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Tax Matters: Consequences of Aggressive Tax Strategies

January 26, 2018
Michigan Business Law Journal

Originally published in the Michigan Business Law Journal:

Now that Fall is upon is, we turn our attention to the traditional seasonal tax customs such as endless debate over tax “reform” or at least thinking around the edges. I will make no bold predictions nor profess any special mystical powers with one caveat: the easiest thing for Congress to do is nothing. I remind you that few observers thought that Congress would let the estate tax laps for a year. Something, anything, had to be done to prevent such an occurrence. Since there was no “grand bargain,” nothing happened, which caused something to happen. Plan accordingly.

In past columns I have written cautionary tales concerning the IRS “Dirty Dozen” list. One item on that list was related to micro-captive insurance companies. The now annual list provides an excellent guide for practitioners to warn, counsel, or perhaps admonish clients concerning engaging in possible tax “strategies” presented to them by various advisors. In my experience, business and corporate lawyers are generally not part of the early discussion group, if at all, concerning such strategies and who “promotes” them. There are many reasons that this happens. Sometimes the client is counseled that the strategy is proprietary or secret. Sometimes the client does not want to hear the cautionary tales, i.e. “my lawyer hates everything,” and sometimes the client is very fee conscious. This is short-term thinking. Two very recent Tax Court opinions provide eye-opening and sober observations about the consequences of aggressive tax strategies. At the writing of this column, it is unknown if the cases will be appealed or the result of any such appeals. Regardless, clients should understand that the IRS will litigate transactions that they believe lack economic substance or claim outsized tax savings. The results are not encouraging for taxpayers.

Read the article in its entirety: Tax Matters: Consequences of Aggressive Tax Strategies

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