Tax Opinion Letter: Cost & Coverage?

Practical and Practice issues for Professionals who practice in the area of taxation. Moral, social and economic issues relating to taxes, including international issues, the U.S. Internal Revenue Code, state tax issues, etc. Not for "tax protestor" issues, which should be posted in the "tax protestor" forum above. The advice or opinion given herein should not be relied on for any purpose whatsoever. Also examines cookie-cutter deals that have no economic substance but exist only to generate losses, as marketed by everybody from solo practitioner tax lawyers to the major accounting firms.

Tax Opinion Letter: Cost & Coverage?

Postby ejalquat » Thu Apr 12, 2012 7:48 pm

This is a follow-up to the previous post about getting a tax opinion letter on the economic substance doctrine as it relates to a specific transaction. Keep in mind, I'm not an attorney and I find myself in unfamiliar territory here as I've never had cause to seek a written tax opinion at any point in the past. So, with that in mind I've got two more questions:

1) Is there a ballpark figure for what a tax opinion from a well regarded attorney generally costs? The transaction involves an installment sale of real estate. There are no exotic financial instruments or trusts and it is a domestic location. Obviously there are some slightly unusual twists or the opinion wouldn't be needed.

2) Does a written tax opinion generally come with any sort of a 'warranty' whatsoever? Specifically, if the IRS should decide to audit the transaction and takes the position that it violates the economic substance doctrine, is the law firm that produced the opinion under any legal or moral obligation to defend the opinion on their time? Or, do they basically shrug their collective shoulders and say, "hmm, we disagree, but best of luck and oh if you want us to defend our opinion it's going to cost you $750 an hour?"

Thanks in advance for the input.

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