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United States v. Barth

October 1, 1984

UNITED STATES OF AMERICA AND PHILIP J. KENNEDY, SPECIAL AGENT, INTERNAL REVENUE SERVICE, PETITIONERS-APPELLEES,
v.
LESLIE R. BARTH, LESLIE R. BARTH ASSOCIATES, P.C., A/K/A BARTH & RICHHEIMER, P.C., LESLIE R. BARTH ORGANIZATION, INC., SOUTHEASTERN REALTY ASSOCIATES, INC., NORTH AMERICAN INVESTMENT RESOURCES, INC., AND BISMARK REALTY CONSULTANTS, INC., RESPONDENTS-APPELLANTS



Appeal from an order of the United States District Court for the District of Connecticut, Cabranes, J., enforcing five summonses issued by the Internal Revenue Service. Reversed in part and affirmed in part.

Author: Pratt

Before: VAN GRAAFEILAND, WINTER, and PRATT, Circuit Judges.

PRATT, Circuit Judge:

Respondents, Leslie R. Barth and five corporations of which he is president, appeal from an order of the United States District Court for the District of Connecticut, Jose A. Cabranes, Judge, enforcing five Internal Revenue Service (IRS) summonses pursuant to 26 U.S.C. § 7604(b) (1982). We reverse in part and affirm in part.

I.

During the course of an investigation of Barth's alleged failure to file corporate and personal federal income tax returns for the years 1976 through 1980, the IRS served five administrative summonses on Barth individually and in his capacity as president of the five respondent corporations. The summonses directed Barth and the corporations to turn over described corporate records, as well as copies of each corporation's state and federal income tax returns. Although Barth gave many of the corporate records to the IRS, the government considered Barth's compliance incomplete and petitioned the district court in August 1982 for an order enforcing the summonses pursuant to 26 U.S.C. § 7604(b).

Barth's partial compliance left two unresolved issues which were the subject of several proceedings before the district court, and which ultimately were addressed in the enforcement order appealed from. Those issues were: (1) whether the court should order Barth to turn over copies of the corporate income tax returns; and (2) whether the court should order the corporations to provide a witness who could testify about the corporate records.

As to Barth, the district court ordered:

Barth shall either produce the summonsed corporate tax returns or testify under oath before this court that he did not possess them on the date of the summons, or at any time thereafter, * * *. (Emphasis added).

As to the corporations, the district court ordered:

Respondent corporations shall designate, and if necessary, shall appoint, an agent or agents who shall, having made such inquiry as is necessary in the circumstances, appear in person * * * to testify for the corporations in response to the summonses, without invoking their personal privileges against self-incrimination, and shall furnish such information as is available to the corporations. (Emphasis added).

Judge Cabranes denied a motion to stay the enforcement order, but we stayed the district court's order pending argument and resolution of this appeal.

II.

Section 7602 of the Internal Revenue Code authorizes the IRS to examine records, to issue summonses, and to take testimony for the purpose of "determining the liability of any person for any internal revenue tax." 26 U.S.C. § 7602(a); United States v. Euge, 444 U.S. 707, 710-11, 63 L. Ed. 2d 141, 100 S. Ct. 874 (1980). Before the district court may enforce an IRS summons the government must demonstrate: (1) that the summons was issued for a proper purpose; (2) that the material sought is relevant to that purpose; (3) that the information sought is not already within the commissioner's possession; and (4) that all administrative steps have been followed. United States v. Powell, 379 U.S. 48, 57-58, 13 L. Ed. 2d 112, 85 S. Ct. 248 (1964). Once the government establishes ...


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