Discovery. Rule 70 1 : General Provisions

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1 Rule 70 1 : General Provisions Discovery o Informal Processes: Parties must attempt to obtain information through informal means prior to using formal discovery mechanisms. o Time for Discovery: Unless authorized by the Court, discovery is not permitted until 30 days after joinder of issue and must be completed at least 45 days prior to trial. o Scope and Limitations: Scope includes all non-privileged and relevant matters if it is reasonably calculated to lead to discovery of admissible evidence. o Signing Discovery Requests: Counsel or pro se parties must sign discovery requests certifying they are made in good faith. o Informal Processes: Branerton Corp. v. Commissioner, 61 T.C. 691 (1974). Petitioner s use of interrogatories prior to meeting with IRS agents violated Rule 70(a), which requires the use of informal processes prior to formal discovery. Schneider Interests v. Commissioner, 119 T.C. 151 (2002). Since respondent failed to show the requested information could not have been obtained through informal processes, respondent violated Branerton and Rule 70(a) by using interrogatories prior to a conference with petitioner. International Air Conditioning Corp. v. Commissioner, 67 T.C. 89 (1976). Petitioner s motion to compel responses to interrogatories violated Rule 70 and Branerton because petitioner did not agree to an informal meeting with respondent. o Time for Discovery: Kabbaby v. Commissioner, 64 T.C. 393 (1975). Petitioner was denied discovery under Rule 70(a)(2) prior to filing a reply, as it would not materially narrow the issues because petitioner either knows whether the facts pleaded in the answer are true or false or he has no knowledge of the facts. o Party s Own Statements: Phelps v. Commissioner, 62 T.C. 513 (1974). Notes taken by IRS agents in nine different interviews, though not a transcript of petitioner s statements, were sufficiently detailed to constitute statements petitioner was entitled to receive under Rule 70(c) [now Rule 70(d)]. o Scope and Limitations: 3K Investments v. Commissioner, 133 T.C. 112 (2009). Petitioner s request that the IRS produce its collection of opinion letters issued by private firms to other parties who were engaged in similar transactions was not likely to lead to admissible evidence, because it would not show petitioner acted in good faith. Mid-Continent Supply Co. v. Commissioner, 67 T.C. 37 (1976). 1 All Rule references are to the Tax Court Rules of Practice and Procedure.

2 o Petitioner s discovery request for a Technical Advice Memorandum issued by respondent s field office regarding the audit of an unrelated third-party s return was not discoverable under Rule 70. Barger v. Commissioner, 65 T.C. 925 (1976). Citing Committee Notes to Rule 70(b), the Court held that a taxpayer s own statements were not discoverable where IRS planned to use them for impeachment on an issue uniquely within [taxpayer s] own knowledge. P.T. & L. Construction v. Commissioner, 63 T.C. 404 (1974). Statements of a third-party witness that the IRS intended to use to impeach other witnesses was discoverable. The Court distinguished this case from one where a party was seeking a copy of his or her own inconsistent statements. Industrial Electric Sales and Service, Inc. v. Commissioner, 65 T.C. 844 (1976). Statements made by third-party witnesses were discoverable under Rule 70, even though IRS intended to use them only for impeachment purposes. The impeachment value, the Court reasoned, could be preserved by first requiring petitioner to answer Rule 90 requests for admissions. Ryan v. Commissioner, 568 F.2d 531 (7th Cir. 1977). Where petitioner is subject to interrogatories based on information respondent illegally obtained, petitioner must still provide answers under Rule 70(b) if reasonably calculated to lead to admissible evidence. However, admissibility of the actual interrogatories is determined independently under Rule 70(d) [now Rule 70(e)]. Rowlee v. Commissioner, 80 T.C (1983). Petitioner s interrogatories, which included questions about the novel 1984, were not reasonably calculated to lead to the discovery of admissible evidence, thus were outside the scope of discovery under Rule 70(b). Work-Product and Privilege: P.T. & L. Construction Co. v. Commissioner, 63 T.C. 404 (1974). A special agent s reports were not prepared in anticipation of litigation, thus they were not protected by the work-product doctrine. Ratke v. Commissioner, 129 T.C. 45 (2007). In a proceeding for attorneys fees and sanctions, petitioner requested two documents outlining the IRS s trial strategy. This request exceeded the scope of discovery under Rule 70, because: (1) the documents were protected by the work-product doctrine; (2) petitioner already had access to redacted copies, thus failed to show sufficient need to overcome privilege; and (3) the IRS did not waive privilege, since it did not rely on the documents to prove its position was substantially justified. Bernardo v. Commissioner, 104 T.C. 677 (1995). The Court held: (1) attorney-client privilege would not include documents prepared by petitioner s accountant when not done at the request of petitioner s counsel; (2) documents prepared by petitioner after receiving notice of a report from the IRS Art Advisory Panel, but before a notice of deficiency, were protected by work-product doctrine; and (3) taxpayer did not raise a claim that can only be disproven by reference to work-product, thus not impliedly waived. Owens-Illinois, Inc. v. Commissioner, 76 T.C. 493 (1981).

3 o Petitioner researched foreign law at the time it filed returns, thus the foreign statutes, regulations, translations, and constructions upon which petitioner was relying were not protected by the work-product doctrine under Rule 70. Dvorak v. Commissioner, 64 T.C. 846 (1975). Affidavits made by IRS staff were not protected by the work-product doctrine, thus were discoverable under Rule 70 because: (1) The affidavits were not prepared at the direction of an attorney who would try this case; (2) the affidavits are statements of fact, not adversary in nature; and (3) the affidavits do not fix the Government's theory of the case because they are not made by attorneys, agents, or representatives of respondent and are merely statements of fact Teichgraeber v. Commissioner, 64 T.C. 453 (1975). Private Letter Rulings are not privileged, but the Court held that petitioner failed to show how Private Letter Rulings issued to third-parties were relevant and within the scope of Rule 70. Admissibility of Certain Evidence: Levin v. Commissioner, 87 T.C. 698 (1986). Under Rule 70(d) [now Rule 70(e)], the Court did not make factual findings based on answers to interrogatories because: (1) they were not were not entered and received into evidence; and (2) respondent never had an opportunity to examine the person responding to the interrogatories. Rule 71: Interrogatories o Availability: Excluding interrogatories related to expert witnesses, a party generally may only serve 25 interrogatories. o Procedure: Parties must provide answers and any objections within 30 days of service. o Experts: Parties may be required to identify any expert witness they intend to call and provide a summary of the expected testimony. o Plier v. Commissioner, 92 T.C. 499 (1989). Interrogatories should be framed, as near as may be, as single, definite questions, thus a request to fill out Forms 1040 did not constitute an interrogatory under Rule 71. o Zaentz v. Commissioner, 73 T.C. 469 (1979). Petitioner s interrogatories were too vague for respondent to answer. o Dusha v. Commissioner, 82 T.C. 592 (1984). Petitioner violated Rule 71 by failing to answer interrogatories, because a valid exercise of the Fifth Amendment privilege requires more than a blanket refusal to answer where, as here, the material sought is not incriminatory on its face. o Piscatelli v. Commissioner, 64 T.C. 424 (1975). Poor health is not a sufficient defense to a motion filed under Rule 71(c) to compel a response to interrogatories. o Penn-Field Industries v. Commissioner, 74 T.C. 720 (1980).

4 In response to petitioner s interrogatories under Rule 71, respondent was not required to provide statistical evidence on audit practices because information was irrelevant and unduly burdensome. Rule 72: Production of Documents, Electronically Stored Information, and Things o Parties must describe requested items with reasonable particularity. o Parties have 30 days from service to respond. o Morris v. Commissioner, 65 T.C. 324 (1975). Respondent was ordered to produce the requested documents, as Rule 72 does not require petitioner to make a showing of good-cause. o Branerton Corp. v. Commissioner, 64 T.C. 191 (1975). The party objecting to a request for production under Rule 72 has the burden of establishing a basis for the objection. Respondent met this burden by demonstrating that petitioner s request seeking all documents related to the audit lacked reasonable particularity. o Marsh v. Commissioner, 62 T.C. 256 (1974). The Court denied taxpayer s request for production under Rule 72 where the documents requested were not in the possession, custody, or control of the Commissioner of Internal Revenue, but could be obtained by taxpayer directly from the appropriate government agency. o Rechtzigel v. Commissioner, 79 T.C. 132 (1982). The Court held petitioner's blanket claim of the privilege against self-incrimination must be rejected as unjustified, thus taxpayer had to respond to an IRS request for production under Rule 72. o Corelli v. Commissioner, 66 T.C. 220 (1976). A Private Letter Ruling issued to another taxpayer was not privileged, and it was discoverable through petitioner s use of a Rule 72 request for production. Rule 73: Examination by Transferee o Effect: Transferees are permitted to examine before trial the books, papers, documents, correspondence, electronically stored information, and other evidence of the taxpayer or of a transferee who held the property prior to the taxpayer. o Procedure: Transferee must be a petitioner seeking redetermination of such transferee's liability in respect of the taxpayer's tax liability. Transferees must apply to the Court for discovery under Rule 73. Rule 74: Depositions for Discovery Purposes

5 o Subject to specific limitations, depositions are permitted of parties, nonparties, and expert witnesses with or without consent of the parties. o Delucia v. Commissioner, 87 T.C. 804 (1986), superseded on other grounds by TAX COURT RULES OF PRACTICE AND PROCEDURE 74 (2012). Though all the issues relevant to taxpayer were resolved by summary judgment, taxpayer was still considered a party to continued proceedings against his co-petitioners. Thus, the rules for taking party depositions applied when respondent attempted to take taxpayer s deposition. o K&M La Botica Pharmacy v. Commissioner, 81 T.C. Memo Depositions without a party s consent are an appropriate vehicle for obtaining particular information from the sole source where that information is likely to be found; it does not afford an opportunity to question a witness merely for the purpose of probing veracity and credibility. Depositions to Perpetuate Evidence Rule 80: General Provisions o Subject to limitations provided in Rules 81, 82, and 83, depositions to perpetuate the evidence can be taken when a case is anticipated, it is pending, or during a trial. o Howe v. Commissioner, T.C. Memo Petitioner s attempt to depose respondent s expert after trial commenced violated Rule 80, because it was for purposes of discovery. Rule 80 only authorizes depositions to mak[e] testimony or any document or thing available as evidence. Rule 81: Depositions in a Pending Case o To order a deposition, the Court must find there is a substantial risk that the person or document, electronically stored information, or thing involved will not be available at the trial of the case. o Gauthier v. Commissioner, 62 T.C. 245 (1974). The Court denied taxpayer s request to depose an IRS agent prior to trial, because petitioners have made no showing to the Court that there is a substantial risk that [the IRS agent] or the documents they seek to have produced will not be available at the trial of this case. o Estate of Haber v. Commissioner, 91 T.C. 236 (1988). An otherwise healthy witness who engaged in the dangerous activity of flying ultra light airplanes did not present a substantial risk that testimony would be lost for trial, thus a deposition under Rule 81 was not justified. Rule 82: Depositions Before Commencement of Case

6 o Depositions to perpetuate evidence prior to bringing a case are permissible. o Those seeking to take a deposition must show they expect to be a party to a suit. o Reed v. Commissioner, 90 T.C. 698 (1988). The Court denied a request for a deposition under Rule 82 because the party failed to show that the testimony will, in all probability, be lost before trial. o GlaxoSmithKline Holdings v. Commissioner, 117 T.C. 1 (2001). A deposition under Rule 82 was permitted where the proposed deponents' advanced ages, their residences abroad, and the potential for substantial delay in a trial [were] all factors which suggest that there is a high probability that critical testimony will be lost. o Masek v. Commissioner, 91 T.C (1988), aff d on reh r, 92 T.C. 814 (1989). Petitioner [did] not establish[] a need to perpetuate these individuals' testimony, particularly in view of the patent discovery aspects of the application where proposed deponent s affidavit stated they were only in their sixties and in good health. o Masek v. Commissioner, 92 T.C. 814 (1989). Upon reconsideration, the Court again concluded that petitioner failed to establish substantial risk, noting there is not one shred of evidence in this record indicating deponents were ill. o Gale East, Inc. v. Commissioner, T.C. Memo Petitioner not entitled to take a deposition under Rule 82 by simply alleging facts to suggest a deponent was ill and providing [the] Court no verification of the fact. Rule 83: Depositions After Commencement of Trial o The Court can authorize depositions after trial has commenced. o The Court can set conditions for taking these depositions. o To the extent that the Court does not provide for a specific condition for taking the deposition, Rule 81 governs. o Pinson v. Commissioner, T.C. Memo Respondent violated Rule 83 by taking depositions after trial without approval of the Court. o Howe v. Commissioner, T.C. Memo Petitioner s request to take the deposition of an expert witness under Rule 83 was denied, because petitioner sought the deposition for purposes of discovery. Rule 84: Depositions upon Written Questions o A party may seek permission from the Court to take a deposition by written questions. o Unless a proposed deponent is in a foreign country, permission to use written questions should only be granted if there is a special reason. o Bagby v. Commissioner, 102 T.C. 596 (1994). There was good cause to take the deposition of petitioner s wife, a resident of New York, by written questions where petitioner lived in France.

7 Rule 85: Objections, Errors, and Irregularities o This rule provides the time period when objections relating to depositions must be made, otherwise they are waived. o Exxon Corp. v. Commissioner, T.C. Memo Respondent waived objections to the form of the deposition, deposition by written questions, when the issue was not raised at the time of the deposition. o Foster v. Commissioner, 80 T.C. 34 (1983), vacated in part on other grounds, 756 F.2d 1430 (9th Cir. 1985). Respondent waived an objection to the use of deposition testimony under Rule 85(c) where the issue of the witness s availability at trial was not raised during the deposition. Admissions and Stipulations Rule 90: Requests for Admissions o Requests for admissions must separately state each matter. o A matter is deemed admitted unless a party responds with an objection or denial within 30 days of service. o Cochran v. Commissioner, 107 T.C. 18 (1996). Petitioner violated Rule 90 because his answers were evasive, incomplete, and not made in good faith. o Morrison v. Commissioner, 81 T.C. 644 (1983). Respondent would be prejudiced if petitioner was allowed to withdraw deemed admissions, because respondent relied on these admissions for five months and used them in a summary judgment motion. Permission to withdraw admissions was denied. o Burns v. Commissioner, 76 T.C. 706 (1981). Petitioner had no Fifth Amendment basis for refusing to answer requests for admissions. Though taxpayers are not held to a standard of specificity that would surrender the protection provided by the Fifth Amendment, there was nothing to suggest the IRS s innocuous questions would lead to self-incrimination. o Fortune Odend hal v. Commissioner, 75 T.C. 400 (1980). Respondent s refusal to respond to petitioner s requests for admissions was justified because petitioner did not attempt to first acquire information through informal means. o Estate of Allensworth v. Commissioner, 66 T.C. 33 (1976). Petitioner could use requests for admissions under Rule 90 to elicit the IRS s application of law to facts of the case to clarify a vague notice of deficiency. o Freedson v. Commissioner, 65 T.C. 333 (1975). No court order was necessary before petitioner s failure to respond to requests for admissions resulted in deemed admissions, because this automatically occurs under Rule 90. o Corelli v. Commissioner, 66 T.C. 220 (1976).

8 Petitioner under Rule 90 could require the IRS to admit or deny whether petitioner s copy of a Private Letter Ruling issued to a third-party was in fact an exact copy. Rule 91: Stipulations for Trial o To the extent possible, parties must agree to stipulations. o Objections based on relevance are not sufficient grounds for refusing to stipulate to a fact. o Stipulations should be comprehensive and include information obtained through discovery. o Electronic Arts, Inc. v. Commissioner, 118 T.C. 226 (2002). Under Rule 91 respondent was bound to the stipulation that the video games at issue were manufactured in Pueto Rico. o Louisana Land Exploration Co. v. Commissioner, 90 T.C. 630 (1988). Respondent was held to stipulation agreement with taxpayer regarding the amount of depletion deductions that were allowable. o Jasionowski v. Commissioner, 66 T.C. 312 (1976). Though the parties stipulated that a certain amount of rent was paid, the Court rejected the stipulation because of contrary facts in the record. o Blohm v. Commissioner, 994 F.2d 1542 (1993). The Court rejected the stipulated date of the Cayman Islands kickback transactions, because the overwhelming evidence contained in the record demonstrates that the stipulated date was simply incorrect. o Barkley Co. v. Commissioner, 89 T.C. 66 (1987). Petitioner could not hold evidence until the end of trial and then submit it for purposes of impeaching documents in the record by stipulation. o Sunstrand Corp. v. Commissioner, 89 T.C. 810 (1987). While relevancy is not a ground for refusing to stipulate to a fact under Rule 91, the Court held that it retained authority to exclude evidence for relevancy under a motion in limine. o Stamos v. Commissioner, 87 T.C (1986). The language of the stipulations submitted by the parties was so vague that it was unenforceable. o Marcus v. Commissioner, 70 T.C. 562 (1978). Taxpayer s blanket refusal to stipulate to any document supporting the IRS s case violated Rule 91, thus the Court deemed facts in the IRS s proposed stipulation admitted. Rule 92: Cases Consolidated for Trial o For Rules , the word party means any party to consolidated cases involving a common matter.