Conservation Easement Disputes and The Section 7525 Tax Practitioner Privilege




The IRS, consistent with repeated public announcements, continues to implement aggressive
actions in its challenges of partnerships making conservation easement donations. Grounded in its unproven theory that many unrelated parties involved with a typical easement donation (e.g., organizers, landowners, accountants, appraisers, land trusts, etc.) somehow collaborated to do something improper, the IRS has become more insistent about seeking copies of pre-donation communications between parties, particularly accountants, whose roles vary considerably.

For example, accountants might provide tax and/or information return preparation services,
bookkeeping, compliance assistance, tax advice, entity formation, financial and tax calculations, due diligence of various sorts, or something else entirely. Section 7525 establishes a safeguard for accountants and others, called the federally authorized tax practitioner (“FATP”) privilege. It states that, when it comes to tax advice, the confidentiality protections that have long applied to communications between taxpayers and attorneys generally extend to communications between taxpayers and FATPs. There are limitations, of course, including that the FATP privilege yields no help when communications deal with “tax shelters.”

Listen in to learn more about: 
  • The easement donation process and related tax rules, 
  • Explanation of the evolving attacks by the IRS
  • Description of the scope and limitations of the FATP privilege
  • Summary of the most recent federal case addressing the tax shelter exception
  • Identification of the theories recently raised by the IRS in its effort to gather all potentially pertinent data, including communications with accountants before the partnership files its Form 1065 (U.S. Return of Partnership Income) claiming the easement deduction.

About Hale E. Sheppard

HALE E. SHEPPARD, Esq. (B.S., M.A., J.D., LL.M., LL.M.T.) is a Shareholder in the Tax Controversy Section of Chamberlain Hrdlicka and Chair of the International Tax Group.

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