Tax Strategy Second Opinion: Tax Position Risk Assessment

Who a tax strategy second opinion is for

Our clients are usually business owners, founders, and high-net-worth individuals who have been presented with a strategy and want an independent view before they commit.

Typical situations include:

• A promoter, advisor, or CPA has pitched a strategy that promises a large deduction, credit, or deferral.
• You are weighing an aggressive but legitimate return position and want to know the real audit and penalty risk.
• A transaction is being structured, and someone has said the structure “saves taxes” without explaining how.
• You already used a strategy on a filed return and have started to wonder whether it was sound.

We do not sell, promote, or implement tax strategies. That independence is the point of a second opinion.

We review your position the way an IRS examiner would

Most tax planning is written from the taxpayer’s point of view. Our review starts from the other side of the table: what would an experienced examiner request, question, and argue?

Otto Bosch spent years as an IRS Revenue Agent in the Global High Wealth group of the IRS Large Business & International Division. He knows how examinations of complex positions are built, because he built them.

The doctrines the IRS uses to challenge tax strategies

A strategy can follow the literal words of the tax code and still fail. The IRS and the courts apply several long-standing doctrines to look past form to substance:

• Economic substance. Codified in section 7701(o) of the Internal Revenue Code, it asks whether a transaction meaningfully changed your economic position and had a substantial purpose apart from taxes.
• Step transaction. Separate steps planned as one deal can be collapsed and taxed as a single transaction.
• Substance over form. The IRS can tax what actually happened, not what the documents call it.
• Business purpose. A transaction with no real purpose other than reducing tax is vulnerable.
• Assignment of income. Income generally stays with the person who earned it, even if it is directed elsewhere.
• Related-party rules and valuation. Deals among family members or controlled entities, and positions that depend on an appraisal, draw close scrutiny.

A Tax Position Risk Assessment tests your strategy against each doctrine that applies to it.

Penalties: why getting this wrong costs more than the tax

If a position fails, the tax is only part of the bill. Accuracy-related penalties are generally 20% of the underpayment, plus interest.

The economic substance rules are harsher. A transaction that lacks economic substance can carry a 20% penalty, rising to 40% if it was not adequately disclosed, and the usual reasonable cause defense generally does not apply.

Certain transactions also carry their own disclosure duties. If a strategy is a “listed” or other reportable transaction, you may need to file Form 8886 with your return, and failing to disclose can trigger separate penalties.

Red flags in promoted tax strategies

The IRS publishes an annual “Dirty Dozen” list of tax scams and abusive arrangements it is watching. The strategies vary, but the warning signs repeat:

• The tax benefit is far larger than the cash you actually put at risk.
• The promoter guarantees the outcome or calls the strategy “IRS-approved.”
• Money moves in a circle and ends up back where it started.
• The fee is tied to the tax savings, or you are asked to keep the strategy confidential.
• The benefit depends on an appraisal or valuation that seems surprisingly high.
• The same structure is being sold to many people with very different situations.

A red flag does not mean a strategy is unlawful. It means the strategy deserves an independent review before your name is on the return.

What a Tax Position Risk Assessment covers

Every assessment is specific to your facts and documents. It typically addresses:

• The IRS’s strongest arguments against the position, ranked by risk.
• Your defenses, including the statutory support, case law, and facts in your favor.
• Documentation gaps that should be closed before you file or close.
• Disclosure: whether the position should be disclosed on the return, and how.
• Penalty exposure and what would support a good-faith defense.
• Alternatives that reach a similar business goal with less risk.

You get a clear answer in plain language: proceed, proceed with changes, or walk away.

Already used the strategy on a filed return?

You still have options, and they are usually better before the IRS makes contact. We can assess the position on the filed return, discuss whether correcting it makes sense, and prepare you for an examination if one comes.

If the IRS has already opened an audit, see our tax audit defense practice. We represent clients through examination, appeals, and the U.S. Tax Court.

How the assessment works

1. Privileged consultation. We discuss the strategy, your goals, and your timeline, under attorney-client privilege.
2. Document review. We review the proposal, promoter materials, draft agreements, appraisals, and any opinion you were given.
3. Risk analysis. We build the IRS’s case against the position, then test your defenses against it.
4. Written findings. We deliver our conclusions and recommendations, including documentation and disclosure steps.
5. Follow-through. If you proceed, we can work with your CPA on reporting, and we can defend the position if it is examined.

Why clients choose Kugelman Law

The examiner’s perspective. Otto Bosch is a former IRS Revenue Agent from the Global High Wealth group of the IRS Large Business & International Division. He reviews a strategy the way the government would.

Litigation experience. Founder Alex Kugelman is a former judicial law clerk at the U.S. Tax Court with nearly two decades of federal tax controversy experience. Both attorneys are admitted to practice before the U.S. Tax Court.

Independent and privileged. We have no stake in whether you use a strategy. Our advice is legal advice, protected by attorney-client privilege.

Nationwide and remote. We are based in Marin County, with offices in San Rafael, San Francisco, and Irvine. We represent clients throughout California and, for federal tax matters, nationwide.

Related guides

• Why you want a former IRS Revenue Agent attorney on your team
• What does an IRS Revenue Agent do?
• IRS and FTB audit defense
• U.S. Tax Court litigation

Frequently asked questions

What is a Tax Position Risk Assessment?

It is an independent legal review of a proposed tax strategy or return position from the IRS’s point of view. We identify how the IRS would challenge it, how strong your defenses are, and what documentation and disclosure the position needs.

When should I get a tax strategy second opinion?

Before you sign, invest, or file. Once a transaction closes or a return is filed, many of the choices that reduce risk are no longer available.

Can relying on my advisor protect me from penalties?

Sometimes. Good-faith reliance on a qualified, independent advisor who had all the facts can support a reasonable cause defense to many penalties. Reliance on the person selling the strategy generally does not, and the defense is generally unavailable for the economic substance penalty.

What is the economic substance doctrine?

It is a rule, codified in section 7701(o) of the Internal Revenue Code, that denies tax benefits from transactions that do not meaningfully change your economic position or lack a substantial non-tax purpose. A strategy can satisfy the literal words of the code and still fail this test.

What is a listed or reportable transaction?

These are transactions the IRS has identified as having potential for tax avoidance. Participants generally must disclose them on Form 8886, and failing to disclose can lead to significant penalties even if the underlying tax position is upheld.

Will an assessment prevent an IRS audit?

No review can prevent an audit. What it can do is help you avoid positions that are unlikely to hold up, strengthen the ones you take, and build the record you will need if you are examined.

Do you work with my CPA or financial advisor?

Yes. We regularly coordinate with clients’ CPAs and advisors. Our role is to give you an independent legal view, protected by attorney-client privilege.

What does a consultation cost?

We offer paid consultations fully protected by attorney-client privilege; we do not offer free consultations. A paid consultation gives you a real analysis of the strategy and your options. Call (415) 968-1780 to schedule.

About our attorneys

Otto Bosch is a tax controversy attorney at Kugelman Law and a former IRS Revenue Agent from the Global High Wealth group of the IRS Large Business & International (LB&I) Division. He is admitted to practice before the U.S. Tax Court and in Missouri, is an IRS Enrolled Agent, and holds an LL.M. in Taxation.

Otto was quoted in Tax Notes in 2026 on IRS examination training and the LB&I audit campaign targeting deferred legal fee structures. His practice focuses on IRS audit defense, high-net-worth and partnership examinations, and U.S. Tax Court litigation.

Alex Kugelman is the founder and managing attorney of Kugelman Law and a former judicial law clerk at the U.S. Tax Court. He has nearly two decades of federal tax controversy experience, including U.S. Tax Court and U.S. District Court litigation, and was quoted in the Financial Times and the New York Post in July 2026 on California tax policy.

Get a second opinion before you commit

If a strategy sounds too good to be true, or you simply want to know where it stands, talk with us before you sign or file.

Schedule a paid, privileged consultation by calling (415) 968-1780 or visiting our contact page.

This page is attorney advertising and general information, not legal advice. Whether a tax position is supportable depends on the specific facts and current law. Contacting Kugelman Law does not create an attorney-client relationship.