Disclosure of Information Concerning Real Estate
Transactions to the IRS
Opinion rules that a lawyer may disclose
information to the IRS concerning a real estate transaction which would
otherwise be protected if required to do so by law, and further that notice of
such required disclosure, should be given to the client and other affected
parties.
Inquiry:
Lawyer L frequently handles real estate transactions for his
clients. Lawyer L has reviewed new federal tax law requirements. He believes
that, as of January 1, 1987, he is required to file Form 1099 with the Internal
Revenue Service for each real estate transfer in which he acts as the closing
agent. That form would require that he provide the Internal Revenue Service
with the sales price and tax identification numbers for the parties to the real
estate transaction.
Lawyer L is concerned that he may be violating client confidences
by disclosing the information required by Form 1099 to the Internal Revenue
Service. If he must disclose this information, is he required to advise the
parties to the transaction that the returns are being filed? Is it necessary to
secure the permission of the clients in order to disclose that information?
Opinion:
Rule 4(c)(3) permits a lawyer to disclose confidential information
if he is required by law to do so. Whenever Lawyer L is required by tax law
provisions to provide certain information to the Internal Revenue Service, he
may ethically do so. Since it is a legal requirement, the consent of the
client, as such, is not required. Rule 6(b)(l) requires a lawyer to keep a
client reasonably informed of the status of any matter and to comply promptly
with requests for information. The comment thereto indicates that a lawyer is
required to "fulfill reasonable client expectations for
information...." Therefore, Lawyer L and other attorneys similarly
situated should inform their clients, and other affected persons as reasonable
and appropriate, when the lawyer must provide information to the Internal
Revenue Service.