IRS Circular 230 – Required Disclosures – Covered Opinion

Sec. 10.35: Required Disclosures: Covered Opinion

Under Sec. 10.35(e), a covered opinion must contain all of the following disclosures that apply:

1. Relationship between promoter and practitioner:

(i) Any compensation arrangement such as a referral fee, or a fee-sharing arrangement between the practitioner and any person (other than the client for whom the opinion is prepared) with respect to promoting, marketing or recommending the entity, plan or arrangement that is the subject of the opinion;

(ii) Any referral agreement between the practitioner and a person (other than the client), engaged in promoting, marketing or recommending the entity.

2. Marketed Opinions:

A marketed opinion must prominently disclose that:

(i) The opinion was written to support the promotion or marketing of the transaction or matter addressed in the opinion;

(ii) The taxpayer should seek advice based on the taxpayer’s particular circumstances from an independent tax adviser.

3. Limited Scope Opinions:

A limited scope opinion must promptly disclose that:

(i) The opinion is limited to the one or more federal tax issues addressed in the opinion;

(ii) Additional issues may exist that could affect the federal tax treatment of the transaction or matter that is the subject of the opinion and the opinion does not consider or provide a conclusion with respect to any additional issues;

(iii) With respect to any significant federal tax issues outside the limited scope of the opinion, the opinion cannot be used by the taxpayer for the purpose of avoiding penalties that may be imposed on the taxpayer;

4. Opinions that Fail to Reach a More than Likely Conclusion:

An opinion that does not reach a conclusion at a confidence level of at least more likely than not with respect to a significant federal tax issue must prominently disclose that:

(i) The opinion does not reach a conclusion at a confidence level of at least more likely than not with respect to one or more significant federal tax issues addressed by the opinion; and

(ii) With respect to those significant federal tax issues, the opinion was not written, and cannot be used by the taxpayer for the purpose of avoiding penalties that may be imposed on the taxpayer.

5. Advice Regarding Required Disclosures:

The tax practitioner may not provide advice to any person that is contrary to or inconsistent with the required disclosure.

Sec. 1035(f): Effect of Opinion that Meets these Standards.

(f)(1): In General:

An opinion that meets the requirements of this section satisfies the practitioner’s responsibilities under this section, but the persuasive- ness of the opinion with regard to the tax issues in question and the taxpayer’s good faith reliance on the opinion will be determined separately under applicable provisions of the law and regulations.

(f)(2): Standards for other Written Advice:

A tax practitioner who provides written advice that is not a covered opinion for purposes of Section 1035 is subject to the requirements of Sec. 10.37.

Sec. 10.35(g):

Section 10.35 applies to advice that is rendered after June 20, 2005.

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