R6 - Legal Duties & Responsibilities

Question 1

Legal Liabilities

Answer 1

Civil actions for Tax Malpractice:

1. Breach of Contract.
2. Tort.
3. Violation of Statutes.

Question 2

How to Prove Malpractice?

Answer 2

Prove ALL:

1. TRP owed a duty to TP.
2. Breach of duty to TP.
3. Plaintiff suffered injuries.
4. Determinable cause between injury suffered and duty of TRP.

Question 3

What is the best against Breach of Contract?

Answer 3

• Client’s failure to cooperate.
• Client hindered my performance.
• Persons in privity of contract. Only my client and a named 3rd party beneficiary can sue me, not general public.

Question 4

What is commission of a tort?

Answer 4

A wrongful act.

Question 5

What are the three types of tort?

Answer 5

• Unintentional = Ordinary Negligence
• Intentional = Fraud
• Intentional = Constructive Fraud/Gross negligence
  Keywords!!!

Question 6

What is the result of Ordinary Negligence?

Answer 6

Negligence requires the breach of duty of exercise due care.

Question 7

How can someone sue me for Ordinary Negligence?

Answer 7

Must prove:

1. Failure to properly supervise.
2. Failure to warn proper internal controls weakness.

Question 8

Who can sue me for Ordinary Negligence?

Answer 8

• Persons in privity of contract. Only my client and a named 3rd party beneficiary can sue me, not general public.
• Limited class that might be affected by my work, i.e. creditors and investors.

Question 9

What is the ultramares case?

Answer 9

Some states follow this doctrine.

Persons in privity of contract. Only my client and a named 3rd party beneficiary can sue me, not general public.

Question 10

What is the result of fraud?

Answer 10

Punitive damages.

Question 11

What is the result of fraud?

Answer 11

• Punitive damages.

- More people can sue, not only those with privity.

Question 12

How can someone sue me for fraud?

Answer 12

MAIDS!
M = Material misrepresentation.
A = Actual and justifiable reliance on misrepresentartion.
I = Induce client to do something based on false info?
D = Damages
S = Scienter (Intent to deceive)

Question 13

Who can sue me for Fraud?

Answer 13

Anyone can sue me for fraud.

Question 14

What is the best defense against fraud?

Answer 14

• Lack of scienter, good faith.

- Privity is not a defense for fraud.

Question 15

What are the levels of fault?

Answer 15

1. Reasonable care = not guilty
2. Lack of reasonable care = Ordinary negligence
3. Lack of even slight care = Gross negligence, constructive fraud.
4. Actual fraud = scienter
5. Criminal fraud = criminal scienter.
   1-4 are civil, 5 is only one criminal.

Question 16

Privileged communications

Answer 16

a. Attorney-Client Privilege
b. Work Product Privilege
c. Tax practitioner-Taxpayer Privilege

Question 17

Attorney-Client Privilege

Answer 17

Applies when you were hired by an attorney to aid them to provide legal services to the client.
My work-product is considered the work product of an attorney.

Question 18

Work Product Privilege

Answer 18

Applies when you were hired by an attorney and you produce tangible material (workpapers) in preparation for litigation.
Does not extend to communication.

Question 19

Tax practitioner-Taxpayer Privilege (Civil cases only)

Answer 19

Applies to tax advice from a tax practitioner (sec 7525), and is similar to attorney-client privilege (advice was between attorney and client). Only applies on civil cases. IT DOES NOT APPLY TO CRIMINAL CASES OR TAX SHELTERS.