On Subjectivity, Tax, and other Icky Things

This post started as a comment on Sarah Lawsky's post over at Concurring Opinions, but then it got too long, so now it's here.  A brief recap: Sarah thinks it's interesting that no one really likes oatmeal raisin cookies.  Also, she's written a cool paper about what it means when tax lawyers make statements of probability, such as the statement they must make (under IRS regs.) when providing tax advice that it is, say, more probable than not that a transaction will get favorable tax treatment.   Ok, here's what my comment said:

Hi, Sarah.  First of all, no one loves oatmeal raisin cookies because raisins look like bugs.  Ew. 

I've been thinking about your paper for a while, which for me is the sign of a really outstanding piece of writing.  I'm now fairly (say, 80%...) convinced that you're right in your claim that predicting tax outcomes involves uncertainty, not risk.  (And I went back and re-read Luce and Raifa, just to be sure.)  And your prescriptions based on that seem pretty reasonable.

What I'm wondering now is if the whole project of tying ethical or penalty-free lawyering to statements of probability is misguided.  And this could apply equally to tax penalties or Rule 11 more generally. 

The probability approach suggests that nose-counting can be a sufficient way to meet a standard based on likelihood of success (like the accuracy-related penalties or Rule 11).  That is, a proper method for a tax lawyer to go about her job could be to do a decisional study of every federal appeals judge, then calculate the odds of drawing an appellate panel with a particular group of judges, and so on.  If there are judges with truly outrageous views, and there is a non-trivial chance of drawing a voting majority of them on one's case, then no Rule 11.   

But what if society, or the lawyer herself, recognizes that the position with a non-trivial chance of winning is actually outrageously wrong and unreasonable?  Maybe the outlier judges are all 115 years old, and the equivalent of the mortifying old uncle of the federal bench. 

I think what rules like the accuracy-related penalties and Rule 11 are asking of lawyers is good-faith engagement in contemporarily-accepted, objective, legal analysis.  That is, it asks them to determine not is, but ought.  There's a strong analogy here to Mike Dorf's early work on injunctions and the "probability of success" standard -- probably worth a read.   

Anyway, my view is that the IRS's choice to describe the obligations of lawyers practicing before it in terms of probability is unfortunate and reductive, because it leads to the sort of pure positivism that I mention, and the theoretical black holes that you describe so well.  For instance, one step in that direction, as  I've mentioned, is to chuck the probabilistic regime altogether, and replace it with a standard that prohibits all tax-motivated planning not expressly authorized by Congress.