Opinion
No. MC 01-70 PHX RCB
April 2, 2002
ORDER
On August 1, 2001, Petitioner brought this action seeking to quash an IRS summons seeking records from a third-party record keeper (doc. # 1). Respondent moved to dismiss the petition to quash and counter-petitioned to enforce the summons (doc. # 10). Petitioner then responded and requested an evidentiary hearing (doc. # 13).
In order to obtain enforcement of a summons, the IRS must make a prima facie showing of good faith and legitimate purpose. This is done by submitting an affidavit or declaration by the summoning agent which states: 1) the investigation is being conducted for a legitimate purpose; 2) the summons is relevant to that purpose; 3) the information sought is not currently within the possession of the Service; and 4) all appropriate administrative steps were followed. United States v. Powell, 379, U.S. 48, 58 (1964). The declaration of Theresa Alvarez, provided by respondent, meets the requirements of Powell. Alvarez declares that she is conducting an investigation into the "individual income tax liabilities of Thomas and Ruby Day for the tax years ending December 31, 1997 and December 31, 1998." Declaration of Revenue Agent Theresa Alvarez at ¶ 2. Information from TRE is relevant to the investigation because Thomas and Ruby Day transferred their personal residence to a trust that has the same address as TRE and "a loan file shows that checks from TRE International's checking account were used to make payments for Thomas and Ruby Day's Loan on their personal residence." Id. ¶ 23. The summoned documents were not in the possession of the IRS at the time the summons was issued. Id. ¶ 21. The declaration outlines all of the procedures followed to issue the summons, which do not appear irregular in any way. Id. ¶¶ 3-20.
To quash the summons, the taxpayer has the burden of proving that the IRS summons is an abuse of process or that enforcement is not sought in good faith. Id. A taxpayer is only entitled to an evidentiary hearing if there is a sufficient showing of the government's bad faith. United States v. Samuels, Kramer Co., 712 F.2d 1342, 1348 (9th Cir. 1983). The taxpayer must be able to provide a minimal amount of evidence to entitle him to an evidentiary hearing. United States v. Stuckey, 646 F.2d 1369, 1372 (9th Cir. 1981). Required evidence consists of specific factual allegations, supported by affidavits, in rebuttal to the government's prima facie showing of good faith. Samuels, Kramer Co., 646 F.2d at 1348. These facts must raise sufficient doubt about the government's purpose for enforcing the summons. United States v. Church of Scientology, 520 F.2d 818, 825 (9th Cir. 1975) Sufficient doubt is raised if the court can infer the possibility of some wrongful conduct by the government. Samuels, Kramer Co., 646 F.2d at 1348.
TRE's allegations and evidence are not sufficient to warrant an evidentiary hearing. TRE alleges that the summons was issued to "harass and intimidate trust companies" as part of "wide-ranging IRS criminal investigation" into a trust consulting firm who has done business with TRE. Petition to Quash Summons at ¶ 9. TRE further alleges that the "IRS is abusing its administrative summons power to discourage the use of business forms it finds inconvenient and otherwise undesirable." Id. ¶ 10.
In support of these allegations, TRE offers a declaration by William Willardson, a trustee of TRE. Willardson declares that he "was told by various third parties that System Two Limited [the trust consulting firm referenced above] had been `raided' by IRS and that IRS had obtained customer lists from System Two." Declaration of William Willardson at ¶ 6. TRE also includes a letter it received from the IRS informing it of various tax violations by System Two Limited and requesting that TRE amend its tax returns if it participated in any of the enumerated violations. None of the allegations or evidence raise any credible doubt as to the government's purpose for issuing the disputed summons.
The declarant has no personal knowledge of the facts attested. Neither the declaration nor the letter provided by TRE substantiate or even hint at a wide-ranging criminal investigation or an intent harass trust companies and eliminate an inconvenient form of business. Therefore, TRE's request for an evidentiary hearing and motion to quash the summons must be denied, and respondent's counter-petition to enforce granted.
IT IS ORDERED that Petitioner's Motion for an Evidentiary Hearing (doc. # 13) is DENIED.
IT IS FURTHER ORDERED that Petitioner's Petition to Quash the IRS Summons (doc. # 1) is DENIED.
IT IS FURTHER ORDERED that Respondent's Counter-petition to Enforce the Summons (doc. # 10) is GRANTED.