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TheSubjectFacts
The accountant (a CPA) had prepared
the taxpayer's annual federal and
state income tax returns for 17 years
(1988-2005). For tax years 1999-2002,
the taxpayer's filing status was listed
as real estate investor and the income
from the taxpayer's Florida real estate
investments was reported as capi-
tal gains. Then, for the three years of
2003-2005, the filing status of the tax-
payer was changed to that of an indi-
vidual engaged in the business of real
estate (but the change in the tax filing
status had not been disclosed to the
taxpayer); the Florida income was thus
reported as ordinary income.
The taxpayer's new accounting firm,
upon noting the change in the fil-
ing status, filed amended returns for
2003-2005; following an audit, the
IRS upheld the change to the real es-
tate investor filing status. Thereupon,
the taxpayer filed a lawsuit for pro-
fessional malpractice and negligence
against the former accountant and
against his firm (the "defendants"), but
not until November 2009, which was
three years and seven months after the
defendants' final tax return work had
been completed in connection with the
taxpayer's 2005 returns.
TheRespectivePositions
oftheParties
In response to the lawsuit, the defen-
dants filed their defense that the tax-
payer's claims were time-barred by
the Connecticut three-year statute of
limitations for professional malprac-
tice claims (C.G.S. 52-577). In the
taxpayer's two-step counter-argument
to this "stale claim" defense, he first
alleged that the defendants owed a
fiduciary duty to him; second, the tax-
payer alleged that, as a consequence
of this purported fiduciary duty, the
defendants were required to have af-
firmatively disclosed to the taxpayer
the change in his tax filing status for
2003-2005.
In sum, the taxpayer's sequential as-
sertions were that, because the defen-
dants were his fiduciaries and then be-
cause they had purportedly engaged
in fraudulent nondisclosure, therefore,
their nondisclosure had "tolled" the
running of the statute of limitations -
with the net result that, as the taxpayer
then argued, the lawsuit was not to be
time-barred by his delay in filing the
lawsuit.
At the trial court's ensuing summary
judgment proceedings, and in order to
buttress his attempt to characterize the
defendants' relationship with him over
the 17 years as one of a fiduciary na-
ture, the taxpayer submitted an affida-
vit in which he asserted that: (i) he had
trust and confidence in the defendants
as tax experts; (ii) in tax matters, the
defendants had superior knowledge,
skill, and expertise; and (iii) he believed
at all times that the defendants were
proceeding in his best interests.
TheCourt'sUnequivocalRejection
oftheTaxpayer'sArguments
The Appellate Court first reconfirmed
the Connecticut Supreme Court's defi-
nition of a fiduciary relationship as one
TheIssue:
Do accountants, in their performance of tax return
preparation work (and particularly when there has
been a long-term accountant/client relationship with
the taxpayer), act in a fiduciary capacity on behalf of
their clients?
TheCourt'sHolding:
No.
ConnecticutAppellateCourt
RulesontheCPAasFiduciary
Recent Decision on Iacurci v. Sax Significant to Connecticut CPAs
By Philip H. Bartels, J.D., Of Counsel, Shipman & Goodwin
OnDecember4,2012,theConnecticut
AppellateCourtissueditsdecisionin
Iacurciv.Sax(139Conn.App.386)in
animportantcaseoffirstimpression
inourstate.