How it works
An opinion letter applies the law to your specific facts and states a conclusion at a defined confidence level: will, should, more likely than not, or substantial authority. The level determines what penalty protection attaches and whether disclosure is required. A reasoned opinion recites the facts relied on, analyzes the authorities, and explains the conclusion; a conclusory letter without analysis carries little weight. Tax opinions support positions with preparers, counterparties, and the IRS; token opinions address whether a digital asset is likely a security.
Why it matters
An opinion is not a guarantee of outcome. It is evidence that the position was analyzed by a qualified professional before you acted, which is what reasonable cause and good faith require to avoid penalties, and what exchanges and investors want to see before they rely on a token.
Example
A DAO member takes the position that governance tokens received for contributed work are not income until vested and transferable. A more-likely-than-not opinion documenting the analysis supports the position on the return and defends against the accuracy penalty if the IRS disagrees.
Related: more likely than not, accuracy-related penalty. Read more: opinion letters.
