[00:00:00] Speaker 03: Case number 22.1308, Johannes Lamprecht and Linda Lamprecht, Appellants versus Commissioner of Internal Revenue. [00:00:08] Speaker 03: Mr. DeVos for the Appellants, Mr. Brandman for the Appellee. [00:00:11] Speaker 03: Good morning, Mr. DeVos. [00:00:21] Speaker 03: Certainly. [00:00:29] Speaker 03: May it please the court. [00:00:30] Speaker 01: Good morning. [00:00:31] Speaker 01: My name is Lloyd Devos, and I'm counsel to the appellants, Johannes and Linda Lambrecht. [00:00:37] Speaker 01: And I'd previously requested two minutes to set aside for rebuttal. [00:00:41] Speaker 01: I'd like to direct the court to the fifth argument in our brief, that the final resolution of the UBS John Doe summits took place on August 19, 2009, when the United States and Switzerland agreed in power of the... [00:00:57] Speaker 02: the lectern up a little bit because the microphone is not catching everything. [00:01:12] Speaker 03: I'm sorry, your honor. [00:01:13] Speaker 03: I'll start again. [00:01:15] Speaker 01: I'd like to direct the attention to the court to the fifth argument in our brief that the final resolution of the UBS John Doe summons took place on August 19, 2009, when the United States and Switzerland agreed in paragraph three of the agreement between them that the UBS John Doe summons would not be enforced. [00:01:35] Speaker 01: August 19th, 2009 is the date when the UBS John Doe Summons was resolved, and not at a later point in time when the commissioner, for reasons known only to himself, sent a letter to that effect. [00:01:47] Speaker 01: Even with extensions of time as provided by law, the limitations period for the commissioner issued notices of deficiency had expired prior to the deficiency notices being issued to the LAMPRAS. [00:02:01] Speaker 01: Even if you agree with the commissioner, [00:02:03] Speaker 01: which you should not do, that he met his burden of production under sections 7491C and 6751B by having an immediate supervisor approve in writing the accuracy penalty that we're discussing here under the applicable legal standard. [00:02:22] Speaker 01: And even if you agree with the commissioner, which you should not do, [00:02:25] Speaker 01: that the Lemprest did not file qualified amended tax returns after the commissioner issued the John Doe summons, notwithstanding the fact that they made no claim on their original return with respect to the activity described in the UBS John Doe summons as is required in the treasury regulations. [00:02:45] Speaker 01: And even if you agree with the commission, which you should not do, that the UBS John Doe summons was a valid and enforceable summons [00:02:54] Speaker 01: not withstanding that the only evidence produced below prove that the UBS John Doe summons was not issued for the purpose of obtaining documents and information under section 7602, but was issued for the prohibited of extending the statute of limitations and as an illegal summons and not be relied upon to extend the limitation periods during which the commissioner could claim a deficiency from the LAMPRAX. [00:03:21] Speaker 01: Even if you agree with the commissioner on all these things based on the agreement between the United States and Switzerland as two sovereign nations, the time for the commissioner to issue a deficiency notice in respect of 2006 expired on November 11th, 2013. [00:03:38] Speaker 04: Why should we accept that date rather than the date that the subpoena was complied with? [00:03:45] Speaker 01: Because at the time the United States and Switzerland entered into the agreement that they did, they agreed that the UBS John Doe Summons shall not be enforced by the United States. [00:03:56] Speaker 01: That will not be enforced, shall not be enforced. [00:04:00] Speaker 01: That's an agreement between two countries pursuant to the mutual agreement provisions. [00:04:04] Speaker 01: of the agreement of the tax treaty between the United States and Switzerland. [00:04:09] Speaker 01: As such, it has binding force and the United States agreed it was not going to enforce 7602 or attempt to enforce under 7602 its right to obtain documents using the subpoena power. [00:04:21] Speaker 01: The United States agreed that with Switzerland. [00:04:24] Speaker 01: And therefore, it's not a question of what it's complied with. [00:04:26] Speaker 01: The United States agreed that it is not going to attempt to obtain compliance. [00:04:30] Speaker 01: And at that point, we're done. [00:04:32] Speaker 01: The subpoena has been resolved using the language of... How is that consistent with the statute? [00:04:39] Speaker 01: The statute says when it is final, when it's finally resolved, when the commissioner has determined that the subpoena has been finally resolved. [00:04:52] Speaker 01: That's what the regulations say, finally resolved. [00:04:55] Speaker 01: The agreement by the commissioner that the UBS John Doe summons was not going to be enforced, resolved the subpoena, resolved the summons. [00:05:07] Speaker 01: The summons at that point in time was not going to be ordered to be enforced by a federal court. [00:05:12] Speaker 04: And as we've said in our brief, where you have- What if someone issues a subpoena to another party or documents [00:05:22] Speaker 04: and they reach an agreement like this, it says we're not going to enforce, but they say, we're not gonna enforce the subpoena, you know, through contempt or otherwise. [00:05:39] Speaker 04: But if you don't give us the documents within 30 days, you agree to pay us essentially liquidated damages of a million dollars. [00:05:49] Speaker 04: Has the subpoena been resolved? [00:05:54] Speaker 04: Has it been complied with, if that's the agreement? [00:05:58] Speaker 01: No, I would say in that circumstance between private parties, no, Your Honor. [00:06:01] Speaker 01: But here we're talking about an agreement between two sovereign nations having force of law under the neutral agreement provision of a tax treaty. [00:06:08] Speaker 01: And as such, it does resolve the subpoena. [00:06:11] Speaker 01: Because we're talking here about an agreement that this subpoena has been resolved. [00:06:15] Speaker 01: There's no condition that I'll pay you a million dollars later. [00:06:17] Speaker 04: Well, there's a condition that you're going to get documents, right? [00:06:22] Speaker 04: No, that was part of the agreement that those documents are going to get turned over. [00:06:28] Speaker 01: No, Your Honor, that was part of the UBS agreement with the United States. [00:06:33] Speaker 01: The agreement between the Swiss government and the United States was that the subpoena will not be enforced because the parties had different interests, and that's why there were two separate agreements. [00:06:42] Speaker 01: Well, who was the subpoena issued to? [00:06:45] Speaker 01: The subpoena was issued to UBS. [00:06:47] Speaker 01: But the government of Switzerland intervened because its interests as a sovereign were being affected. [00:06:53] Speaker 01: What was happening is that the United States, through the issuance of the subpoena, was asking UBS to violate Swiss law. [00:06:59] Speaker 01: And the Swiss government had issued a blocking order prohibiting UBS from turning over any documents to the United States or to the IRS, regardless of the order of the district. [00:07:11] Speaker 03: And the way that it got resolved was that [00:07:15] Speaker 04: that the United States would not enforce the agreement against Switzerland, but that UBS would turn over documents. [00:07:23] Speaker 04: And that's what happened. [00:07:24] Speaker 01: No, Your Honor. [00:07:25] Speaker 01: The way it got resolved was that the United States made a request for documents under the tax treaty between the United States and Switzerland. [00:07:34] Speaker 01: The Switzerland received the document information request and Switzerland, using its domestic law and internal law, requested the documents from UBS. [00:07:42] Speaker 01: UBS turned the documents over to the Swiss Federal Tax Administration. [00:07:47] Speaker 01: And the Swiss Federal Tax Administration then turned the documents over to the United States pursuant to the terms of the tax treaty. [00:07:53] Speaker 01: There was no direct disclosure of documents from UBS to the United States. [00:07:57] Speaker 01: That did not take place. [00:08:00] Speaker 01: And that's also important in the context of the extension of the statute of limitations. [00:08:04] Speaker 01: Because if the United States is receiving documents under a valid IRS summons, the statute of limitations may be extended. [00:08:12] Speaker 01: That is not the case in the case of the document. [00:08:14] Speaker 02: Was there a formal request by the Internal Revenue Service for documents pursuant to the tax treaty? [00:08:22] Speaker 02: Yes, there was, Your Honor. [00:08:23] Speaker 02: And is that in the record? [00:08:24] Speaker 01: No, it is not, Your Honor. [00:08:26] Speaker 01: It was not relevant. [00:08:27] Speaker 02: It was below. [00:08:28] Speaker 02: If the request simply said, [00:08:30] Speaker 02: Please turn over the documents that are covered by our John Doe summons. [00:08:36] Speaker 01: I'm sorry, Your Honor, I don't understand the question. [00:08:39] Speaker 02: If the document request simply repeated that John Doe summons, then your argument seems to me to evaporate. [00:08:50] Speaker 01: Here under the document request that was made by the United States to Switzerland was a different document request that did not reflect the document request under the John Doe summits. [00:09:01] Speaker 02: What were the documents that the United States was [00:09:05] Speaker 02: asking Switzerland to turn over, or UBS to turn over. [00:09:09] Speaker 02: How did they differ from what the John Doe summons saw? [00:09:13] Speaker 01: The reason, Your Honor, is because, and parts of this are in the record in the form of the excerpts from the Swiss government official report. [00:09:21] Speaker 01: The difference is that the Swiss government objected to a blanket summons as not being authorized. [00:09:26] Speaker 01: The summons was tailored pursuant to agreement between the United States and the Swiss government, who only require certain categories of information. [00:09:35] Speaker 01: from people who had bank accounts of greater than a certain size, which meant the indications of fraud or the like under the terms of the United States was tax-treated. [00:09:44] Speaker 01: And again, none of this was... It was narrowed. [00:09:46] Speaker 02: It was still part... I mean, that sounds to me like that was part of the John Doe Summons. [00:09:50] Speaker 01: Well, Your Honor, it's part of the documents requested on the John Doe Summons. [00:09:55] Speaker 01: But as a matter of law, it is not the John Doe Summons. [00:09:58] Speaker 01: It is a tax-treating request, and that is a different legal... They can compromise and agree on narrowing [00:10:04] Speaker 02: And when the documents do come in, pursuant to the compromise, then the John Doe summonses and satisfied. [00:10:13] Speaker 02: And that's the, I think that's the internal revenue services take that resolved means satisfied. [00:10:21] Speaker 01: I understand your point, Your Honor, but I respectfully disagree. [00:10:25] Speaker 01: The government of Switzerland made it very clear in their submissions, and as you can see in the Swiss government official report, that the Swiss government objected to the infringement upon their sovereignty of the issuance of the UBI Rajanto summons by the United States. [00:10:39] Speaker 01: then they issued a governmental blocking order prohibiting compliance. [00:10:44] Speaker 01: Switzerland said that the only way that they were going to permit the documents to be given was pursuant to a request under the tax treaty, which did not violate their sovereignty and which they had agreed to provide documents under. [00:10:57] Speaker 01: But again, that's a different type of a document production than production under summons. [00:11:02] Speaker 01: The internal revenue codes specifically says that there's an extension of time for the statute of limitations in the case [00:11:09] Speaker 01: of summits, it does not say, and it specifically does not say that there is an extension of time in the case of a document request under the provisions of a tax treaty request. [00:11:19] Speaker 01: And that's how we understand the tax law to be. [00:11:22] Speaker 01: There's never been a, it's become almost a matter of faith among the tax bar, but there are no judicial decisions on it one way or the other. [00:11:29] Speaker 00: I understand. [00:11:30] Speaker 00: Thanks. [00:11:30] Speaker 00: Do you agree with this statement? [00:11:32] Speaker 00: The settlement agreement between the parties to the enforcement suit specified the dismissal of the suit would... I'm sorry, I'm not hearing you. [00:11:40] Speaker 00: I apologize. [00:11:41] Speaker 00: The settlement agreement between the parties... [00:11:44] Speaker 00: to the enforcement suit specified the dismissal of the suit would in and of itself have no effect on the John Doe summons. [00:11:53] Speaker 01: I agree with that, Your Honor. [00:11:54] Speaker 01: As we said in our papers, it had no effect whatsoever. [00:11:57] Speaker 01: There was no determination whether the John Doe summons was effective or was not effective. [00:12:03] Speaker 01: The parties agreed to put that off for a later day. [00:12:06] Speaker 01: And as it turned out, it was never an issue that came up. [00:12:08] Speaker 00: I'd like to turn to the first argument in your brief, which is where I thought you were going to begin your oral argument. [00:12:15] Speaker 00: And I think there's some strength to the merits of it, that 6662 lists about 10 different penalties, about 10 different accuracy-related penalties. [00:12:29] Speaker 00: And the supervisor here, [00:12:31] Speaker 00: when he gave his approval to assess a penalty, didn't specify which of those 10 accuracy-related penalties he was approving. [00:12:44] Speaker 00: But the district court, sorry, the tax court did not address that argument one way or the other. [00:12:57] Speaker 00: Were you surprised that the tax court didn't address that? [00:13:00] Speaker 01: Yes, Your Honor, I was surprised for a couple of reasons. [00:13:03] Speaker 01: One, because the assumption in your question is that the supervisor approved the penalty, whereas we pointed out in our brief, the signature of the supervisor happened before. [00:13:14] Speaker 00: I want to not get too distracted by the other arguments. [00:13:19] Speaker 01: In this particular argument, because the tax court in three separate cases has said you have to specify the penalty and the leading case on which the other tax court judges reside was the decision of Judge Custodson. [00:13:34] Speaker 00: If you were surprised the tax court didn't address this point, why didn't you move for reconsideration on that? [00:13:43] Speaker 01: We didn't move for reconsideration on this point because frankly, after reading the [00:13:48] Speaker 01: think we would get anywhere. [00:13:51] Speaker 00: Well, I think maybe that was a reason. [00:13:54] Speaker 00: But maybe another reason is that you hadn't made this argument before the tax court. [00:14:00] Speaker 00: So it actually shouldn't have been very surprising that the tax court didn't address it. [00:14:03] Speaker 01: No, Your Honor, as we put into our brief, we did specify this in our last reply brief that was filed with the tax court. [00:14:10] Speaker 01: And in fact, I quoted the provision in the brief where we actually raised the argument to the court. [00:14:14] Speaker 00: So even if, uh, [00:14:18] Speaker 00: Raising a new argument in a reply brief on a summary judgment motion is enough to put an argument before court. [00:14:30] Speaker 00: Your argument, and I've got it here in front of me, is very skeletal. [00:14:38] Speaker 00: It says, [00:14:42] Speaker 00: Mr. David and Mr. Anderson say what they say. [00:14:45] Speaker 00: They approved initial determination without knowing what the penalty was, the authority for the penalty, or how much the penalty was for. [00:14:56] Speaker 00: The declarations are not evidence of a written initial determination to impose a penalty. [00:15:02] Speaker 00: That doesn't sound very much like [00:15:04] Speaker 00: the argument I summarized, and it doesn't sound very much like the argument that you make in your blue brief here. [00:15:10] Speaker 01: Well, Your Honor, I think all I can say to that is the way that this case developed on the motion for summary judgment was that we received copies of the documentation on which the government relied as part of the motion for summary judgment that were not produced previously in discovery. [00:15:26] Speaker 01: We received the explanation of those documents in the government's reply brief. [00:15:31] Speaker 00: Right. [00:15:32] Speaker 00: You mean the government's response to your summary judgment motion? [00:15:37] Speaker 00: No, in support of the government's summary judgment motion. [00:15:41] Speaker 00: Did that come before or after you filed your reply brief in your summary judgment? [00:15:46] Speaker 00: That came before we filed our reply. [00:15:48] Speaker 00: Why couldn't you make this full argument in the reply brief to your summary judgment motion? [00:15:53] Speaker 01: The answer, Your Honor, is because we were limited by space in terms of what we were doing. [00:15:58] Speaker 01: There's no other reason for it, and I can't give you one. [00:16:01] Speaker 00: Okay. [00:16:01] Speaker 00: And I do think that goes back to the reconsider. [00:16:04] Speaker 00: And I'm not an expert in tax score procedure, but you can file a motion for reconsideration to a tax score decision, correct? [00:16:10] Speaker 01: You could, of course, under the rules. [00:16:15] Speaker 03: All right. [00:16:16] Speaker 03: No other questions. [00:16:18] Speaker 03: We'll give you some time. [00:16:18] Speaker 03: Thank you very much, Your Honor. [00:16:28] Speaker 03: Mr. Brandman. [00:16:31] Speaker 03: Please, the court. [00:16:31] Speaker 03: Robert Brandman for the Commissioner of Internal Revenue. [00:16:37] Speaker 05: At bottom, this case is very simple. [00:16:40] Speaker 05: At a superficial level, this case is very simple. [00:16:44] Speaker 05: The Lamprex filed a tax return, and then a few years later, on which they did not report their Swiss bank income, [00:16:53] Speaker 05: years later after a widely publicized U.S. [00:16:56] Speaker 05: government crackdown on Swiss bank secrecy, but widely publicized at least amongst tax attorneys and Swiss bankers. [00:17:03] Speaker 05: They filed amended returns. [00:17:05] Speaker 05: It's perfectly obvious from compare, if the amended returns are correct, perfectly obvious that they understated their income by more than 5,000 and more than 10%. [00:17:15] Speaker 02: You're saying the UBS summons, the John Doe summons was widely publicized? [00:17:21] Speaker 05: I am saying it was widely publicized, at least the government cracked down widely publicized. [00:17:28] Speaker 02: Before the taxpayers filed their amended returns? [00:17:34] Speaker 05: I think it was, but it's not essential that they have known about it. [00:17:38] Speaker 02: The way I read the regulation, what matters is the date of service. [00:17:43] Speaker 05: Yes, that's right. [00:17:46] Speaker 05: I'm just giving some background just to make it more of a [00:17:52] Speaker 05: In any event, if the amended return is correct, the original return is plainly understated income and they're liable for this penalty. [00:17:59] Speaker 05: And beyond that, we have sort of a buckshot approach to, you know, many, many different theories for why the assessment might not be correct. [00:18:10] Speaker 05: And rather than march the court through, you know, my reputation of each of them, you know, [00:18:18] Speaker 05: and whether the court finds any of Mr. DeVos' arguments compelling. [00:18:22] Speaker 00: Well, you know, I raised the, give my numbers right, the 6751 argument. [00:18:31] Speaker 00: Yes. [00:18:32] Speaker 00: And, you know, I asked some questions of opposing counsel that, you know, suggests I think it may well have been forfeited here. [00:18:40] Speaker 00: But you represent the government and you will have more cases. [00:18:46] Speaker 00: And at some point, an attorney is going to nod for this argument. [00:18:50] Speaker 00: So when is an approval, a supervisor's approval of an inspector's proposal for an accuracy-related penalty just says, I approve accuracy-related penalty, i.e. [00:19:04] Speaker 00: I approved 6662 penalty. [00:19:09] Speaker 00: How is that approval of the relevant penalty when it could be any of 10, 66, 62 penalties? [00:19:20] Speaker 05: It's not that specific, correct? [00:19:22] Speaker 05: This has been a developing area of the law in the last 10 years. [00:19:27] Speaker 05: It's developing slowly. [00:19:29] Speaker 05: There was no development for a long time after the statute was first enacted, I think in 1998, and development started to pick up around 2015 or so. [00:19:41] Speaker 05: The experts started taking that provision seriously. [00:19:47] Speaker 05: If I am correct, there is currently [00:19:54] Speaker 05: some certainty in this area. [00:19:55] Speaker 05: But to this point, it's only been a common law series of tax court decisions looking at this issue tangentially. [00:20:04] Speaker 05: And none of them really support the point that the approval has to specify the subsection of 6662. [00:20:14] Speaker 00: In order to be clear, I don't think that the strongest argument is that it has to name the subsection. [00:20:22] Speaker 00: I just think the argument is it has to make clear which of the subsection penalties it's approving. [00:20:34] Speaker 00: In other words, if one subsection were called the inheritance tax penalty, and that was subsection H. [00:20:44] Speaker 00: You know, I'm not saying that it would have to say I approve a subsection H penalty assessment. [00:20:50] Speaker 00: It could say I approve an inheritance tax accuracy related penalty assessment. [00:20:57] Speaker 05: Right. [00:20:59] Speaker 05: Currently the I mean the overall section is just called accuracy related. [00:21:05] Speaker 05: There are I think 10 different provisions that allow for 20% penalty. [00:21:11] Speaker 05: And they're not stackable. [00:21:15] Speaker 03: So they can't be, the penalty can't be more than 20% even if you multiply. [00:21:24] Speaker 05: Some of them hold a larger penalty, 40% or 50%. [00:21:29] Speaker 05: I think it would be, [00:21:31] Speaker 05: there'd be a distinction there. [00:21:33] Speaker 05: Perhaps if the approval is for the 40% penalty, it should specify that it's that level of penalty or the subsection that imposes a penalty at that level. [00:21:43] Speaker 05: But among the, you know, 10 or so that only impose the 20% penalty, at least among the two or three that are most common, it's, well, so far no court has held that it was necessary to pin that. [00:22:01] Speaker 05: And there's not a handle, I think, at 6751 that indicates that it should be. [00:22:12] Speaker 00: Well, let me see the number right again. [00:22:15] Speaker 00: 6751 talks about [00:22:19] Speaker 00: such assessment so it seems like it's referring to a particular assessment and it could be that you look at returns and it's possible you could do an assessment or a negligence accuracy related penalty or an under reporting accuracy related penalty and if the supervisor just approves [00:22:42] Speaker 00: you know, choose your own adventure inspector, pick whichever accuracy related penalty that's at the 20% level you want, then it's not really the supervisor approving such assessment. [00:22:56] Speaker 00: It's more like the supervisor giving the inspector something close to a blank check to I approve now and you decide what I'm approving later. [00:23:12] Speaker 05: In this case at least, I think the approval for substantial understatement penalty should be the easiest one, should always be included. [00:23:20] Speaker 05: In this case, you can look at the two returns and it's perfect. [00:23:24] Speaker 05: You don't have to turn past the front page of either of them. [00:23:27] Speaker 00: But in this case, there was a negligence accuracy-related assessment. [00:23:31] Speaker 00: Yes, there was. [00:23:33] Speaker 00: That was possible? [00:23:33] Speaker 00: Underreporting was possible? [00:23:36] Speaker 05: There was a later approval of the negligence penalty after the examination, I guess, maybe did some additional work. [00:23:43] Speaker 05: Just simply on opening up the thing, you know, an examiner can look at the front page of two returns and know like that, that substantial understatement. [00:23:54] Speaker 02: I don't know if I understood. [00:23:57] Speaker 02: Are you saying there were two approvals? [00:24:00] Speaker 02: Yes, there was a later approval for negligence. [00:24:03] Speaker 02: For the, for the exact amount of the assessment? [00:24:08] Speaker 02: The approvals don't specify the amount. [00:24:11] Speaker 05: It was what? [00:24:12] Speaker 05: The negligence penalty is the same 20% as the substantial understatement. [00:24:17] Speaker 05: There is a later approval submitted by a different revenue agent for negligence and they were approved. [00:24:32] Speaker 05: They were communicated to taxpayer at a later date. [00:24:35] Speaker 02: There's been a great deal of discussion in the press. [00:24:40] Speaker 02: about the IRS backdating these approvals. [00:24:44] Speaker 05: Is that an issue here? [00:24:46] Speaker 05: There's not an issue about backdating of the negligence penalty or the approval of the substantial understatement penalty. [00:24:54] Speaker 05: There's been argument in this case about what time of day the revenue agent signed off on the initial determination versus when the supervisor signed off. [00:25:07] Speaker 05: My opponent, my friend, has argued that the supervisors approved before the revenue agent signed. [00:25:17] Speaker 05: Tax court said the revenue agent doesn't have to sign at all, so it doesn't matter. [00:25:24] Speaker 05: But as to the specific issue about what time of day the approval came through, I put those approvals under a virtual microscope by Mitchell. [00:25:35] Speaker 02: Is this a form? [00:25:37] Speaker 02: that the supervisor sign or does the individual revenue agent prepare this, whatever this form and give it to the supervisor? [00:25:49] Speaker 05: This was a form the revenue agent prepared in order to get permission to open up the 2006 and seven years. [00:25:57] Speaker 05: The revenue agent was already auditing, examining 2010. [00:26:05] Speaker 05: 2010 examination, and he saw that 2006 and 2007 were, could be penalized. [00:26:12] Speaker 05: So he requested permission to open those returns up in order to assess an accuracy-related penalty. [00:26:19] Speaker 05: The supervisor signed off and according to Mr. Boss, the revenue agent signed later in the day, but I expanded those forms on my computer to 300% and I couldn't [00:26:36] Speaker 05: officer signed off. [00:26:38] Speaker 05: But the best answer is the tax court answer. [00:26:40] Speaker 05: It doesn't matter whether the revenue agent signed them all. [00:26:44] Speaker 04: Do you want to respond at all to the argument number five that your friend on the other side made that the [00:26:54] Speaker 04: date that the summons the agreement was reached between Switzerland and the United States to summons would not be in force should be the controlling date. [00:27:05] Speaker 05: I think I heard some new new material today. [00:27:09] Speaker 05: This phrase that the agreed summons would not be enforced. [00:27:14] Speaker 05: I saw that briefing or. [00:27:17] Speaker 05: But, of course, the case below was not about enforcing the summons or about a document request made by treaty. [00:27:26] Speaker 05: That's just part of the background. [00:27:28] Speaker 05: In fact, the important part is that the IRS issued a summons and the statute is extended based on the final resolution of the summons. [00:27:37] Speaker 05: It's either if it's been enforced, one set of dates. [00:27:41] Speaker 05: It hasn't been enforced when the summons is finally resolved. [00:27:45] Speaker 05: regulation gives that data is when all the material has been turned over and it even gives the IRS an additional amount of reasonable additional amount of time to review the material that's been given, given its complexity and volume to determine that the summons have been applied with. [00:28:06] Speaker 05: And there was agreement all around between Switzerland and the IRS as to when material was turned over [00:28:16] Speaker 05: 15th next year. [00:28:19] Speaker 04: All right. [00:28:20] Speaker 04: There are no other questions. [00:28:22] Speaker 04: Um, we'll your argument submitted. [00:28:25] Speaker 04: Thank you for your job. [00:28:27] Speaker 03: And Mr DeVos will give you two minutes for rebuttal. [00:28:35] Speaker 03: Thank you very much, Your Honor. [00:28:37] Speaker 01: Let me speak first to Judge Randolph's question. [00:28:39] Speaker 01: The IRS has a form, a form 300. [00:28:42] Speaker 01: There is a copy of it in the record. [00:28:44] Speaker 01: It's referenced in our briefs. [00:28:45] Speaker 01: The IRS form 300 is a civil penalty approval. [00:28:50] Speaker 01: Whenever an IRS agent wishes to propose a penalty against a taxpayer, the Internal Revenue Manual, which of course is not legally binding, says that the IRS agent should fill out the form submitted to his supervisor. [00:29:04] Speaker 01: The supervisor signs off on the form. [00:29:06] Speaker 01: The penalty is approved and then is communicated. [00:29:08] Speaker 01: All of these 6751B cases, not only this one, but all of them that are making their way through the courts, all involve the situation where the IRS agent did not fill out the Form 300. [00:29:20] Speaker 01: In other words, they took some other approach to trying to get supervisory approval, or they did not get supervisory approval at all. [00:29:29] Speaker 01: That's the evil that 6751B was aimed at. [00:29:34] Speaker 01: And that's why we see a lot of cases coming through the tax court and coming into the courts of appeal now. [00:29:40] Speaker 02: Are there any other cases, I'm not clear about this, are there any other cases in the federal courts, not the tax court, that deal with this particular form as a method of satisfying supervisor approval? [00:29:56] Speaker 02: No. [00:29:58] Speaker 02: How about in the tax code? [00:30:01] Speaker 01: Not that I'm aware of in the tax code, no. [00:30:06] Speaker 01: The only other point that I'd like to make to the court is that normally taxpayers have great difficulty moving the institutional intention of the IRS. [00:30:14] Speaker 01: and you can't make a claim that the IRS behaved wrongly. [00:30:17] Speaker 01: This case is very unusual in that because of the affidavit of Dr. Zuloff and the official Swiss government report, we actually have evidence of the institutional intention of the IRS. [00:30:30] Speaker 01: The IRS sent to their Swiss counterparts were issuing the UBS John Doe summons in order to extend the statute of limitations. [00:30:40] Speaker 01: A few days after that, the IRS went into district court and filed declarations saying we want information and documents. [00:30:47] Speaker 01: Both can't be correct at the same time. [00:30:50] Speaker 02: Do we know what material, if any, accompanied the form when it went to the supervisor for approval? [00:31:03] Speaker 01: We have no information. [00:31:05] Speaker 01: In other cases, the IRS has submitted an affidavit of the agent who submitted the form. [00:31:10] Speaker 01: For example, that's referenced in our brief where the agent submitted an affidavit saying what information was submitted and what he was relying upon in order to get and what the process was to get the supervisor's approval. [00:31:24] Speaker 01: In this case, the agent is still in the employ of the Internal Revenue Service. [00:31:28] Speaker 01: There was no affidavit submitted. [00:31:30] Speaker 02: We don't know whether any information other than the form was put before the supervisor. [00:31:36] Speaker 01: We don't know. [00:31:36] Speaker 01: We don't know. [00:31:38] Speaker 01: That's within the purview of the IRS that we were never able to obtain that information. [00:31:46] Speaker 00: I meant to ask you one question about qualified returns issue before now. [00:31:53] Speaker 00: Thank you, Your Honor. [00:31:57] Speaker 00: Original tax returns asked if you had any foreign bank accounts and your clients checked no. [00:32:08] Speaker 00: Then later for the corrected returns, they checked yes. [00:32:14] Speaker 00: That is correct. [00:32:15] Speaker 00: So my question is about the original returns. [00:32:18] Speaker 00: When they checked no, wasn't that an affirmative misstatement? [00:32:25] Speaker 01: That was an affirmative misstatement if you assume that it was affirmatively done and we could get into that, but. [00:32:31] Speaker 01: There have been cases before the various district courts and courts of appeal. [00:32:35] Speaker 00: I don't understand what you mean. [00:32:37] Speaker 00: You said it was an affirmative misstatement if we assume it was affirmatively done. [00:32:42] Speaker 01: I'm sorry, Your Honor. [00:32:43] Speaker 01: I'm trying to clarify. [00:32:44] Speaker 01: The software that accountants use to prepare these forms default to a no answer. [00:32:50] Speaker 01: There have been cases in the district courts, and I don't think there have been any in the courts of appeal, in connection with foreign bank account report forms. [00:32:57] Speaker 01: where the taxpayer has said, I didn't affirmatively intend to check that box. [00:33:01] Speaker 01: The software did it, and I didn't notice it. [00:33:03] Speaker 01: That issue never arose in this case. [00:33:05] Speaker 00: And the precedents say when that happens, we don't blame the taxpayer? [00:33:10] Speaker 01: The district courts have held that this is a question of fact, usually in the context of whether the taxpayer willfully intended not to have the box say no or not. [00:33:20] Speaker 01: There was no finding on this issue. [00:33:22] Speaker 01: There was no fact finding on this issue that took place before the tax court. [00:33:27] Speaker 01: But yes, I agree with you. [00:33:29] Speaker 01: The original tax return that was filed did indeed say that there were no foreign bank accounts. [00:33:34] Speaker 01: And the amended tax return did indeed disclose all of this was bank accounts. [00:33:41] Speaker 03: All right. [00:33:41] Speaker 03: Thank you. [00:33:42] Speaker 01: Thank you very much.