More Facts Resolve Tax Risks –

Bringing the Financial Institution to the Party –

THE FINANCIAL INSTITUTION played the main role in selling the transaction product to the taxpayer and most times assured the taxpayer that the structure was not untoward in light of expert opinions obtained. Accordingly, the financial institution should be held partially responsible for their role in devising and offering the product.

Similarly, the opinions the financial institution obtained could assist the taxpayer’s case and should be disclosed to the taxpayer, who in turn may elect to provide the contents to the IRS.

Just because the financial institution sold the product to the taxpayer, it does not mean that they are no longer involved. Representatives thereof will have intimate knowledge of the transaction and why it does not fall foul of the law. Accordingly, they should assist the taxpayer in formulating counterarguments to any queries raised by the IRS.

In many cases there is a sound business rationale for including a particular step in the transaction, which should be considered from the financial institution’s perspective, and not necessarily from the taxpayer’s perspective. In these circumstances the taxpayer may not have knowledge of it, and it is therefore crucial to involve the financial institution in explaining the purpose in terms thereof.

In accordance with Circular 230 Disclosure