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(187) Beale, supra note 28, at 639; Dzienkowski & Peroni, supra note 28, at 2743 (advocating for a MLTN threshold except in limited cases); Perkins, supra note 175, at 229 (advocating for gatekeeper role at MLTN threshold).
Deciding whether a tax position meets the MLTN standard must be based on the technical merits of the position.
"It was an excellent collaboration of diverse views." "This is the way public policy should be done." In the views of many, the reform process was greatly facilitated by the leadership of both TNC and MCHT, the latter of which provides coordination for all of the state's land trusts through MLTN. Although with hindsight a few would have preferred involvement of major landowner groups earlier in the process, most believed starting the process with the working group and gradually expanding the circle worked for the best.
In applying the MLTN recognition standard to a tax position: (i) it is presumed that the tax authority will examine the tax position and have full knowledge of all relevant facts; (ii) the technical merits of a tax position derive from sources of authority in the tax law and their applicability to the facts and circumstances; and (iii) each tax position must be evaluated without consideration of the possibility of offset.
Topic 740 requires an affirmative evaluation of whether it is MLTN (greater than a 50% chance) that the entity is entitled to an economic benefit resulting from tax positions taken in income tax returns.
Many questions remain on how this will be interpreted, as the "tax shelter" definition could be viewed as swallowing the entire tax area, effectively imposing the MLTN standard to all returns, and making it more difficult for taxpayers to get returns filed where that standard is not met.
The differing standards present a potential for a conflict between a preparer and a taxpayer/client.This could arise if a return were to contain a position that satisfies the taxpayer standard (substantial authority) under Section 6662(d), but not the higher preparer standard (MLTN) under Section 6694.
Under the law, to protect themselves from a potential penalty, any tax positions taken by a taxpayer that did not meet the Internal Revenue code's MLTN standard would have to be disclosed on the return.
The MLTN standard is normally satisfied if one can reasonably conclude that there is a greater than 50% likelihood the position will be upheld on its merits.
In many cases the MLTN source of the flaw of extremes causes nothing more than a time shift in income statement items, with an overly conservative starting point.
For many preparers, it may prove difficult to determine the correct treatment of routine items with the degree of certainty required by the MLTN standard.
In meeting the requirements of Interpretation 101-3, the member may assist the client in understanding why the tax positions do or do not meet the more-likely-than-not (MLTN) threshold and the basis for any unrecognized tax benefit so that the client can accept responsibility for the amounts reported and disclosed in the financial statements.
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