typically maintain greater protection, though the line can blur if their work informs a later testifying expert. HOW TO AVOID A WAIVER It is also important that client advisors do not inadvertently waive privilege and work-product protections. In United States v. Sanmina Corp., the court confronted waiver risks when legal analyses migrated into valuation materials provided to the IRS. Sanmina claimed a substantial worthless stock deduction and submitted a law-firm valuation report that referenced internal legal memoranda. When the IRS sought those memoranda, Sanmina asserted privilege and work-product protection. The court held that submitting the valuation waived protection for any factual information referenced in it, including the legal memoranda, but preserved protection for opinion work-product reflecting attorneys’ mental impressions, conclusions, or legal theories. Accordingly, attorney and other professions should proceed carefully when valuations are filed with returns or otherwise submitted to tax authorities. Build reports on independently supportable, non-privileged factual and financial assumptions. Avoid embedding or summarizing privileged legal analysis in the body of the report, appendices, or footnotes. If the engagement relies on legal conclusions (for example, entity characterization or rights analysis), consider providing for those conclusions in a separate privileged memorandum that is not cited or attached to any valuation furnished to the IRS. PRACTICAL TAKEAWAYS Engagement letters should match the context and scope of the work sought and how that work is assisting counsel to provide legal advice. If counsel needs a CPA or appraiser to interpret complex financial data to render legal advice, document that necessity in the engagement letter and channel substantive communications through counsel with individuals necessary to such communications. Make clear that the professional’s work product is for counsel’s use in advising the client only, not for independent business reporting, and avoid dual-purpose scopes in which one purpose is arguably business advice oriented rather than legal. Where possible, keep valuation deliverables that may be shared with the IRS fact-focused, and segregate privileged analyses in separate attorney work product. For expert roles, decide early whether a consulting-only engagement better preserves confidentiality given the matter’s potential outcomes. CONCLUSION Valuations are essential to many business and wealth-transfer planning strategies, but their importance also makes them prime targets for scrutiny by tax authorities and opposing parties. Despite their frequent involvement in legal strategies, valuations are not automatically protected by attorney-client privilege or the work-product doctrine. Effective risk management, therefore, requires attorneys, tax professionals, and advisors to understand the limits of attorney-client privilege and the work-product doctrine, and take the necessary precautions to ensure that valuable client information is not inadvertently disclosed. With thoughtful planning, cross-disciplinary teams can preserve confidentiality where it truly advances legal advice—without compromising the integrity and usefulness of the valuation itself. Nathan G. Patterson and Haley Faust Leise are attorneys at Koley Jessen, focusing their practices on business succession planning, estate planning and administration, and implementing advanced tax-planning techniques for business owners. Patterson and Faust Leise counsel business owners, families, and individuals, providing a range of services from preparation of basic estate plan documents to the development and implementation of sophisticated wealth transfer techniques and business succession strategies to achieve the client’s personal, financial, and business-based objectives. If you would like to discuss a client matter with Patterson and Faust Leise, you can reach them at (402) 390-9500 or nathan.patterson@koleyjessen.com and haley.leise@koleyjessen.com. We are delighted to announce that Heidi Kelly has been selected as a Partner at Boone & Associates. Since joining our firm in 2021, Heidi has consistently demonstrated exceptional technical expertise, a deep commitment to client service, and strong leadership within our team. Her dedication to excellence and ability to foster trusted relationships have been instrumental in our continued growth and success. As a Partner, Heidi will take on an expanded leadership role, guiding strategic initiatives, mentoring our professionals, and continuing to deliver outstanding value to our clients. Please join us in congratulating Heidi on this well-deserved achievement. We look forward to the exciting contributions she will bring to this new chapter of her career. 11 nescpa.org
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