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Sean P. Gjerde Dba Law Offices of Sean P. Gjerde v. United States of America

August 13, 2012

SEAN P. GJERDE DBA LAW OFFICES OF SEAN P. GJERDE, PETITIONER,
v.
UNITED STATES OF AMERICA, COMMISSIONER OF INTERNAL FINDINGS AND REVENUE, AND DEBI LINDERHOLM, REVENUE AGENT, RESPONDENTS.



ORDER AND RECOMMENDATIONS

This matter came before the court on February 24, 2012 for hearing of respondents' motion to dismiss (Doc. No. 14). Petitioner, Sean P. Gjerde, is proceeding pro se with a petition to quash an Internal Revenue Service summons pursuant to 26 U.S.C. § 7609(b)(2). The case has been referred to the undersigned U.S. Magistrate Judge pursuant to Local Rule 302(c)(10). Adam Smart, Esq. appeared telephonically on behalf of respondents. No appearance was made by or on behalf of petitioner. Oral argument was heard, and respondents' motion was taken under submission.

For the reasons set forth below, the undersigned now recommends that petitioner's amended petition to quash be denied and respondents' motion to dismiss be granted.

BACKGROUND

The amended petition alleges that petitioner is a licensed attorney who practices law in California. (Am. Pet. (Doc. 12) at 4.*fn1 ) This action arises from an Internal Revenue Service ("IRS") audit of petitioner's tax returns for the tax years 2007 through 2010. (Id. at 11; Linderholm Decl. (Doc. No. 14-2) at 1.) As part of that audit, IRS Revenue Agent Debi Linderholm issued summonses to Wells Fargo Bank, N.A. and Elk Grove Commerce Bank, requiring each to produce records, including bank statements and copies of deposit slips, for two of petitioner's client trust accounts held at these banks. (Am. Pet. (Doc. 12) at 3-4.)

Petitioner filed his original petition to quash in this matter on August 21, 2011, (Doc. No. 1), and on September 16, 2011, filed a motion to file an amended petition to quash. (Doc. No. 7.) Respondents filed a motion for an extension of time to file an answer on October 13, 2011. (Doc. No. 9.) On November 7, 2011, all documents filed by petitioner were stricken and petitioner was ordered to file and serve a petition in compliance with the Federal Rules of Civil Procedure and the Local Rules of Practice. (Doc. No. 11.)

Petitioner filed an amended petition to quash on November 30, 2011. (Am. Pet. (Doc. No. 12)). Therein, petitioner seeks to quash the issued IRS summonses on four grounds:

(1) that the statue of limitations has expired; (2) that the IRS already possesses the documents sought; (3) relevancy; and (4) attorney-client privilege. (Id. at 4, 15-17.) Respondents filed a motion to dismiss the amended petition on December 23, 2011. (Doc. No. 14.)

The matter first came before the undersigned for hearing of respondents' motion to dismiss on January 27, 2012. Adam Smart, Esq. appeared telephonically on behalf of respondent United States of America. No appearance was made by or on behalf of petitioner and petitioner did not file any opposition to respondents' motion to dismiss. At that hearing, the undersigned requested additional information from respondents concerning the intended use of the information sought by the summonses. The hearing of respondents' motion was continued to February 24, 2012. On February 16, 2012, respondents filed a supplemental memorandum in support of its motion. (Doc. No. 18.)

The matter again came before the undersigned for hearing of respondents' motion on February 24, 2012. Adam Smart, Esq. appeared telephonically on behalf of respondents. No appearance was made by or on behalf of petitioner at the February 24, 2012 hearing. Petitioner has still not filed opposition to respondents' motion and, in fact, has not filed anything in this matter since filing his amended petition to quash on November 30, 2011.*fn2

LEGAL STANDARD

The IRS is permitted to determine a person's tax liability by examining the person's documents, taking the person's testimony, and issuing summonses. 26 U.S.C. § 7602(a) (authorizing the IRS to issue summonses for the purposes of "ascertaining the correctness of any return, making a return where none has been made, determining the liability of any person for any internal revenue tax . . . or collecting any such liability"). The powers granted to the IRS for determining tax liability are to be "liberally construed in recognition of the vital public purposes which they serve," and the restriction contained in 26 U.S.C. § 7605(b) against unnecessary examinations or investigations is "not to be read so broadly as to defeat them." De Masters v. Arend, 313 F.2d 79, 87 (9th Cir. 1963). See also United States v. Arthur Young & Co., 465 U.S. 805, 814 (1984) (noting "Congress' express intention to allow the IRS to obtain items of even potential relevance to an ongoing investigation") (emphasis in original); Speck v. United States, 59 F.3d 106, 108 (9th Cir. 1995) (citing the Supreme Court's recognition in Arthur Young & Co. that Congress granted the IRS "expansive information-gathering authority").

A taxpayer identified in an IRS summons served on a third party recordkeeper may bring a proceeding to quash the summons, and the government, in turn, may seek to compel compliance with the summons. 26 U.S.C. § 7609(b)(2)(A).

To defeat a petition to quash, . . . the government must establish that (1) the investigation will be conducted for a legitimate purpose; (2) the material being sought is relevant to that purpose; (3) the information sought is not already in the IRS's possession; and (4) the IRS complied with all the administrative steps required by the Internal Revenue Code. See United States v. Powell, 379 U.S. 48, 57-58 (1964). "The government's burden is a slight one, and may be satisfied by a declaration from the investigating agent that the Powell requirements have been met." United States v. Dynavac, Inc., 6 F.3d 1407, 1414 (9th Cir. 1993). The burden is minimal "because the statute must be read broadly in order to ensure that the enforcement powers of the IRS are not unduly restricted." Liberty Fin. Servs. v. United States, 778 F.2d 1390, 1392 (9th Cir. 1985).

Once the government has established the Powell elements, "'those opposing enforcement of a summons . . . bear the burden to disprove the actual existence of a valid civil tax determination or collection purpose by the Service . . . . Without a doubt, this burden is a heavy one.'" United States v. Jose, 131 F.3d 1325, 1328 (9th Cir. 1997) (en banc) (quoting LaSalle, 437 U.S. at 316). As we observed in Derr, "[e]nforcement of a summons is generally a summary proceeding to which a taxpayer has few defenses." United States v. Derr, 968 F.2d 943, 945 (9th Cir. 1992). "'The taxpayer must allege ...


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