Archive for the ‘accountant’ Tag
Why I am a Tax Accountant?
Sometimes people ask me why I am a tax accountant. This question seems to have different colors to it when asked. Sometimes it is an interest in me – what things I find enjoyable about the profession or how my particular career path led me to where I am. Sometimes it is an interest in themselves as they are “trying on” my work clothes to see if this field may be of interest to them in some capacity. And other times it is an interest in the general human condition probing for answers to: “How in the world could anyone in their right mind, voluntarily do what you do?”
Prior articles are republished on my website at www.tlongcpa.com/blog .
Travis H. Long, CPA, Inc. is located at 706-B Forest Avenue, PG, 93950 and focuses on trust, estate, individual, and business taxation. Travis can be reached at 831-333-1041. This article is for educational purposes. Although believed to be accurate in most situations, it does not constitute professional advice or establish a client relationship.
Confidentiality, Privilege, and Taxes
Filed under: Foreign Reporting, General | Tags: accountant, accountant-client privilege, Attorney, attorney-client privilege, confidentiality, confidentiality privilege, disclosure, evidentiary privilege, IRC 7525, IRS, Kovel letter, privilege, professional standards, tax evasion, tax shelters, third-party
Leave a comment Originally published in the Cedar Street Times
August 22, 2014
Pretty much anybody that watches crime shows on television knows about attorney-client privilege. This is how murderers can admit the details of their crimes to their attorneys and the communication is protected from discovery by the courts.
But what about tax related communications with your accountant? Unfortunately, there are not a lot of television shows featuring taxpayers admitting the gory details to their accountants on how they swindled the IRS. That said, prime time dramas are probably not the best place to learn about the legal and accounting world anyway!
Misinformed people will sometimes think they can sit down with their CPA and contrive ways to scheme the IRS, or that they can openly discuss all the income they took in under the table and did not report. Communications with a CPA are confidential due to professional standards, but they usually do not qualify for evidentiary confidentiality privilege in a court of law. This means the CPA should not disclose the information to other parties without your permission, but if questioned in a court of law, the information would have to be disclosed. The other problem a CPA would have knowing the skeletons in your closet, is that a CPA (or any preparer) cannot knowingly file a false return.
So you may think you should hire a tax attorney to prepare your returns in order to get privilege. That actually won’t work either. One of the main tenets of attorney-client privilege is that if you do not treat the information as confidential and you disclose it to a third-party other than your attorney and his or her associates, then you have lost your privilege. Since tax returns are inherently a third-party communication for disclosure to the taxing authorities, it has been ruled that tax preparation services are not afforded attorney-client privilege. In fact, there have been interesting cases where attorneys have lost their attorney-client privilege because they included estate tax preparation as part of their engagement with the client.
Tax advice, however, is a different story. For engagements that strictly involve tax advice, and not tax preparation, attorney-client and accountant-client privilege is extended. Accountant-client privilege has more limitations than attorney-client privilege as defined in Internal Revenue Code section 7525. Most notably is that accountant-client privilege does not extend to criminal matters before the IRS or Federal courts, nor does it apply to tax shelters designed for tax evasion.
As previously discussed, the disclosure of information to a third-party generally waives the attorney-client privilege. An exception to this rule is if the attorney needs the assistance of another professional (such as an accountant) in order to render legal advice to the client. A Kovel letter (based on the 1961 case) can be drafted and signed by the accountant and attorney which essentially extends the attorney-client privilege to the accountant. The accountant is then, in essence, working for the attorney and not the ultimate client. This does provide additional protections, but it still would not provide protections for tax return preparation.
Prior articles are republished on my website at www.tlongcpa.com/blog.
Travis H. Long, CPA is located at 706-B Forest Avenue, PG, 93950 and focuses on trust, estate, individual, and business taxation. He can be reached at 831-333-1041.
Do You Own Inches of Land in the Yukon?
Filed under: General | Tags: 1955, accountant, Bruce Baker, Canada, cereal, deeds, Klondike, Kondike Big Inch Land, land, one inch, Puffed Rice, Puffed Wheat, Quaker Oats, real estate taxes, Yukon
Comments (1) Originally published in the Cedar Street Times
July 25, 2014
When I was growing up, I remember my Dad once telling me that he owned eight square inches of land in Canada. He said he got the land as a promotion when buying cereal as a young boy. At the time, I thought that was kind of cool, and just accepted it at face-value.
As I look back on that now from my perspective as an accountant, dealing with all kinds of financial related issues on a daily basis, a lot more questions come to mind. For instance, where are the deeds to the property, and how would we find the right recorder’s office to get copies of the deeds if needed? Were the deeds ever even recorded? Was it a fee simple interest? Did he have mineral rights? Eight square inches may be just enough to drill a very small oil well! Or maybe there is gold!
How would that impact his retirement planning? What about real estate taxes? Typically land requires the annual or semi-annual payment of property taxes or the land is taken back or sold to settle the outstanding debt if unpaid. Are there any laws regarding foreign ownership of land or any new requirements to look into regarding foreign asset holdings?
Could we lease the land, and what would the tax impacts be? Should my Dad have included it in his estate planning so that loose ends would not pop up at some point which could result in title problems or perhaps probate? Would there be any liability associated with this land, and should he have carried a general liability or perhaps an umbrella insurance policy in case his eight inches contained a stone on which someone could have tripped?!
What was his cost basis on these inches and how much profit would be recognized if we sold it? All of these questions and more find their way to my door step for other client issues. As an accountant, we often end up as the independent advisor – like the hub in a wheel with spokes running out to the financial planner, investment advisor, insurance agent, attorney, banker, etc. Almost every profession leads back to taxes and tax planning in some way.
In my Dad’s case, I found we did not have any real concerns, but there is a fantastic story to go along with these inches of land which you can read all about at: http://www.yukoninfo.com/dawson-city-yukon/the-klondike-big-inch/. The gist of the story is that this was a marketing plan in 1955 developed by Bruce Baker to get children to buy Quaker Oats Puffed Rice and Puffed Wheat cereals.
Baker decided to tie-in a popular radio and television show which Quaker Oats sponsored, “Sergeant Preston of the Ukon” by offering children the opportunity to own one square inch of land in the Yukon in Canada if they bought cereal. The attorneys thought the idea was crazy, but Baker persisted and even flew to the Yukon and secured a 19.11 acre parcel to be divided up into 21 million one-square-inch parcels. The company eventually agreed to the idea and thus began their most successful campaign ever. Cereal boxes flew off the shelves as deeds were printed and inserted into each box, and every one inch parcel was given away. They did a second campaign and Baker had four tons of Yukon riverbed sand sifted and packaged into tiny promotional pieces as well.
As the years rolled on, the inquiries about these hard-earned plots of land kept coming in by owners that wanted to know more about their plot of land, or its worth, and also by estate planning attorneys that were trying to figure out what to do with these deeds! One child was said to have sent four toothpicks and a string and asked the Quaker Oats company to put a fence up around his property! One person collected over 10,000 of these from people around the country and asked Quaker Oats to pick out a quiet place for him along a lake or river, if possible!
The reality of what happened is that the company that was created to handle all the deeds – The Klondike Big Inch Land Company, Inc. realized it would be way to expensive to record all the deeds in each child’s name, so with the opinion of a Canadian attorney they decided to send the deeds out and never have them officially registered. The Klondike Big Inch Company, Inc. did not pay the $37.20 property tax bill in 1965, so the land reverted back to the Canadian government. The company then shut its doors.
Still, to this day, however, nearly 60 years later, Canada and Quaker Oats receive hundreds of communications each year regarding the land!
Prior articles are republished on my website at www.tlongcpa.com/blog.
Travis H. Long, CPA is located at 706-B Forest Avenue, PG, 93950 and focuses on trust, estate, individual, and business taxation. He can be reached at 831-333-1041.
