DocketNumber: Docket No. 9786-76
Citation Numbers: 69 T.C. 716, 1978 U.S. Tax Ct. LEXIS 178, 24 Fed. R. Serv. 2d 1338
Judges: Dawson
Filed Date: 2/15/1978
Status: Precedential
Modified Date: 1/13/2023
*178
*716 OPINION
On September 12, 1977, the petitioner filed, pursuant to
The key issue confronting us with respect to these motions is whether the private letter rulings sought by petitioner are relevant to the disposition of the legal issues involved in this case.
On August 2, 1976, respondent mailed a notice of deficiency to Kenneth *180 C. Davis (petitioner) and Inger P. Davis for the taxable years 1972 and 1973. In the notice of deficiency respondent disallowed a portion of the charitable deductions claimed by petitioner for 1973 for books received from the West Publishing Co., used and then donated to the University of Chicago Law Library. Respondent determined that petitioner had not established that he was entitled to the deduction. Respondent also determined that receipt of some of these books by petitioner constituted income which was not reported in 1972 and 1973.
Petitioner contests the entire amount of the deficiencies for both years. He alleges in his petition that "the position of the Commissioner is obviously
On March 14, 1977, petitioner filed a motion in which he asked this Court to enforce discovery 1 by compelling respondent to produce Internal Revenue Service rulings (with the names and other indications of the identity of particular taxpayers deleted) issued to Congressmen who received from the Government free *181 copies of the Congressional Record and then gave them to charitable organizations and deducted the value of the gifts. The motion was granted on July 19, 1977. In a memorandum sur order accompanying that motion, it was stated in part:
*718 While much of petitioners' argument is difficult to follow, one contention they make is that a uniform practice by respondent of issuing letter rulings on a particular subject with a consistent holding can be sufficient to establish an administrative practice, the retroactive departure from which in a manner not uniform as to all taxpayers similarly situated would constitute an abuse of discretion.
While we do not pass on the merits of petitioners' position in regard to any duty of consistency, administrative practice or abuse of discretion by respondent, in our view there are statements in certain cases which are sufficiently broad, particularly cases dealing with retroactive revocation of rulings in a manner discriminatory towards certain taxpayers as compared to others to justify under the particular facts here present granting petitioners' motion for discovery.
On September 13, 1977, respondent provided petitioner with the requested *182 rulings. 2
*183 Petitioner now seeks by way of discovery the "reference" files 3 on "the question of deductibility of charitable contributions of property which taxpayers have received by gift or otherwise without paying an income tax on receipt of the property."
Respondent asserts that under the criteria set forth by this Court in its memorandum*184 sur order on July 19, 1977, which granted petitioner's request for discovery of the private letter rulings issued to the Congressmen, no basis exists for granting the present motion for discovery because the positions in those rulings are consistent with respondent's position in this case. It is also his contention that the disallowance of the charitable contributions in this case is not a retroactive revocation of rulings in a manner discriminatory to the petitioner. Respondent argues, therefore, that the "reference" files for the private letter rulings provided are not relevant and are thus not discoverable in the Tax Court. In support of his argument *719 respondent cites
At issue is the scope of the disclosure of information for private letter rulings issued to taxpayers inquiring about tax consequences of possible transactions. More specifically, we must decide whether the information requested by petitioner is relevant to the issues of whether inclusion in income for the receipt of books and a charitable deduction for their donation*185 are permitted in his case.
Petitioner argues that some discrimination exists because the rulings received indicate that Congressmen are permitted a charitable deduction which might be denied to a private citizen. He admits, however, that in the case of rulings with one outcome for four taxpayers and a different outcome for, say 1,000 taxpayers, 4 any one in the latter group has only a weak case for showing discrimination. At this point he seeks discovery of the "reference" files to determine if any taxpayers, other than the four Congressmen, have received a determination contrary to the results in his notice of deficiency, thus strengthening his case of discrimination and also showing an inconsistency toward taxpayers by respondent. Petitioner strongly urges that this Court is bound by "equal justice" to permit pursuit of his claim to this end. 5
*186 We disagree. We are cognizant of the problems a party *720 seeking disclosure has in demonstrating the relevance of documents to which he has had no previous access. Due process, however, does not require that a litigant be provided the benefit of every record which might have a remote bearing on his case. A party's right to discovery is determined by reference to principles of relevancy and materiality as set forth in
The substance of petitioner's case involves the determination of whether the value of books received must*187 be included in his income and whether their value is properly deductible when they are later donated to charity. These are the issues to which relevance must be directed. 7 As we see it, the petitioner's view is that, irrespective of substantive issues, if he is not accorded like treatment with other taxpayers, the resulting discrimination would render nugatory any governing code sections because of respondent's inconsistency. While we granted petitioner's right to discovery in the first instance, we do not feel compelled to grant him the right to have every private letter ruling contained in the reference file on the substantive issues. His request is too broad to be necessary to afford a meaningful opportunity to challenge the deficiency. We will not put aside the substantive issues while we consider relevancy of documents sought in discovery. We find the following language in
We can find nothing in the record before us to indicate either good cause, relevancy, or that the documents sought appear reasonably calculated to lead to the discovery of admissible*188 evidence, as required by the rules, other than the statement by plaintiff * * * that the rulings sought are relevant. Nor is there a showing that the documents sought are material to the issues as is required by this court's ruling in
Although we are aware of the cases 8 where various courts under particular circumstances have recognized a duty of consistency to taxpayers similarly situated, 9 there is a point at which the fine line between what might be specifically relevant (and therefore discoverable) and what might be remotely relevant (and therefore not discoverable) is crossed. We think it is the duty of this Court, as a trial court, to draw that line. We note that when petitioner argues "equal justice," he also acknowledges that it is within the discretion of the courts to decide "how far to push this principle." We are mindful of*190 the responsibility inherent in exercising that discretion; nevertheless, the duty remains within the Court's province and is not controlled by the characterization of either party. It is essential that the Court have control over the scope of discovery. Here we think the material sought by petitioner is not sufficiently pertinent to the substantive issues to be considered relevant and, therefore, it is not "reasonably calculated to lead to discovery of admissible evidence."
*191 We recognize that in certain cases material might be relevant in establishing whether respondent has violated a duty of consistency owed to a taxpayer (for example, by exercising his discretion in such a manner that only one taxpayer is affected;
He may do so even where a taxpayer may have relied to his detriment on the Commissioner's mistake. See
Accordingly, we reject the petitioner's contention that all the private letter rulings contained in the reference file of respondent that are of general application on the substantive issues herein are relevant for purposes of discovery. In our view such private letter rulings bear too nebulous a relationship to the specific substantive issues involved in this case. Petitioner has not established to our satisfaction that the material he seeks would be essential to our determination of the legal questions requiring resolution in his case. He is attempting to burden discovery with an inordinate volume of documents which we would consider inadmissible. Since they are not legally relevant, even if the private letter rulings can be*193 viewed as potentially relevant, 10 such relevance is nevertheless too remote to cause the underlying documents to be discoverable under
1. Petitioner's previous request for these rulings under the Freedom of Information Act (FOIA),
In a prior case,
2. The rulings involve four cases of Congressmen all of whom were permitted a charitable deduction for copies of the Congressional Record provided free as a Government service and donated to a recognized charity. Petitioner asked and subsequently received written confirmation from respondent that, after a diligent search, to the best of his knowledge these four rulings were the only ones on point.↩
3. Letter rulings are separated into two categories for filings purposes. Those that are deemed to be of no significance as reference material are put into a routine or "historical" file which is organized alphabetically by the taxpayer's name and is ordinarily retained for a period of 4 years. Those considered to have reference value are placed in a "reference" file, together with published revenue rulings, proposed revenue rulings, Treasury decisions, court decisions, and special reports. Routine files are destroyed after 4 years but reference files are retained for approximately 40 years. See
4. See generally K. Davis, Administrative Law Text, sec. 3A.9 (3d ed. 1972).↩
5. Petitioner elaborates upon his interpretation of the term "equal justice" in a memorandum filed in support of his first motion for discovery:
"In some circumstances, the Tax Court in the new era will have to concern itself with problems of equal justice, even when the substantive tax law supports the IRS decision the taxpayer is challenging in the Tax Court.
"Here is an example: Let us assume that X is a faculty member of a university, which pays the tuition of X's children at another university, and that the IRS rules that X must pay an income tax on the amount of the tuition. Let us further assume that the Tax Court would hold that X has income in the amount of the tuition. If X challenges the IRS ruling in the Tax Court, could the Court hold in X's favor, even if the Court agrees that the amount of the tuition is taxable? We submit that the answer may be yes, if further facts are added. If the taxpayer by using
* * * *
"The basic principle may be this: When the IRS exercises its discretion not to tax even when it has power to tax, it must do so evenhandedly, and all federal courts that decide tax cases have a responsibility for correcting a flagrant departure from evenhandedness."
Petitioner stated in oral argument that "probably that objective [of 'equal justice'] is unattainable," but nevertheless the concept should serve as a principle applied at the discretion of the courts.↩
6. The scope of discovery under
7. To determine what is "relevant to the subject matter involved in the pending case" within the purview of
8. For example,
9. We are not approving the view that discriminatory treatment by respondent is necessarily a ground upon which relief should be granted in all tax cases. We have expressed serious doubts about the validity of such a claim in ordinary tax deficiency cases which are tried de novo in this Court. See
10. For example, in
Sirbo Holdings, Inc. v. Commissioner of Internal Revenue , 476 F.2d 981 ( 1973 )
Edwin O. Bookwalter v. Joseph H. And Frances R. Brecklein , 357 F.2d 78 ( 1966 )
Karl F. Knetsch and Eva Fay Knetsch v. The United States , 348 F.2d 932 ( 1965 )
Tax Analysts and Advocates and Thomas F. Field v. Internal ... , 505 F.2d 350 ( 1974 )
alfred-b-bornstein-and-ethel-bornstein-v-the-united-states-robert-e , 345 F.2d 558 ( 1965 )
International Business MacHines Corporation v. The United ... , 343 F.2d 914 ( 1965 )
Manhattan General Equipment Co. v. Commissioner of Internal ... , 56 S. Ct. 397 ( 1936 )
Exchange Parts Company of Fort Worth, a Corporation v. ... , 279 F.2d 251 ( 1960 )
Shakespeare Company v. The United States , 389 F.2d 772 ( 1968 )
Automobile Club of Mich. v. Commissioner , 77 S. Ct. 707 ( 1957 )
Dixon v. United States , 85 S. Ct. 1301 ( 1965 )