Saturday, January 19, 2019

Another Confluence of Legal Interpretation and Fact Finding (1/19/19)

Earlier today I posted on a confluence of legal interpretation and fact finding:  Law Finding (The Chevron Framework) and Fact Finding in Trials (Federal Tax Crimes Blog 1/19/19), here.  I offer here another instance of that.

In my current working draft of my Federal Tax Procedure Book, I discuss the more likely than not standard for legal opinions as to tax benefits.  That more likely than not standard says, in effect, that the legal opinion or belief in the legal opinion must be greater than 50% in order to avoid some penalties. 

A similar more likely than not construct is often used to describe the level of belief that a fact finder (judge or jury) in a trial must have in order to find by a preponderance of the evidence that the party bearing the burden of persuasion (usually a plaintiff) has met the burden.

I have added the following as a footnote:
Fact burden of proof theory has a similar analysis.  As I discuss later in the book (starting on p. ___), the preponderance of the evidence as to a fact is often described as more likely than not, which is quantified in percentages as being greater than 50% in order to find the fact.  Conversely, if the trier is either 50-50 (called a state of equipoise) or less as to the fact, the fact cannot be found, meaning that the party bearing the burden of persuasion on the issue loses.  That same type of analysis applies to legal conclusions for tax opinions.  If the adviser is 50-50 (state of equipoise) or less on the legal issue, then the adviser cannot render a more likely than not opinion.  If the adviser is more than 50% on the legal issue, he can render a more likely than not opinion.  Of course, the difference between 49% and 51% opinions is razor thin and probably impossible to quantify with sufficient confidence to render a more likely than not legal opinion.  And the potential for error is compounded when subsequent legal conclusions depend upon the correctness of an earlier conclusion that itself may be uncertain.  Example: Legal issue 1 is barely more likely than not, say 51%; Legal issue 2, which depends on Legal issue 1 is at 51%.  Is the overall opinion that the tax benefits will be achieved at 51% or some lesser number (in this case around 26%).  How does the legal adviser render the opinion?  Heather Field, Tax Opinions & Probability Theory: Lessons From Donald Trump, 156 Tax Notes 61 (7/3/17).

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