tax opinion insurance
Insurance policies designed to cover costs arising from a specific tax position
taken by an insured that is successfully challenged by the IRS (Internal Revenue
Service). Such a challenge could involve additional tax payments, interest,
penalties, and defense costs. A corporation might, for example, consider purchasing
tax opinion insurance if its tax return included a substantial deduction for
an item that, while legitimate, could be viewed as questionable and ultimately
disallowed by the IRS. In this situation, tax opinion insurance would cover
the costs associated with the corporation's tax position, except any additional
tax due.
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