905 F.2d 1276 (9th Cir. 1990), 88-5901, United States v. Abrahams

Docket Nº:88-5901, 88-5653.
Citation:905 F.2d 1276
Party Name:UNITED STATES of America; Darrell G. Henderson, Special Agent, Internal Revenue Service, Petitioner/Appellee-Cross-Appellant, v. Charles L. ABRAHAMS, Respondent/Appellant-Cross-Appellee.
Case Date:June 08, 1990
Court:United States Courts of Appeals, Court of Appeals for the Ninth Circuit

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905 F.2d 1276 (9th Cir. 1990)

UNITED STATES of America; Darrell G. Henderson, Special

Agent, Internal Revenue Service,



Charles L. ABRAHAMS, Respondent/Appellant-Cross-Appellee.

Nos. 88-5901, 88-5653.

United States Court of Appeals, Ninth Circuit

June 8, 1990

Argued and Submitted Nov. 1, 1989.

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[Copyrighted Material Omitted]

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William S. Rose, Jr., Gary R. Allen, Charles E. Brookhart, and John A. Dudeck, Jr., Tax Div., U.S. Dept. of Justice, Washington, D.C., for petitioner/appellee-cross-appellant.

Charles L. Abrahams, La Mesa, Cal., in pro per.

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Appeal from the United States District Court for the Southern District of California.

Before HUG, CANBY, and BOOCHEVER, Circuit Judges.

CANBY, Circuit Judge:

The United States appeals from an order of the district court granting limited enforcement of a summons issued by the Internal Revenue Service. Charles Abrahams, the summonee, cross appeals. We affirm in part, vacate in part, and remand.


Abrahams is an attorney who prepares income tax returns for his clients, and also represents many of them in disputes with the Internal Revenue Service before the Tax and Claims Courts. As a preparer, Abrahams' routine practice has been to file amended client returns, which claim new deductions, just before the close of the statutory three-year period for assessing tax liability. The IRS is investigating this conduct; in particular, it seeks to determine whether Abrahams advised or aided the filing of false or fraudulent returns, improperly omitted information on original returns so that he could later file amended returns, lacked sufficient factual basis for information submitted on the amended returns, or filed amended returns without informing his clients.

Acting pursuant to 26 U.S.C. Sec. 7602, the IRS issued a summons directing Abrahams to produce material relevant to his preparation of client returns from 1978 to 1984. 1 Abrahams objected that the summons called for virtually all of his files and that it allowed only twelve days for compliance. The IRS responded by limiting its request to documents used in preparing returns for thirty-nine named clients, extending the deadline fifteen days, and offering clerical assistance. Abrahams refused to comply.

As authorized by 26 U.S.C. Sec. 7604(b), the IRS filed a petition in district court to compel compliance with the summons. The IRS presented a declaration by the special agent conducting the Abrahams investigation, who stated that his purpose was "to determine whether [Abrahams] wilfully aided or assisted or procured, counseled or advised the preparation of federal income tax returns which are fraudulent or false," particularly with respect to deductions claimed on amended returns. Henderson Declaration at 2-3. Abrahams responded by alleging that the summons had been issued "solely to unearth evidence of criminal conduct"; to gather information for the Justice Department to use against him and for the IRS Audit Division to use against his clients; and "to harass [Abrahams] by disturbing his relationship with his clients." Abrahams also argued that the summons was "overbroad and burdensome," and that the demanded documents were protected by the attorney-client privilege and the work-product doctrine.

Following a hearing, the court ordered partial compliance: Abrahams was to produce documentation used in his preparation of twenty "representative" returns (of Abrahams' choosing) for each of the years

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in question. The court also ordered that the IRS, in pursuing its investigation of Abrahams, was not to interview any of Abrahams' clients unless Abrahams was present in his capacity as counsel. 2

The United States and Abrahams appealed to this court, which (in an unpublished disposition) reversed and remanded for a limited evidentiary hearing on Abrahams' allegations of bad faith and harassment. See United States v. Abrahams, 833 F.2d 1017 (9th Cir.1987). At that hearing, Abrahams examined the special agent investigating him and three other agents involved in his clients' cases. The district court then concluded that Abrahams had not substantiated his charges. The court again ordered enforcement, with the same restrictions imposed previously.

Both parties now appeal once more.


Abrahams contends that the lower court erred (1) in finding that the summons had been issued in "good faith," as required for enforcement, (2) in denying his request for discovery, (3) in concluding that the summons met the fourth amendment standard of reasonableness, and (4) in dismissing his claims of protection deriving from the attorney-client privilege and the work product doctrine. We disagree, and affirm the district court's decisions on these issues.

  1. The Good Faith Elements.

    Contrary to Abrahams' contention, the summons satisfied the requirements for enforcement. In order to establish a prima facie case, the IRS had only to make a "minimal" showing that it issued the summons for a legitimate purpose, and that the information sought in the summons was relevant to that purpose. Stuart v. United States, 813 F.2d 243, 248 (9th Cir.1987) (citing United States v. Powell, 379 U.S. 48, 57-58, 85 S.Ct. 248, 254-55, 13 L.Ed.2d 112 (1964)). 3 Declarations by the special agent that he was investigating Abrahams for possible improper conduct in preparing clients' returns and that the summoned material was necessary for the investigation satisfied the minimal standard. Liberty Financial Services v. United States, 778 F.2d 1390, 1392 (9th Cir.1985). The prima facie case having been made, a "heavy" burden fell upon Abrahams to disprove the IRS assertions. Id. The record developed below indicates that the district court committed no "clear error" in concluding that Abrahams had failed to carry that burden. Ponsford v. United States, 771 F.2d 1305, 1308 (9th Cir.1985).

    1. Purpose.

    Abrahams' objection to the district court's finding of legitimate purpose raises two distinct issues, one a question of law and the other a question of fact. First, Abrahams argues that the summons is invalid because tax collection was not the IRS' objective in issuing it. Abrahams is right that the investigation is not aimed at collecting taxes from him, but he is plainly wrong that the summons power may be used only for that purpose. The IRS may issue a summons in order to "inquir[e] into any offense connected with the administration or enforcement of the internal revenue laws." 26 U.S.C. Sec. 7602(b). Improper conduct in the preparation of clients' returns

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    clearly constitutes "an offense connected with the administration and enforcement" of the tax laws, and therefore falls within the scope of the summons power. 4

    Secondly, Abrahams argues that, despite its claims to the contrary, the IRS issued the summons in order to gain information for use in the Tax and Claims Court cases and to harass him because he represents clients against the IRS. More specifically, Abrahams offered two factual circumstances as evidence of that allegation: (1) the name of an IRS lawyer handling Tax Court litigation involving Abrahams' clients appeared as part of an intra-office reference code in the margin of a letter to Abrahams from the special agent handling his investigation; (2) when leaving the District Counsel's office after an unsuccessful effort to have the Counsel stipulate to an agreement in his clients' cases, Abrahams encountered the special agent who issued the summons. 5

    Under extended questioning by Abrahams' counsel at the hearing, the special agent directing the Abrahams investigation held fast to his assertion that he issued the summons to inquire into possible improper conduct by Abrahams as a preparer of his clients' returns. None of the witnesses testified that anyone involved in the client cases suggested, encouraged or participated in issuing the summons to Abrahams. Hence, as the district court found, Abrahams was not able to show that the purpose stated by the IRS was "merely camouflage for an ulterior non-tax motive." United States v. Zolin, 809 F.2d 1411, 1416 (9th Cir.1987), aff'd in part and vac'd in part on other grounds, --- U.S. ----, 109 S.Ct. 2619, 105 L.Ed.2d 469 (1989).

    2. Relevance. 6

    Abrahams' argument that the summons demands documents that are not relevant to the IRS purpose is meritless. The IRS is investigating Abrahams' conduct in preparing his clients' tax returns; nothing is more likely to "throw light" on that subject than the documents supplied to him by his clients or generated by him for the purpose of filing those returns. Zolin, 809 F.2d at 1414 (defining standard of relevance for IRS summons).

  2. Discovery.

    The district court's refusal to grant Abrahams' request for discovery was

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    not reversible error. Because the proceeding was one for summons enforcement, in which discovery is "the exception rather than the rule," the district court had "great discretion" in answering Abrahams' request, and its decision on the issue must stand unless it has abused that discretion. United States v. Church of Scientology, 520 F.2d 818, 824 (9th Cir.1975); Wang v. United States, 757 F.2d 1000, 1004 (9th Cir.1985). Our review of the record below leaves us far from "a definite and firm conviction that the district court committed a clear error of judgment" in refusing to permit Abrahams to engage in discovery. Abatti v. Commissioner, 859 F.2d 115, 117 (9th Cir.1988) (defining the standard of reversal for abuse of discretion).

    By holding an evidentiary hearing, the court provided an opportunity for Abrahams to demonstrate, at the least, that further inquiry, including discovery, was...

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