Pauls Farm grows more than what springs from its GA boondock soil; it sure brings in a good crop of blogfodder.

Pauls Farm Properties, LLC, Eco Terra 2016 Fund, LLC, Tax Matters Partner, et al., Docket No. 7519-20, filed 4/5/24, has Judge Patrick J. (“Scholar Pat”) Urda reaching back ten (count ’em, ten) years, to the heyday of Jim (“Little Jim”) Haber, immunologist. Of course, it’s more discovery tohubohu, with the Paulists claiming client-attorney privilege for their communications with their trusty attorneys K&C.

To thwart IRS’ assertions of massive chops, the Paulists claim good-faith reliance. Yes, K&C were retained by the promoter of these deals (the Paulists and the als) to “[r]eview all due diligence material for the underlying transaction, including tax returns, title reports. appraisals, market studies, feasibility studies, biology and/or geology studies where applicable, conservation easement deeds . . . .” Order, at p. 2. But the Paulists claim they didn’t rely on K&C; they say they relied on other professional advisers, and exercised due care their own selves. So the Paulists claim client-attorney privilege for the K&C stuff.

But client-attorney privilege may be waived when a party puts at issue matters that out of fairness the other side must examine and contest.

“Petitioners have affirmatively put at issue whether their reliance on advisors was in good faith. As a matter of fairness, we must evaluate all of the advice that was provided in order to assess whether they acted inc good faith. Petitioners thus have waived any privilege over the [K&C] material.

“Petitioners attempt to avoid this conclusion by asserting that they do not intend to claim reasonable reliance on [K&C}’s advice. This is ‘beside the point.” Ad Investment 2000 Fund, 142 T.C. at 257. “[B]y placing the partnerships’ legal knowledge and understanding into issue in an attempt to establish the partnerships’ reasonable legal beliefs in good faith arrived at (a good-faith and state-of-mind defense), petitioners forfeit the partnerships’ privilege protecting attorney-client communications relevant to the content and the formation of their legal knowledge, understanding, and beliefs.” Id.” Order, at p. 4.

For the Ad Investment story, see my blogpost “Self-Determination,” 4/16/14.

Hand it over, Paulists.