Reflections.

• Position: PRACTICE & PROCEDURES

In applying the "because of" test, the district court in Textron focuses on the contents of the tax accrual workpapers rather than their function. This approach essentially changes the "in anticipation of litigation" standard to a "where there is any possibility of litigation" standard. If this interpretation is followed by other courts using the because of test, it will be virtually impossible in these courts for the IRS to obtain documents that contain legal opinions or hazards of litigation assessments, whether the documents are tax accrual workpapers or other memoranda. While this interpretation of the anticipation of litigation standard yields the correct practical result (i.e., the IRS does not get the taxpayer's opinion-based work product that is irrelevant to the purposes of the audit), it arguably stretches the protection of the work-product privilege beyond its proper bounds. IRS Chief Counsel Donald Korb has stated on the record several times that the IRS believes Textron was wrongly decided. The Justice Department has...