Document Type
Article
Publication Title
Tax Lawyer
Publication Date
2008
Volume
Vol. 61, No. 3
First Page
705
Abstract
(Excerpt)
This Article explores the proper measure of damages in tax malpractice litigation. Assuming a plaintiff establishes negligence by a tax advisor and the other requisite elements of the cause of action, exactly what damages may be recovered? May the plaintiff recover additional taxes owed? What about recovery of interest, penalties, and lawyer's or accountant's fees? What about recovery of consequential damages, such as those for emotional distress or mental anguish? What if, as a result of the tax advisor's negligence, the plaintiff is audited and other, unrelated deficiencies are uncovered that likely never would have come to light but for the initial negligence?
At a very simplistic level, one would expect the contours of recoverable damages to be very well established by now. After all, a suit against a negligent tax advisor is likely to be either a relatively simple tort or breach of contract claim. Tort and contract law have been around seemingly forever. In any event, in more recent times, as society has become more litigious and as such cases have become more common, the law should have had ample opportunity to develop definitive answers.
In fact, while the basic elements and concepts concerning the proper measure of damages do seem to have been individually developed, a comprehensive overview of the area is difficult to glean. Also, many uncertainties and gaps in the law seem to remain. For instance, three views have developed as to whether interest incurred on a tax underpayment is recoverable as damages Likewise, there does not seem to be any authority on whether recovery is available when, due to a tax advisor's negligence, an audit is triggered and other, unrelated deficiencies are uncovered. Finally, I have observed a relatively recent instance in which a federal court has either misstated or vastly oversimplified a basic principle in this area.
Comments
©2008. Published in Tax Lawyer, Volume 61, Number 3 (2008), by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association or the copyright holder.