYER which the privilege is designed to permit.
Holding: Remanded. The presence of defendant while the client was relating a complicated tax story to a lawyer would not destroy the attorney-client privilege, as long as the communication was made in CONFIDENCE for the purpose of OBTAINING LEGAL ADVICE. Although defendant did not offer any proof supporting the privilege claim, the uncertainty as to the applicable legal principles, the fixed view of the judge, and the haste with which the proceedings were conducted, extenuated failure of defendant’s counsel to make a proper offer of proof. The case was remanded for a determination of facts.
What 6 requirements trigger a Kovel arrangement as established in US v. Adlman?
To establish a Kovel relationship as stated by 2nd circuit:
- Extension of attorney-client privilege to an AGENT of the attorney
- Engaged by attorney to assist the attorney, not the client
- Engagement letter between attorney and Kovel
- Payment by attorney (ideal but not strictly necessary)
- Returns can only be drafts prepared for the attorney’s use, not for filing with the IRS
- Not retroactive
This is what is considered to be “Koveled”/ “Kovel accountant”
- What is the federally authorized tax practitioner privilege?
- What is it limited to?
- Does the professor think it’s useful?
- Under IRC 7525, “[C]ommunication between a taxpayer and any federally authorized tax practitioner [is privileged] to the extent the communication would be … PRIVILEGED … if it were between a taxpayer and an attorney.”
- It’s limited to:
- noncriminal tax matters where the U.S. is a party (i.e., not recognized in state courts or non-tax controversies).
- tax advice (can’t be used for divorce issues; like accountant subpoenaed to confirm stuff)
- does not apply to tax shelter advice** - No, not really helpful because only applies to privileged info between taxpayer and attorney; doesn’t really apply to accountants or CPA’s, BUT IRS does usually accept it if you do invoke for accountants and CPA’s
What is the fifth amendment protection?
What are the 3 requirements?
“No person . . . shall be compelled in any criminal case to be a witness against himself . . .”
Must be:
- Testimonial (you saying something in some way; can’t be records)
- Incriminating (going to incriminate
- Compelled (not voluntary)
To what does the fifth amendment protection apply?
To what does the fifth amendment protection NOT apply?
Applies in any matter: civil and criminal.
Applies to any person:
- Target and witnesses
- Citizens and resident aliens
- But does NOT apply to entities: collective entity doctrine.
Applies to any answer that is directly incriminatory or could serve as a “link in the chain of evidence.” Hoffman v. United States.
Available to the innocent as well as the guilty.
How do you assert the the fifth amendment protection?
- Must it be expressly invoked?
- Can you be forced to invoke specifically?
- Can you make a blanket assertion?
- Must invocation be timely? Can you answer now and complain later?
- What happens if you invoke it?
- Must be expressly invoked; not mere silence.
- Can be forced to invoke specifically, on a question by question basis (bc question they might ask you is not incriminating)
- Courts may reject general blanket assertion.
- Invocation must be timely; cannot answer and then complain later.
- If invocation challenged, they must take you to court
What happened in United States v. Sullivan?
What was the holding?
Defendant refused to file his tax return on the grounds that it could incriminate him.
Holding: Supreme Court held that the Fifth Amendment does not excuse a complete failure to file a tax return.
BUT Court noted that, if the return called for specific information that the defendant was privileged from providing, the defendant could have raised the Fifth Amendment on the return.
Example: You can take fifth amendment on your tax return if you provided enough information on your tax return (example: you can put fifth amendment on name of bank account). It has to be asserted item by item
What is the act of production doctrine under Couch v. US?
Fifth protects only compelled testimony and not documents voluntarily created.
What is the act of production doctrine under Doe v. United States?
What are the 3 things required for an act of producing documents to be testimonial?
Holding: The Fifth Amendment privilege against self-incrimination IS APPLICABLE to the ACT OF PRODUCING producing business records.
Reasoning: The Court ruled that because Doe had voluntarily prepared the records, their production was NOT COMPULSORY. However, the Court held that the act of production would involve tacit TESTIMONIAL ASPECTS and INCRIMINATING EFFECT, including an admission that the records existed, that they were in Doe’s control, and that they were what the subpoena described.
The Act of producing documents can be testimonial if the act admits that:
- the records exist;
- the witness believes the documents are the ones described in the subpoena or summons; or
- the witness has control over the document.
What is the act of production doctrine under Hubbell v. US?
What happened?
What was the holding?
What is the rule from Hubbell v. US?
Facts: US prosecuted taxpayer for various crimes after he produced documents in response to a court order. The order directed respondent to respond to a subpoena and granted him immunity to the extent allowed by law.
Holding: Hubbell could not be compelled to produce the documents requested by petitioner without first receiving a grant of immunity because it was co-extensive with the constitutional privilege against self-incrimination. The constitutional self-incrimination privilege APPLIED to TESTIMONIAL ASPECTS of a RESPONSE to a SUBPOENA and petitioner had NOT SHOWN ANY PRIOR KNOWLEDGE of documents respondent produced under subpoena.
Rule: The government may NOT make derivative use of the testimonial act inherent in the production of documents to obtain an indictment of the subpoenaed individual.
Why? The constitutional privilege against self-incrimination protects the target of a grand jury investigation from being compelled to answer questions designed to elicit information about the existence of sources of potentially incriminating evidence without first obtaining immunity. Because the act of production carries with it a testimonial quality, in that the witness must attest to the fact that he has possession of the documents, and that they are accurate, and a complete response to the subpoena, a subsequent indictment would be using that testimony to produce additional evidence in violation of the use immunity granted under federal statute.
The Fifth amendment covered the act of producing documents demanded by subpoena:
- documents reflecting all things of value received by Hubbell;
- documents reflecting any sources of money; and
- documents relating to work performed for the Lippo Group.
