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Category - Enrolled Agent

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In the process of preparing Orlo Corporation’s 2002 return, Dave, an enrolled agent, provided to Orlo Corporation calculations he had prepared computing basis of property that was sold and reported on the 1120 Form 4797. Later, when Orlo Corporation’s 2002 return was examined by the Internal Revenue Service, Orlo Corporation refuses to provide the Internal Revenue Service with the calculations, claiming that this was a privileged communication between Orlo Corporation and its federally authorized practitioner. Which of the following statements is true?
  1. Orlo Corporation does not have to provide the calculations to the Internal Revenue Service because they are privileged under the Federal Tax Practitioner privilege rules.
  2. Orlo Corporation must provide the calculations to the Internal Revenue Service because privilege does not apply to a determination with respect to an item that will be presented to the government on an original return.
  3. Orlo Corporation must provide the calculations to the Internal Revenue Service because the Federal Tax Practitioner privilege does not apply to documents written by Dave because he is not a CPA.
  4. Orlo Corporation does not have to provide the calculations to the Internal Revenue Service if they believe this transaction might be construed as a tax shelter
Explanation
Answer: B - Orlo Corporation must provide the calculations to the Internal Revenue Service because privilege does not apply to a determination with respect to an item that will be presented to the government on an original return.
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