As we have noted in a few of our posts this fall, October and November are not usually months to discuss tax issues unless you are running for office (or campaigning for a candidate). Nevertheless, staying apprised of tax rulings and getting opinions on transactions that could have tax implications are important. Not only will these actions help you make informed decisions as the year comes to a close, they could potentially save you money come next spring.
If you are seeking a tax opinion, this post will highlight what to expect.
Essentially, a tax opinion is a forecast of how a tax court or the IRS may view your argument and whether it will stand up to legal scrutiny. The opinion should discuss all the relevant facts, the potential legal arguments supporting and criticizing your position, as well as the legal authorities that may apply. The opinion should be an even-handed assessment of all of these, resulting in a recommendation that follows along these lines:
Reasonable Basis – This means that there’s roughly a one in three chance you’ll win. The position is not particularly strong or supported, but it is a position that has a basic legal basis and is not frivolous.
Substantial Authority – This basically means that there is slightly more case law opposing your position as there is supporting it, and there’s probably about a 40 percent chance you will prevail.
More Likely than Not – This means that you have a better than 50 percent chance of winning if challenged. However, nothing is certain.
Will – This position means that your tax treatment is nearly assured based on current law.
If you need a tax opinion, an experienced attorney can advise you.