Tracy Hamilton

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The struggle between the Internal Revenue Service (IRS) and business taxpayers regarding the discovery of tax accrual work papers is not a new battle. The IRS, seeking a road map of the corporation’s vulnerable tax positions, argues that tax accrual work papers are prepared for ordinary business purposes and are not subject to the protection of the work product privilege as established in Hickman v. Taylor and codified in Federal Rule of Civil Procedure 26(b)(3). Corporate taxpayers, desperate to keep the IRS from discovering work papers containing the probability of success analysis of vulnerable tax positions (not to mention potential tolerance for settlement), argue that tax accrual work papers are prepared in anticipation of potential litigation with the IRS, contain mental impressions and strategy related to the potential litigation, and are subject to protection under the work product privilege doctrine.

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