I have had two clients in attendance at audits in my life.

First, I was so friggin' young and green that I probably should not have been sitting there. Being audited was a good friend of mine....socialized with them, etc etc.  Smart guy.

Agent used the standard routine of questioning the taxpayer's integrity---- "surely you knew it was not right to do xxxxxx".......and my guy got really upset.........to the extent I finally kicked him under the table to shut him up.

Outcome of the audit was nominal taxes due...........3--400.

Last one was in late 70's, and was also with a close friend, probably my best friend since the mid-70's, who was the in-house CPA for a client.

Probably one of the three most intelligent people I have ever worked with..........super sharp.

Agent did the same thing.......... "why would anyone who had integrity do this xxxxxx".

My man also became exceedingly agitated-------which was totally unlike him----- he typically was as cold as ice, and we had, and have since, gone thru so many meetings with bankers, etc etc, and he NEVER lost his cool.

I kicked him to shut him up. 

(And....these kicks were obvious....the agent knew exactly what he was doing, and what I was doing.  These guys are not stupid.)

Audit resulted in maybe a 1000 of taxes.......nominal for that company.....petty cash expenditure.

The point is this........... everyone is fearful of the IRS.  Everyone believes that they act honestly when reporting their transactions.  When the agents question their "integrity", or even such as in your chicken example the farmer took the inquiry as a slant on his character, taxpayers take the comments as insults, and react accordingly.

The so-called professional can stand aside, try and remain calm, and "coolly" think of a retort that enhances the taxpayer's position---- according to the law.  The advisor has more experience in that kind of conflict, more technical knowledge so should know better how deep the water is, and the insult is not (or should not be) taken as personal, since the adviser did not do the transaction, and therefore should have no emotional attachments with the outcome.

All of that said........... that is why I preach that the research and defense of a transaction should occur at least by the time of preparation of the tax return, so that there are minimum surprises even if audited.

To the extent practical..........if we encounter a questionable situation, either one that is illogical, or one like the chicken deal where I might spot that there is no income from chicken sales........we either will put in the tax return itself comments to explain the situation and why it is not a problem, or put notes in our files about that potential problem situation, so that we don't have to rebuild the wheel two years later when memories are vague.

I would bet most real live "tax advisers" do the same.......as compared to part time preparers.

An observation-------- in your chicken deal-------- since most of our farmers are incorporated--------- the answer would have been that the consumption of the chickens would have been by the employees who are required to live on premises, and therefore would have been protected by section 119----- food and lodgings provision!!