Rev. Proc. 59-4

SECTION 1. PURPOSE.

The adoption of the informal conference procedure under Reorganization Plan No. 1 of 1952, C.B. 1952-1, 227, occasioned a number of inquiries concerning the extent to which examining officers and other employees of the Internal Revenue Service may accord recognition to unenrolled persons employed by taxpayers in connection with Federal tax matters. The purpose of this Revenue Procedure is to outline generally the position of the Service in this respect, and to set forth principles which may be used as guides by the Internal Revenue Service as a whole, including Office Audit activities, in determining the extent to which matters may be discussed with unenrolled persons.

SEC. 2. IN GENERAL

.01 Generally speaking, any individual who has knowledge of the facts, or who can furnish information which will be of assistance in establishing the facts, is a proper source of information in connection with a determination of tax liability and can be heard in the capacity of a "witness" without regard to whether he is acting at the request of the taxpayer or claims the taxpayer as his client for purposes other than representation before the Service. For example, an attorney who represented the taxpayer in a sale of real estate may be a proper person to furnish the facts with respect to the particular transaction involved. Similarly, an accountant who has kept or audited the taxpayer's books and records or prepared his tax returns may be a proper person to supply information and assist in the factual development of the case. However, unless properly enrolled and authorized to represent the taxpayer before the Internal Revenue Service with respect to the tax involved in the examination, or unless within the exceptions provided in subsections (1), (2), (3), (4), (6), or (7) of section 10.7 (a) or section 10.7(b) of Department Circular No. 230, as revised, page 6 this bulletin, an individual may not be heard as the taxpayer's representative in advocating, in those cases where issues or controversies have arisen out of the factual development of such cases, the adoption of any particular position with respect to such issues or controversies. The difference may be summarized by distinguishing activities in the capacity of witness--or one who assists in the factual development of a case--and activities in the capacity of advocate--or one who acts in behalf of the taxpayer in urging particular determinations with respect to the issues or controversies which have arisen out of the factual development of a case. In other words, during the examination process a taxpayer has the right to use the services of any person he may elect, whether or not enrolled, for the purpose of explaining his books, records or returns to the examining agent; and the examining agent, in the factual development of a case, has not only the right but also the duty to receive information from anyone, whether or not enrolled and irrespective of the presence of the taxpayer, who has knowledge of facts pertinent to the case.

.02 The foregoing portains primarily to the furnishing of information during the factual development stage of a case. However, the taxpayer also has the right, in those cases where issues or controversies have resulted from the factual development of such cases, to have any unenrolled person who has knowledge of pertinent facts accompany him or his duly enrolled and authorized representative to conferences (including the informal conference in the Audit Division of an office of District Director), but such unenrolled person may appear at such conferences only when the taxpayer or his duly enrolled and authorized representative is present in person, and then only in the capacity of witness.

.03 Nothing in this Revenue Procedure is to be construed as authorizing "practice" before the Internal Revenue Service by unenrolled persons who are not within the exceptions provided in subsections (1), (2), (3), (4), (6), or (7) of section 10.7(a) or section 10.7(b) of Department Circular No. 230, as revised (31 CFR 10.7(a) and 10.7(b)).

.04 It is believed that the foregoing statements will be of assistance to field districts in the exercise of their sound administrative discretion in determining the matters that may be discussed with unenrolled persons without violating the provisions of the regulations relating to "practice" or Section 9 of the Service's "Rules of Conduct and Other Instructions for Employees of the Internal Revenue Service".

SEC. 3. INQUIRIES.

Inquiries from Service personnel regarding this Revenue Procedure should be addressed to the Audit Division (O:A). Other inquiries should be addressed to the Director of Practice (C:DP).

SEC. 4. EFFECT ON IR-MIMEOGRAPH NO. 58.

This Revenue Procedure revises and supersedes IR-Mimeograph No. 58 C.B. 1952-2, 297.

SEC. 5. EFFECTIVE DATE.

This Revenue Procedure shall be effective March 15, 1959.

                                   DANA LATHAM,