Opinion
5313-16
02-21-2024
SCOTT A. BLUM & AUDREY R. BLUM, Petitioners v. COMMISSIONER OF INTERNAL REVENUE, Respondent
ORDER
Joseph Robert Goeke, Judge.
On December 8, 2023, petitioners filed a motion to compel production of documents (Motion). Petitioners filed a first supplement to motion to compel production of documents on January 12, 2024, and respondent filed a response to motion to compel production of documents (Response) on February 16, 2024.
All statutory references are to the Internal Revenue Code, Title 26 U.S.C. (Code), in effect at all relevant times.
In their Motion, petitioners make various requests regarding three primary issues: (1) whether a notice partner FPAA pertaining to Democrat Strategic Investment Fund, LLC (DSIF), was properly issued to Bogan Ventures, LLC (Bogan), petitioner Scott A. Blum's wholly owned disregarded entity, on December 17, 2004; (2) whether the statute of limitations for DSIF was properly extended; and (3) whether respondent has generally complied with Tax Court Rules relating to discovery. We will briefly discuss each of these issues, as well as certain related matters.
I. FPAA Issuance Issue
We issued an Order on February 13, 2024, denying respondent's motion for partial summary judgment. In our Order, we noted that respondent has produced notice partner FPAAs addressed to Bogan at two different addresses, as well as a certified mailing list (CML) dated December 17, 2004. As we stated, "The CML is complete and appears to raise the presumption of regularity." However, we denied respondent's motion for partial summary judgment, in part, because discovery on the topic had not been completed. Petitioners' motion pertains to the notice partner FPAAs and the CML discussed in our Order.
As stated in their Motion, "Petitioners contend that the CML and copies of FPAAs * * * relate to the issuance and mailing of Generic TMP FPAAs on December 17, 2004, as step one in a two-step process for issuing FPAAs for BLIPS." Petitioners' Motion later provides that "The first step involved issuing and mailing 63 Generic TMP FPAA packages to [the TMP]. The second step, by contrast, involved mailing copies of the BLIPS FPAAs approximately a week later to certain BLIPS Notice Partners."
"BLIPS" is an acronym for the underlaying transaction.
Petitioners' claims appear to be incorrect. The FPAAs show they are addressed to Bogan. The tracking numbers on the FPAAs match the tracking numbers on the CML, which itself shows that the FPAAs were mailed to Bogan. Petitioners have only indirectly addressed these facts. Petitioners' position rests in large part on certain admissions previously made by respondent in this case regarding the mailing of, and permission to mail, FPAAs to Bogan. In his Response, respondent stated that he "will amend his Admissions shortly to reflect the applicable Service policy."
The Court has significant concerns with respondent's admissions in this case. Respondent was well aware that the FPAAs were at issue when he filed (allegedly incorrect) admissions on March 13, 2023. Respondent is strongly cautioned that further misrepresentations may be met with sanctions. We believe that petitioners should be given some latitude in discovery on the topic of the FPAAs due to respondent's misrepresentations.
Respondent should have also been aware that his representations to the Court prior to March 2023 were unclear, as on September 20, 2021, we vacated a previous Order dealing, in part, with issuance of FPAAs to Bogan. In spite of this, respondent acted with an apparently cavalier attitude toward admissions, that he now seeks to amend.
II. DSIF Period of Limitations Issue
In his Response, respondent alleges that "A challenge to the period of limitations is a challenge to the underlying tax liability which must be raised at the partnership level. Goldberg v. Commissioner, T.C. Memo. 2021-119. Accordingly, the Court lacks jurisdiction to review the Form 872 Consents that were executed in this case." Petitioners have not addressed why DSIF's period of limitations is relevant in this case.
III. Respondent's Compliance with Discovery Rules Issue
Petitioners make numerous allegations in support of their claim that respondent has failed to comply with the Tax Court's Rules pertaining to discovery. Some of these allegations pertains to documents relating to DSIF. In his Response, respondent states that he "has not received all of the administrative files for [DSIF] simply because respondent does not have custody of them and cannot produce what he does not have." Respondent did not say who has custody of the files or why respondent is unable to obtain a copy of the files.
IV. Related Matters
Petitioners have requested that we order respondent to produce certain documents for in camera review. These documents generally fall into three categories: (1) Approximately 700 pages of documents previously provided to petitioners that have been "redacted on the ground of Government privilege or section 6103"; (2) CMLs relating to other taxpayers who participated in BLIPS transactions, which respondent claims are protected by section 6103; and (3) other documents that respondent has allegedly refused to provide on grounds that they are protected by Federal Rule of Criminal Procedure 6(e). Respondent claims that "Nothing related to the grand jury, or its investigation of criminal activity, is relevant under T.C. Rule 70."
Groups 2 and 3 of these documents may be entirely the same. It is unclear from the parties' filings whether there is any difference. We note that on page 3 of his Response, respondent claims that the CMLs were withheld "on the grounds of I.R.C. § 6103 or Federal Rule of Criminal Procedure * * * 6(e)." However, the document referenced by respondent only asserted section 6103 as a reason for withholding the documents.
Petitioners have also requested that they be permitted "to confidentially submit certain impeachment evidence to aid the Court's review of Respondent's redactions."
Considering the foregoing and the remainder of the parties' filings, it is hereby
ORDERED that respondent, on or before March 15, 2024, amend any and all (allegedly) incorrect admissions he has previously made in this case. Respondent is specifically directed to also clarify any admissions that he believes may be confusing to the Court. For example, respondent previously admitted that "Exam did not mail a copy of the Democrat FPAA to Bogan c/o Scott A. Blum on December 17, 2004." This could be read to be in direct conflict with the FPAAs and CML showing mailing of FPAAs to Bogan on December 17, 2004, but it could possibly be read extremely narrowly to only be admitting that the FPAA was mailed to Bogan without the "c/o Scott A. Blum" designation. Respondent is directed to provide an explanation regarding why each amended admission is (allegedly) incorrect/unclear. Respondent is further directed to generally explain why he has waited until now to amend incorrect admissions. It is further
ORDERED that respondent, on or before March 15, 2024, file a response to this Order explaining in detail who has custody of the DSIF administrative files and why respondent is unable to obtain a copy of the files. Respondent should detail any and all attempts that he has made to procure a copy of the files. It is further
ORDERED that respondent, on or before March 8, 2024, produce a sampling of documents totaling approximately 70 pages from the group of approximately 700 pages discussed in part IV above. These pages should only be redacted in accordance with Tax Court Rule 27(a). Respondent should Bates number this 'unredacted set' and provide a separate set with the same Bates numbers that include respondent's proposed redactions. Respondent should also provide an explanation for each redaction made in the 'redacted set.' The Court expects respondent to produce documents that he believes are most relevant to petitioners' claims regarding the FPAAs - gamesmanship may be met with sanctions. The Court will use these documents, in part, to determine whether the remaining documents should be produced to the Court. Prior to March 8, 2024, respondent should contact chambers at (202)521-0690 to arrange for production. It is further
ORDERED that respondent, on or before March 15, 2024, in his response to this Order, address petitioners' argument on page 18 of their Motion regarding the linking/delinking of petitioner Scott Blum and/or Bogan to the TEFRA proceedings involving DSIF. It is further
ORDERED that petitioners, on or before March 15, 2024, file a response to this Order addressing why they believe DSIF's period of limitations is relevant in this case. Petitioners should address Goldberg v. Commissioner, T.C. Memo. 2021-119 and the fact that a partnership-level proceeding already occurred. It is further
ORDERED that petitioners, on or before March 15, 2024, in their response to this Order specifically address the fact that the FPAAs and CML produced by respondent indicate that the FPAAs were mailed to Bogan. It is further
ORDERED that petitioners, on or before March 8, 2024, produce their alleged "impeachment evidence" to the Court. The documents should be produced without explanation by petitioners. Prior to March 8, 2024, petitioners' counsel should contact chambers at (202)521-0690 to arrange for production. It is further
ORDERED that petitioners' Motion, insomuch as it requests that we direct respondent to produce CMLs pertaining to third parties for in camera review, is denied. It is further
ORDERED that respondent, on or before March 15, 2024, in his response to this Order, generally describe discoverable documents allegedly protected by Federal Rule of Criminal Procedure 6(e) (other than the third-party CMLs). To the extent any documents were not provided to the grand jury, respondent should explain why he believes Federal Rule of Criminal Procedure 6(e) applies.