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  "documentTitle": "ey family office study client deck asia pacific",
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      "text": "Meets at least the \"reasonable basis\" test and is disclosed appropriately on the tax return\nOr has \"substantial authority\"\nHowever, a tax shelter or reportable transaction must at least meet a \"more likely than not\" standard and may also be subject to other disclosure requirements",
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      "text": "Generally, the ability to practice before the IRS has been limited to specific classes of professionals, including certified public accountants, attorneys, and enrolled agents. Prior to 2011, however, the IRS did not attempt to regulate preparers of tax returns. In that year, the IRS began a program to regulate all tax return preparers who are compensated for their services, requiring annual registration and payment of an annual fee, as well as ongoing continuing education and testing requirements. The IRS registration process resulted in registered preparers being assigned a Preparer Tax Identification Number (PTIN), to be reported on all returns signed by the preparer. In January 2013, the US District Court for the District of Columbia invalidated these paid preparer regulations and enjoined the IRS from enforcing them. The District Court has clarified that the injunction applies only to the education and testing requirements and annual fees. At this time, the IRS registration process to obtain a PTIN remains in effect. The concept of \"paid preparers\" is also important in the family office when considering the potential for IRS penalties that may be applicable to tax return positions that the family office may take. IRC Section 7701(a)(36) defines a return preparer as any person who prepares a tax return for compensation, with limited exceptions. IRC Section 6694 outlines the monetary penalties that may apply to return preparers who prepare tax returns containing unsustained positions. The rules are complex and beyond the scope of this report, but generally a paid preparer may be subject to significant monetary penalties for an unsustained tax return position, unless the position:",
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      "text": "ownership, control, employees, and clients even more challenging to apply. Some published reports indicate that certain family offices have transferred their investment adviser function to a non-employee, \"outsourced chief investment officer\" model to avoid registration. Such family offices appear to be taking the position that residual family office investment services (cash flow modeling, etc.) either do not constitute \"investment advice\" under the Advisers Act or are \"solely incidental\" to their general obligations. Forming a private trust company may similarly render the investment services as solely incidental to the trustee function. If this is the case, the family office may not be subject to the Advisers Act. However, these approaches are not specifically sanctioned, and the only certain way for a new family office to avoid registration at this time is to either meet the terms of the exclusion or apply for an exempt order.",
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      "text": "It is important to note that these rules apply not only to the person who signs the tax return as preparer, but also to any other person who prepares a substantial portion of the return and any person who provides advice on a substantial portion of a return entry. A tax return may have multiple preparers for these purposes, and the penalty standards are applied on a position-by-position basis. One of the limited exceptions to Section 7701(a)(36) is a person who \"prepares a return or claim for refund of the employer (or of an officer or employee of the employer) by whom he is regularly and continuously employed.\" It is unclear whether this exception is sufficient to except family office employees from paid preparer status with respect to all tax returns that they might prepare. It is also unclear whether the requirement of compensation applies in situations where family offices who prepare tax returns may not bill their family clients directly for such services. Therefore, it is unclear how these preparer penalty rules will be interpreted by the IRS in a family office setting where employees sign returns, prepare portions of returns signed by others, or provide advice on tax return positions.",
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      "text": "IRS oversight: The IRS has no direct oversight of family offices. However, the US Treasury Department publishes Circular 230, which presents the regulations applicable to those professionals who practice before the IRS. Circular 230 also contains rules of professional conduct and lists requirements for providing tax advice. Tax advisers who violate Circular 230 may be sanctioned, fined, or suspended from practicing before the IRS. Therefore, while the family office itself might not be subject to oversight by the IRS or the Treasury, employees involved in the tax function may be subject to Circular 230.",
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