In which of the following situations does the tax practitioner privilege under IRC §7525 apply?

Answer options:

A criminal tax investigation regarding the client's failure to report income.

A civil proceeding before the IRS regarding a non-tax shelter matter.

Written advice regarding the promotion of a corporate tax shelter.

A state tax court proceeding regarding sales tax liability.

How to approach this question

IRC §7525 limitations: Non-criminal only, Federal only, No tax shelters.

Full Answer

B.A civil proceeding before the IRS regarding a non-tax shelter matter.✓ Correct

The IRC §7525 privilege extends the common law attorney-client privilege to federally authorized tax practitioners. It applies only to non-criminal tax matters before the IRS or in federal court. It does not apply to criminal matters or tax shelters.

Common mistakes

Assuming the privilege is absolute like the attorney-client privilege (it is much narrower).

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