Tag Archives: substantial authority defense

The “Issue of First Impression” Defense to Penalties

The Internal Revenue Code (Code) contains various provisions regarding the imposition of penalties and additions to tax. The accuracy-related penalty under section 6662(a), which imposes a penalty equal to 20 percent of the amount of any understatement of tax, is commonly asserted on the grounds that the taxpayer was negligent, disregarded rules or regulations, or … Continue Reading

Fifth Circuit Rejects Substantial Authority Defense to Penalties

Prudent taxpayers analyze the relevant tax law while structuring and implementing transactions.  The most obvious reason to do so is to ensure that the taxpayer’s proposed tax treatment is accepted by the Internal Revenue Service (IRS).  Another reason is to ensure that, if such treatment is not accepted, the taxpayer will not be subjected to … Continue Reading
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