Opinion
22732-19
06-07-2024
JAMES P. CARNEY, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent
ORDER
Patrick J. Urda, Judge.
This case is scheduled for trial during the Court's special trial session in Boston, Massachusetts, which begins on June 10, 2024. Petitioner James P. Carney contests a notice of deficiency issued by the Internal Revenue Service, which determined deficiencies exceeding $3 million for his 2013 through 2015 tax years. [Doc. 1; Doc. 3 at 5-21; Doc. 30. In each of these years, Mr. Carney claimed deductions stemming from his ownership interest in a yacht, which was used for, inter alia, charter activities. The IRS disallowed the underlying deductions, determining that the "yachting activities lacked a profit motive under section 183." [Doc. 1 at 8.]
Unless otherwise indicated, statutory references are to the Internal Revenue Code, Title 26 U.S.C. (I.R.C.), in effect at all relevant times and Rule references are to the Tax Court Rules of Practice and Procedure. "Doc." references are to the documents in this case as compiled by the Clerk of the Court, using .pdf pagination.
The parties have prepared two stipulations of facts, reserving objections to certain of the attached exhibits. [Docs. 142, 145.] The Commissioner has filed a motion in limine [Doc. 143] urging the admission into evidence of two general groups of these exhibits over Mr. Carney's objections [Doc. 146]. Specifically, the Commissioner argues that certain emails and records kept by Charles Darby, Mr. Carney's partner in the yachting enterprise, satisfy the hearsay exception encapsulated in Rule 803(6) of the Federal Rules Evidence. He further contends that letters relating to a settlement agreement are relevant to the issues in this case, not precluded by hearsay constraints, and not offered for the prohibited purposes described in Rule 408(a) of the Federal Rules of Evidence
It would be useful to the Court to hear additional argument on the Commissioner's motion in limine on the first day of trial in this case. The parties should be prepared to discuss, inter alia, whether preparation of the emails at issue counted as "a regular practice" of the yachting activity under Rule 803(6) of the Federal Rules of Evidence, whether the emails might be introduced for any non-hearsay purpose, and whether any ruling as to the emails would affect the admissibility of the underlying financial records (attached to most of the emails) given Mr. Darby's expansive certification. The parties should also be ready to address the operation of the parol evidence rule and any impact on the settlement letters' relevance.
Accordingly, it is
ORDERED that the Commissioner's motion in limine to admit into evidence (1) certain emails from Charles Darby III's records, and (2) certain other correspondence between Summitbridge National Investments IV LLC and Petitioner, filed May 20, 2024, is set for hearing on June 10, 2024, at 10:00 a.m., at the above-referenced special trial session.