Opinion
13171-20
01-09-2023
ELSAYED ABDELAAL & SOMAYA ALANANY, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent
ORDER
Christian N. Weiler, Judge
Background
This case is scheduled for trial at the Court's Los Angeles, California trial session commencing on Monday March 27, 2023, at the Edward R. Roybal Center & Federal Building, 255 E. Temple Street, Room 1167, Los Angeles, CA 90012. Respondent has filed a Motion to Compel the Production of Documents. For the reasons explained below, we will grant, in part, respondent's Motion, and refrain from ruling on the remaining relief sought by respondent until trial of this matter or at a more appropriate time in the future.
On February 25, 2022, respondent informally requested through petitioners' counsel copies of “all documents petitioners intend to use as evidence to support their allegations that the IRS erred” in its Notice of Deficiency. Since no response was received, on March 25, 2022 respondent sent to petitioners, pursuant to Tax Court Rule 72, a formal Request for Production of Documents. To date no written response by petitioner to respondent's informal request and Request for Production of Documents have been received.
On December 5, 2022 respondent filed a Motion to Compel Production of Documents seeking an order of this Court, pursuant to Tax Court Rule 104, that the Court bar petitioners from introducing any documentary evidence in which petitioners' failed to produce in response to respondent's Request for Production of Documents served on petitioners' counsel on March 25, 2022 and which is not produced prior to a Court imposed deadline.
On December 30, 2022 petitioners filed a response to respondent's Motion to Compel Production of Documents. In petitioner's response, petitioners acknowledge retrieval of copies of cancelled checks related to their WestAmerica bank account \(hereinafter "Cancelled Checks"), have been difficult to obtain since petitioners' accountant is in possession of the original Cancelled Checks and petitioners' accountant is now deceased and his office has since closed. Furthermore, petitioners note how they have unsuccessfully requested copies of the Cancelled Checks from WestAmerica Bank. Petitioners have requested an additional ninety (90) to obtain copies of these Cancelled Checks.
Petitioners also acknowledge the WestAmerica bank account statements reflect monthly deposits and credits in excess of $200,000 during the month of April 2015, and $186,000 during the month of May, 2015; while during these same months the statements also reflect checks and withdrawals of approximately $202,000 and $193,000 respectively. In their response, petitioners indicate how it is necessary for them to obtain copies of the Cancelled Checks to avoid an unfair assessment of tax and how these Cancelled Checks are responsive to several of respondent's Request for Production of Documents.
Discussion
I. Discovery Standard
Pursuant to Rule 72 of the Tax Court Rules of Practice and Procedure, the answering party shall serve a written response, and objections if any, within 30 days after service of the request. Also Rule 72 is not limited to documents in a parties' actual possession. We have previously required parties to obtain information from advisors or entities that have actual possession when the party has sufficient control so as to be able to obtain the documents. See Rosenfeld v. Commissioner, 82 T.C. 105, 116-118 (1984).
Unless otherwise indicated, all statutory references are to the Internal Revenue Code, Title 26 U.S.C., in effect at all relevant times, all regulation references are to the Code of Federal Regulations, Title 26 (Treas. Reg.), in effect at all relevant times, and all Rule references are to the Tax Court Rules of Practice and Procedure.
While the party objecting to any discovery has the burden of establishing that the documents sought by the other party are not relevant or that they are otherwise not discoverable. See Rosenfeld v. Commissioner, 82 T.C. 105, 112 (1984); Rutter v. Commissioner, 81 T.C. 937, 948 (1983); Branerton Corp. v. Commissioner, 64 T.C. 191, 193 (1975). We have also concluded that any claim that a party is not in possession, custody, or control of documents constitutes an objection to the production of documents. Gaw v. Commissioner, T.C. Memo. 1995-531, 1995 WL 664592, at *31 (citing Henderson v. Zurn Indus., Inc., 131 F.R.D. 560, 567 (S.D. Ind. 1990) (construing analogous provision of Federal Rules of Civil Procedure)).
II. Analysis
Respondent has issued both informal and formal written discovery to petitioners; however, to date, no written response or objection thereto has been received. Under Rule 72, a response to respondent's Request for Production of Documents is required by petitioners within 30 days. If a party fails to respond to a request for production of documents, then a motion to compel might be in order. See Rule 104(a)(3), (b).
Considering the representations made by petitioners in their response, the Court is inclined to afford petitioners a final opportunity to respond to respondent's written discovery, prior to granting any relief sought by respondent under Rule 104. What appears to remain unresolved between the parties is whether petitioners are in possession or have "sufficient control" over the documents being sought by respondent.
Considering the foregoing, it is
ORDERED, that respondent's Motion to Compel Production of Documents is granted in part, in that, petitioners are to submit to respondent a written response to each of respondent's Request for Production of Documents, including questions one (1) through seven (7), in accordance with Tax Court Rule 72 on or before January 30, 2023. It is further
ORDERED that petitioners are to produce for inspection (at a mutually agreeable time) by respondent, or are to furnish copies to respondent, each and every document responsive to respondent's Request for Production of Documents (including electronically stored information) on or before February 15, 2023, unless a prior objection to the information being sought is made by petitioners in their written response. It is further
ORDERED that respondent's Motion to Compel Production of Documents is held in abeyance in all other respects. It is further
ORDERED that the parties shall comply with the following:
With respect to any issues as to which settlement discussions have not yet commenced, the parties are expected to begin discussions as soon as practicable for purposes of settlement. With respect to any issues as to which settlement discussions have already commenced, the parties are expected to continue such discussions with a view to determining whether or not the parties will be able to agree to a basis of settlement of such issues. Some cases are susceptible to full or partial settlement, and the Court expects the parties to negotiate in good faith with this objective in mind. All minor issues should be settled so that the Court can focus on the issue(s) needing a Court decision.
Finally, the parties attention is drawn to the Court's Standing Pretrial Order dated December 1, 2022, and the deadlines set forth therein, including the parties deadline to file as stipulation of fact and exchange any proposed trial exhibits at least (14) fourteen days prior to trial.