Teichgraeber v. Comm'r of Internal Revenue
| Decision Date | 19 June 1975 |
| Docket Number | Docket Nos. 7591-74— 7594-74. |
| Citation | 64 T.C. 453 |
| Parties | BERNARD E. TEICHGRAEBER, ET AL.,1 PETITIONER v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT |
| Court | U.S. Tax Court |
OPINION TEXT STARTS HERE
Elliot Ira Miller, for the petitioners.
Thomas E. Bulleit, for the respondent.
Rules 70 and 72, Tax Court Rules of Practice and Procedure.— A Technical Advice Memorandum was issued by the National Office of the Internal Revenue Service to a District Director in connection with the examination of the returns of another taxpayer. Held, the TAM is not subject to discovery under Rule 70. Held, further private letter rulings that may have been issued by the Internal Revenue Service to other taxpayers are not subject to discovery under Rules 70(b) and 72.
Petitioners' motion for an order to produce documents was assigned to and heard by Commissioner Randolph F. Caldwell, Jr. The Court agrees with and adopts his opinion which is set forth below.2
These cases are presently before the Court on petitioners' motion for an order to produce documents, filed on January 17, 1975. Oral argument has been made by counsel for the parties and they have filed memoranda in support of their respective positions.
Petitioners' motion seeks production of the following:
Any private letter rulings, including but not limited to any rulings issued to Bache & Co., with respect to attempts by stock and securities brokerage firms to deduct conversion losses, bad debts or similar losses and which discuss the deductibility of such losses or the standards for determining the appropriate year for the deduction thereof.
Petitioners Bernard and Richard Teichgraeber (son and father) were general partners in the brokerage firm of Thomson & McKinnon. Bernard's late wife, Barbara, was a limited partner. Bernard and Barbara terminated their partnership interest in April 1967, while Richard terminated his interest on December 31, 1967.
On its partnership return for 1967, Thomson & McKinnon claimed a deduction for ‘conversion errors' of $1,343,740. Respondent disallowed that deduction on audit of the partnership's return and increased petitioners' distributive shares of partnership income accordingly. Petitioners' counsel represents that the respondent proposed to allow the deduction for the succeeding year, 1968. Petitioners' counsel further represents that such treatment was agreeable to the remaining partners in Thomson & McKinnon, but not to his clients (petitioners in these cases) for the reason that in 1968 they were no longer members of the firm and thus could not benefit by the deduction if allowed for 1968.
In the course of the administrative proceedings within the Internal Revenue Service, an appellate conferee told petitioners' representative that the ‘conversion errors' issue had been considered and a ruling had been issued with respect thereto, in connection with Bache & Co., another brokerage house. According to petitioners' counsel, the conferee said that the ‘ruling was clear, that (it) set forth the standards and criteria for the disallowance of the conversion loss, and its application was clear here and in fact would indicate that we really hadn't much of a case to begin with.’ When petitioners' counsel asked the conferee to furnish a copy of the Bache ruling, the latter replied that he was unable to do so.
After the present cases were begun, petitioners' counsel requested that respondent furnish him with ‘copies of any private letter rulings, including the ruling obtained by Bache & Co., in connection with attempts by stock and security brokerage firms to deduct conversion losses, bad debts, or similar losses, which discuss the deductibility of such losses and the standards for determining the appropriate year for the deduction thereof.’ Respondent refused to produce, and the present motion to compel production was filed.
At the hearing it appeared that there had not been a private letter ruling to Bache & Co. Rather, a Technical Advice Memorandum had been issued. Respondent's counsel, resisting efforts to compel him to produce anything, did not advise the Court whether any private rulings had been issued. However, respondent's counsel has since tendered to the Court, for inspection in camera, the Technical Advice Memorandum regarding Bache & Co., as well as the revenue agent's request therefor.
The questions presented are (1) whether such Technical Advice Memorandum (hereinafter TAM) is discoverable; and (2) whether the private rulings, if there are any, as described in the above-quoted portion of petitioner's motion to compel, are discoverable.
1. The TAM.— In our opinion, this document is not subject to discovery. In Tax Analysts & Advocates v. .I.R.S., 505 F.2d 350 (C.A.D.C. 1974), the Court of Appeals held that technical advice memoranda of the same type as is involved here, were exempted from disclosure under section 522(b)(3) of the Freedom of Information Act. In this case, we will follow the Court of Appeals, and hold that the TAM is not discoverable for the same reason that the Court of Appeals held that kindred technical advice memoranda were exempt from disclosure. In so holding, we are not implying that because material is exempt from disclosure under the Freedom of Information Act, it will necessarily follow that it is not subject to discovery under the Tax Court Rules of Practice and Procedure.
Petitioners' motion to compel production of the TAM is therefore denied.
2. The private letter rulings.— Rule 70(b) defines the scope of discovery in the Tax Court: ‘The information or response sought through discovery may concern any matter not privileged and which is relevant to the subject matter involved in the pending case.’ We do not believe that the private letter rulings are privileged, within the meaning of the Rule, nor do we believe that they are cloaked with v. Taylor, 329 U.S. 495(1947). They do not appear to have been prepared in anticipation of litigation, but rather as responses to taxpayers' requests for the views of the Service with respect to contemplated transactions. Indeed, in the Tax Analysts case such rulings were required to be furnished under the Freedom of Information Act.
The more difficult question is whether such rulings are ‘relevant to the subject matter involved in the pending case,‘ as Rule 70(b) requires.
Petitioners assert that relevance lies in their claim, presented in an amendment to their petitions, that the respondent may be seeking...
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