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January 03, 2006

While I was goofing off over the holiday weekend, Paul Caron was blogging up a storm at the TaxProf blog. One post was a selection of the top ten tax stories of 2005 by members of a tax professor online discussion group.

Somehow the KPMG indictments and deferred prosecution agreement failed to make the list. This must be because the tax professors aren't practitioners. For us in the field, it is a big deal. Whether or not you think the indictments are justified, there is something chilling about seeing members of a prominent firm in your own profession hauled before a judge and facing the possibilty of professional ruin and long prison terms.

The final version of Circular 230, the IRS rules on practitioner conduct, also failed to make the tax professor's top ten. These rules have triggered a panic among tax practitioners not seen since we first realized we HAD to learn how to use computers. Now if you get an e-mail saying "have a nice day" from a practicing tax attorney or accountant, it probably has a disclaimer saying that you can't use the nice day to avoid penalties.

The professors should have mentioned the Long-Term Capital Holdings LLC case and the Tribune Company case. In Long-Term Capital Holdings, the Second Circuit upheld stiff penalties for a tax shelter by refusing to let the partners hide behind their tax advisors. The Tribune case was notable as both a rare case in which a reorganization was litigated and for the sheer size of the tax deficiency - $551 million, before interest.

But I quibble. The professors put together a respectable list, and I am too lazy to do likewise. It's well worth reading in full.

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