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Can Tax Authorities Demand Access to Audit Workpapers? Canadian Experience Follows U.S. Rule

Can Tax Authorities Demand Access to Audit Workpapers? Canadian Experience Follows U.S. Rule

Recent victories in litigation have allowed the Canada Revenue Agency to review tax accrual workpapers of Canadian corporations, provided the request for access is not a “fishing expedition” attempting to find issues.In the U.S., the I.R.S. has enjoyed that power for many years. Sunita Doobay of Blaney McMurtry L.L.P., Toronto, examines the scope and limitations of the Canadian decisions. Stanley C. Ruchelman reviews case law in the U.S., the role of FIN 48, and the purpose behind Schedule UTP (reporting uncertain tax positions), which surprisingly is designed to limit examinations of tax accrual workpapers.

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Attorney-Client Privilege Extends to Accountants Retained by Legal Counsel

Attorney-Client Privilege Extends to Accountants Retained by Legal Counsel

Over time, the attorney-client privilege, which protects information disclosed by a client, has been extended to include certain client communications to accountants retained by legal counsel to provide input regarding the application of accounting rules. However, the privilege does not apply when a client retains the accountant prepare tax returns. In U.S. v. Adams, the I.R.S. challenged the extension of the privilege to an accountant who provided advice to the client’s defense counsel and later prepared U.S. tax returns for the client. The decision likely satisfies neither the I.R.S. nor the taxpayer. Rusudan Shervashidze and Stanley C. Ruchelman explain the I.R.S. challenge and the Solomon-like solution reached by the court.

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