If You Speak Tax

I’ve given the Bard’s famous line a twist, but so does Judge Albert G (“Scholar Al”) Lauber, as he reviews the Rule 74(c)(3) deposition request of Excelsior Aggregates, LLC, Big Escambia Ventures, LLC, Tax Matters Partner, et al., Docket No. 20608-18, filed 10/14/22. It’s not much ado about nothing, because the Big Scambies want to depose an IRS Special Counsel from OCC, who, they aver, “… is a subject-matter expert on the charitable contribution deduction and that she has spoken on the topic of conservation easements at public programs attended by attorneys, appraisers, and property owners.” Order, at p. 1.

The deposition is in aid of the Big Scambies’ claim of good-faith reliance on experts to avoid chops.

Thanks to one of the trusty attorneys for petitioners for bringing this one to my attention. Friday featured more than 400 orders, three-quarters of which were standing pre-trials, and as Dawson put paid to designated hitters, I took what I could find to try to make deadline.

Anyway, the expert, whom I’ll call Karen, isn’t a party; only the Com’r is a party. That means Karen’s deposition testimony, if allowed, could be used only to impeach or contradict her trial testimony. See Rule 81(i)(1) and (2). And her trial testimony, to the extent she advised the RA who prepared the FPAA at issue here, would be privileged client-attorney.

“Petitioners suggest that testimony from [Karen] is relevant to the issue of whether petitioners had reasonable cause for claiming the charitable deductions at issue in these cases. Under Treas. Reg. §1.6664-4, a taxpayer’s good-faith reliance on the advice of an independent, competent tax professional may establish reasonable cause, but the reasonableness of such reliance presupposes that the taxpayer has supplied the professional with all the necessary information to assess the taxpayer’s particular tax position. [Karen’s] comments about conservation easements at public programs and conferences were entirely general in nature. Because petitioners had supplied her with no information about their transactions in particular, we do not see how her testimony could be relevant to their reasonable cause defense.” Order, at pp. 2-3. (Citation and footnote omitted).

The omitted footnote says the experts upon whom the Big Scambies relied attended some of Karen’s lectures. But Judge Scholar Al says that doesn’t show the qualifications of said attendees. And the Big Scambies can call their experts on the trial to testify about what they gleaned from Karen’s expatiations (of which they have transcripts). Whatever Karen testifies now does not bear upon what she said at the time said experts were relying on same.

Anyway, “(T)he Commissioner ‘speaks’ only through formal statements of policy, such as regulations and revenue rulings. The informal statements of individual IRS employees—even those who occupy senior positions—do not bind the Commissioner. Petitioners are not entitled to treat [Karen’s] statements as those of the respondent in these cases.” Order, at p. 2. (Citations omitted).

So remember, practitioner, when you’re sitting through yet another Intergalactic Zoominar, the IRS hotshots take their text from Shakespeare’s quotation first set forth at the head hereof.