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Keywords

liabilitygood faithrelevance
liabilitygood faith

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U.S. v. BDO Seidman, LLP, 225 F.Supp.2d 918, 90 A.F.T.R.2d 2002-6810, 2002-2 USTC P 50,763

Facts

The case arose from an investigation into BDO Seidman, LLP regarding its potential liability under the Internal Revenue Code for promoting potentially abusive tax shelters. The IRS asserted that BDO failed to properly disclose these tax shelters as required by law. The investigation involved multiple statutory provisions and was supported by a series of summonses issued by the IRS to obtain relevant information from BDO.

What is at issue here is an investigation of BDO as to its potential liability under the Internal Revenue Code (“Code”) for promoting potentially abusive tax shelters, which the government asserts the firm failed to disclose properly in accordance with statutory requirements.

Issue

Did the IRS issue the summonses in good faith, and how should BDO's claim of privilege over the requested documents be handled?

Did the IRS issue the summonses in good faith, and how should BDO's claim of privilege over the requested documents be handled?

Rule

The government must establish a prima facie case that the IRS issued the summons in good faith, demonstrating a legitimate purpose, relevance of the information sought, that the information is not already in the IRS's possession, and that the IRS followed statutory procedures for issuing the summons.

First, the government must make a prima facie case that the IRS issued the summons in good faith.

Analysis

The court found that the IRS met all four elements of the prima facie case for good faith issuance of the summonses. BDO's challenges to the legitimacy of the investigation and the relevance of the information were deemed unpersuasive. The court also noted that BDO's blanket assertion of privilege was insufficient, necessitating a detailed examination of the documents to determine the applicability of the privilege on a case-by-case basis.

In those terms this is not a difficult case. All four of those prima facie elements are indisputably present, even though BDO makes unpersuasive efforts to challenge each of them.

Conclusion

The court ordered BDO to deliver the privilege-claimed documents for a one-by-one examination by Magistrate Judge Ashman, acknowledging the complexity and volume of the documents involved.

Ordered accordingly.

Who won?

The United States prevailed in the case as the court upheld the IRS's authority to issue summonses and found that BDO's claims of privilege required further examination.

The United States prevailed in the case as the court upheld the IRS's authority to issue summonses and found that BDO's claims of privilege required further examination.

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