When resources are scant and time is short, one would be more than human if one didn’t resort to the quick fix. Even if we know the Rule of Three, we fall for the quick fix.

The Rule of Three? There are three problem-solving desirables: fast, cheap, and good. You can have two of them, but not all three. For example, cheap and good is not fast. Fast and good is not cheap. Fast and cheap is not good.

But IRS, despite the latest infusion of cash, allegedly to reduce inflation, still goes for quick and cheap. Section 7456(b) is a drop-the-bomb sanction against offshores. If any offshore doesn’t cough up documents ordered by Tax Court, Tax Court must strike pleadings, toss petitions altogether, or “render judgment by default.” Of course, Tax Court enters decisions, it doesn’t render judgments; even though relief is styled as declaratory judgment, summary judgment, default judgment, or judgment on the pleadings, what you get is a decision.

Accipitor Trading, Ltd., Docket No. 18842-19, filed 10/25/23, is a BVI Corp, whose sole director is a citizen of Liechenstein. Accipitor didn’t bother to file US tax returns for twenty (count ’em, twenty) years, so IRS gave Accipitor two tranches of SNOD, one for about a million (chops in), and the other for about $800K (ditto), relating to Section 881 rental real estate activity. And alternatively, IRS claims Accipitor owes tax on $53 million in unexplained bank deposits.

Judge Travis A. (“Tag”) Greaves ordered Accipitor to hand over documents. Accipitor says it did, IRS says it didn’t, and wants pleadings struck and default judgment. IRS says BVI law requires Accipitor to have these documents, so they ought to have them, and hand them over.

“Our Rules require that a party responding to discovery make a ‘reasonable inquiry’ before submitting a response. Specifically, Rule 70(g) requires the attorney to certify, to the best of their knowledge formed after a ‘reasonable inquiry,’ that the response is consistent with our Rules, not made for an improper purpose, and not unreasonable or unduly burdensome given the needs of the case. Rule 104(d) provides that ‘an evasive or incomplete * * * response is to be treated as a failure to * * *respond’. However, when counsel for a responding party signs a response to a discovery request, they are not certifying that every document has been produced. They are certifying that they made a reasonable inquiry and the response is complete to the best of their knowledge. Here, as evidenced by Exhibit 1 to the declaration of respondent’s counsel LDS regarding the Documents Motion, petitioner’s counsel made the certifications required by Rule 70. Further, in its Opposition to the Documents Motion, petitioner repeatedly states that it has produced all responsive documents and that no further responsive documents exist.

“While we appreciate respondent’s view that additional documents ‘should exist’, it does not mean that such documents do exist. Petitioner’s alleged failure to comply with BVI record keeping requirements is an issue to be addressed by the BVI authorities.” Order, at p. 6. (Name omitted).

There’s argy-bargy about responses to interrogatories and inconsistent testimony by the Liechenstein director in a completely different proceeding, but that can be developed on the trial, as can Accipitor’s somewhat casual recordkeeping, both at to BVI and IRS standards.

Once again, the Rule of Three: fast and cheap is not good.