Substantial Authority: Baucus Confirmed

Thursday, February 6, 2014

Baucus Confirmed

Baucus’s impending departure will set off a round of musical chairs among Senate committee chairmen. Sen. Ron Wyden (D-Ore.) is expected to assume control of the finance panel, a move that likely will lead to Sen. Mary L. Landrieu (D-La.) taking the top spot on the Senate Energy Committee.

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Substantial Authority

Substantial Authority has a special meaning to tax practitioners. When somebody takes a questionable position on his tax return, the strength of that position depends on how well the authority - statutes, regulations, cases and ruling - supports the position. If your tax advisor says you have "substantial authority" for your position, it means the chances of success if the IRS should challenge your position are less than 50%, but you're not being negligent in taking the position.

In other words, if you have substantial authority for your position, you're probably going to lose, but you won't be penalized if you do, so what the hell?

Substantial Authority is a green light to play the audit lottery with no adverse consequences. Bless Congress for thinking it up....