CIVIL TAX CONTROVERSY

Civil Tax Litigation

LeSourd & Patten is well known for its expertise in civil tax litigation. Prior to entering private practice, four of our attorneys represented the Internal Revenue Service in courts throughout the United States. The firm's attorneys frequently represent taxpayers in United States Tax Court, United States District Courts, United States Court of Federal Claims and appellate courts.

Examples of Litigation:

• Tax litigation involving depreciation of factory trawlers and other commercial fishing industry issues
• Convincing the Internal Revenue Service and the Department of Justice to decline to prosecute a large regional financial institution and obtaining a tax refund of over one-half million dollars for the same tax years in the United States Claims Court.
• Obtaining a decision from the United States Court of Appeals for the Ninth Circuit that the accumulated earnings tax did not apply to publicly-held corporations.
• Persuading a federal judge in Alaska to dismiss an Internal Revenue Service collection suit because of a procedural technicality.
• Convincing the Internal Revenue Service in a United States Tax Court case to concede a quarter million dollar tax liability asserted against an architect.

Audits and Appeals

LeSourd & Patten's attorneys resort to litigation only when necessary. The firm settles many disputes at the audit or Appeals Office level. In audits, we often assist our clients and their accountants in pursuing a strategy that maximizes the chance of an early settlement, but also lays the necessary groundwork for possible future litigation.

Audit and Appeals Office work includes:

• Convincing the Internal Revenue Service to drop a civil penalty investigation of a CPA for allegedly "aiding and abetting" in the preparation of a false return.
• Receiving a determination from the Internal Revenue Service Appeals Office that pilots of an airline were independent contractors rather than employees.
• Convincing a revenue agent that a case involving a gross understatement of tax should not be referred to the Internal Revenue Service Criminal Investigation Division, but should be resolved through civil proceedings.
• IRS Income Tax Examinations
• IRS Summons – Examination
• IRS Appeals Office
• IRS Estate Tax Examinations
• Valuation Disputes
• IRS Interest Abatement
• IRS fast-track settlement
• IRS fast-track mediation
• IRS arbitration
• Qualified Offers
• IRS Refund Claims
• Civil Tax Fraud
• Ruling Requests
• Technical Advice Requests
• Freedom of Information Act requests
• Tax opinions
• TEFRA Partnership Procedures
• Statute of Limitations
• Attorney Fee Recoveries
• Jeopardy and Termination Assessments
• Collection Due Process appeals
• CAP Appeals
• IRS employment tax examinations
• Worker classification (employee/independent contractor)
• Trust Fund Recovery Penalty
• Payroll tax issues
• Return Preparer and Promoter Penalties
• Promoter Injunctions
• Circular 230 Issues
• Office of Professional Responsibility Matters

Tax Collection

Our attorneys regularly resolve tax collection issues with IRS Revenue Officers and collection personnel at the Ogden Service Center and the IRS Automated Collection System. We have extensive experience in helping clients with liens, levies, seizures and other enforced collection procedures. In resolving collection matters, we often negotiate installment agreements and offers in compromise and, where appropriate, provide advice regarding the dischargeability of taxes in bankruptcy.

Collection matters include:

• Persuading the Tax Division of the Department of Justice to accept $45,000 in full payment of a 100% tax penalty and accrued interest, totaling approximately $138,000.
• Convincing the Internal Revenue Service to drop its assertion that an individual was liable for the 100% penalty for taxes withheld by a corporation but not paid to the government.
• Successfully negotiating an installment payment plan on behalf of a physician involving a tax liability of $100,000 which the Internal Revenue Service was attempting to collect through enforced collection action.
• Voluntary Disclosure for Non-filers
• Installment Agreements
• Currently Not Collectible Status
• Offers in Compromise
• Collection Due Process Appeals
• CAP Appeals
• Federal Tax Lien Subordinations
• Federal Tax Lien Certificates of Discharge
• Lien and Levy Releases
• Federal Tax Lien Certificate of Non-Attachment
• Erroneous Federal Tax Liens
• Wrongful Levy
• Abatement of Penalties
• Innocent Spouse Relief
• IRS Seizures
• IRS Summons - Collection

State & Local Tax

State and local tax matters include:

• Successfully appealing to the United States Supreme Court a business and occupation tax case involving a major manufacturer.
• Challenging in a Chapter 11 bankruptcy proceeding a $1.7 million claim for Washington State excise taxes. Following extensive discovery, the Department of Revenue was convinced to concede over $1.0 million of its claim.
• Washington Sales & Use Taxes
• Washington Business and Occupation (B&O) Taxes
• City Business and Occupation (B&O) Taxes
• State Voluntary Disclosure
• Closing agreements with the State Department of Revenue
• Trust Fund Accountability Assessment
• State & Local Tax Litigation

CRIMINAL TAX DEFENSE

Since its inception, LeSourd & Patten's attorneys have represented individuals and corporations who are targets of criminal tax and other types of investigations by the Internal Revenue Service and the Department of Justice. The firm represents clients in administrative investigations, grand jury investigations and trials in federal district court, as well as in Internal Revenue Service civil audits which have the potential to be referred to the Criminal Investigation Division.

Criminal tax matters include:

• Obtaining an acquittal following a five-day trial in federal district court for an individual charged with willfully failing to file federal income tax returns.
• Advising an accounting firm how to respond to an Internal Revenue Service summons in connection with one of its clients who was the target of a criminal investigation.
• Favorably settling a civil forfeiture action where the United States Attorney was pursuing a parallel grand jury investigation involving an alleged conspiracy to violate drug and money laundering statutes. The United States Attorney agreed to drop all criminal charges including charges for willful failure to file tax returns.
• Tax Fraud
• Tax Evasion
• Federal, State, and Local IRS summons
• Offshore/Foreign Bank Account Reports (FBAR)
• Report Of International Transportation Of Currency Or Monetary Instruments (CMIR)
• Form 8300
• Currency Transactions Reports (CTR)
• Suspicious Activity Reports (SARs)

WHISTLEBLOWER REPRESENTATION

LeSourd & Patten, P.S. represents clients before the Internal Revenue Service in Whistleblower cases. If certain technical prerequisites are met, the IRS is authorized to pay an award to persons who provide specific and credible information that leads to the collection of tax, penalties and interest from a noncompliant taxpayer. Section 7623 of the Internal Revenue Code has recently been amended to provide for a potential award typically ranging from 15% to 30% of the amount collected.

TRANSACTIONAL TAX PLANNING

Business Transactions

LeSourd & Patten advises individuals and businesses regarding significant business transactions. The firm assists clients in selecting the appropriate ownership structure for their businesses and advises clients on how to minimize their tax liability. The firm also prepares contracts, such as buy-sell and employment agreements, which have a significant effect on tax consequences.

Business tax planning matters include:

• Obtaining a favorable private letter ruling regarding a section 355 spin-off in connection with a section 368(a)(1)(D) reorganization.
• Assisting a corporation in forming an Employee Stock Ownership Plan (ESOP) whereby the employees acquired 51% ownership of the corporation through tax-deductible payments from the corporation, and the selling shareholders indefinitely deferred recognition of taxable gain on the sale.
• Drafting a comprehensive shareholder agreement which took into account the tax consequences of a buy-out by one of the shareholders.
• Obtaining a favorable private letter ruling for a corporation which sought to minimize the tax effect of its distributions.
• Transferee Liability
• Alter ego Liability
• Successor Liability

Real Property Transactions

LeSourd & Patten represents clients in all aspects of real property transactions. The firm's attorneys assist clients in structuring and financing real property investments with special emphasis on tax planning.

Real property matters include:

• Representing a European company in its acquisition of a large hotel and office building chain.
• Assisting a client in forming a family real estate partnership established for the purchase, lease and sale of real properties.
• Representing a client in the closing of a real estate transaction involving the tax-free exchange of real property interests.
• Assisting clients in the formation and management of professional clinics and medical office buildings.

Exempt Organizations

LeSourd & Patten has expertise in the formation of nonprofit and tax-exempt organizations and charitable institutions, and in helping such organizations obtain and maintain tax-exempt status under federal and state law. The firm also represents exempt organizations with respect to tax assessments of unrelated business taxable income, revocation of exempt status proceedings, review of private foundation status, and asserted prohibited transactions.

Exempt organization matters include:

• Obtaining tax-exempt status for a large religious foundation.
• Settling a Tax Court case involving self-dealing with a private foundation for less than 5% of the excise tax and penalty asserted.
• Advising a tax-exempt medical organization on tax-deductible gifts to the organization and on the management, rental, and sale of assets held by the organization.

State & Local Tax

LeSourd & Patten provides a wide variety of services relating to state and local taxes. The firm represents taxpayers in audits by the Washington Department of Revenue and in appeals. The firm also represents clients in the litigation of state tax matters.

State and local tax matters include:

• Advising an out-of-state financial institution regarding Washington sales tax and business and occupation tax in connection with real property foreclosures.
• Obtaining for a stock brokerage firm a Department of Revenue determination that saves the client $250,000 per year in business and occupation taxes.

ERISA, COMPENSATION & BENEFITS

LeSourd & Patten provides a broad range of services to sponsors of tax-qualified retirement plans, profit-sharing plans, and fringe benefit programs. The firm represents sponsors in connection with both the original design of plans and the application for approval of plans by the Internal Revenue Service. In addition, the firm regularly prepares and submits private letter ruling requests and exemption applications to the Internal Revenue Service and the Department of Labor with respect to asserted prohibited transaction excise tax liability.

Qualified plan matters include:

• Achieving a settlement with no liability for tax or penalties for a multi-employer union plan charged with prohibited transactions totaling over $85,000,000 on which the tax, penalties and interest would have exceeded $20,000,000.
• Designing and implementing a financial institution's profit-sharing plan for its employees, and obtaining Internal Revenue Service approval for the bank's Master Plans offered to its customers.
• Designing and implementing a pension and fringe benefit program for a group of medical professionals.

GIFT & ESTATE PLANNING

LeSourd & Patten has an active estate planning practice. We prepare or provide advice regarding simple wills with guardianship provisions, complex wills with trust provisions, generation-skipping transfers and charitable gifts. The firm's practice also emphasizes estate planning outside of a client's will, particularly minimizing estate taxes through lifetime giving programs and other means.

Estate planning matters include:

• Assisting a client in establishing a family gift program for annual giving with a view to minimizing federal gift, estate and income taxes.
• Establishing an irrevocable life insurance trust as a means for a client to receive and administer life insurance proceeds, thus eliminating federal estate tax in the estate of both spouses.
• Utilizing grantor retained interest trusts (GRITS) to transfer property from one generation to the next while minimizing federal gift and estate taxes.

CORPORATE & BUSINESS LAW

LeSourd & Patten believes in small business and that a small business owner should have the opportunity to succeed. Our attorneys assist clients and businesses in selecting the appropriate ownership structure for their business, the advantages and disadvantages, and the associated tax liability, with an emphasis on minimizing taxes. Collectively, the members of our team have over 100 years of experience in forming corporations (profit and nonprofit), limited liability companies (LLCs), and partnerships, with an emphasis on professional service corporations and LLCs, as well as corporate governance and compliance (daily operations advice). In addition, our attorneys can assist you with the sale of your business or professional practice or with the purchase of a business or practice. Our attorneys can also advise you on employee benefits and executive compensation, qualified retirement plans, wealth transfer, and other planning for the business owner.