U.S. v. Linsteadt, s. 83-1214

Citation724 F.2d 480
Decision Date06 February 1984
Docket NumberNos. 83-1214,83-1463,s. 83-1214
Parties84-1 USTC P 9215 UNITED STATES of America and Larry D. McLain, Plaintiffs-Appellees, v. L.A. LINSTEADT, as President, and Wannelle Linsteadt, as Vice President of Pronto, Inc., Defendants-Appellants. UNITED STATES of America, and Larry McLain, Plaintiffs-Appellees, v. NORTHEAST NATIONAL BANK, et al., Defendants, L.A. and Wannelle Linsteadt and Pronto, Inc., Intervenors-Appellants. Summary Calendar.
CourtUnited States Courts of Appeals. United States Court of Appeals (5th Circuit)

Tarlton, Douglas, Kressler & Wuester, William O. Wuester, Fort Worth, for defendants-appellants.

Mattie Nell Peterson Compton, Asst. U.S. Atty., Fort Worth, Tex., Michael L. Paup, Chief, Appellate Sect., Tax Div., U.S. Dept. of Justice, Glenn L. Archer, Jr., Asst. Atty. Gen., Charles E. Brookhart, George L. Hastings, Jr., Washington, D.C., for plaintiffs-appellees.

Appeals from the United States District Court for the Northern District of Texas.

Before BROWN, TATE and HIGGINBOTHAM, Circuit Judges.

TATE, Circuit Judge:

Before us are two appeals from separate orders of the district court enforcing two sets of Internal Revenue Service ("IRS") summonses. 26 U.S.C. Secs. 7602, 7604. Both orders enforced production of books, records, and other data sought by the IRS for the purpose of ascertaining the correct corporate and individual income tax liability of a corporation ("Pronto") and of its officers (the "Linsteadts"), who were husband and wife and also the president and vice-president, respectively, of Pronto, the corporation. The Linsteadts appeal, both as corporate officers and individually. Because the issues overlap in part, we are considering these two appeals together for disposition on appeal.

We affirm both orders, finding no merit to the appellant Linsteadts' contentions (1) that the IRS failed to make an adequate showing that the requested materials were relevant to its tax investigation, (2) that some of the requests were unenforceably overbroad, and (3) that the summons should be rejected as to some of the requested documents as being already in the possession of the IRS (even though not readily retrievable by it).

Both sets of summonses arise out of the IRS tax investigation into the tax liabilities of Pronto and the Linsteadts for the 1978, 1979, and 1980 tax years. Appeal No. 83-1214 concerns the enforcement of two summonses served on the Linsteadts, as officers of Pronto, to produce records (as detailed on each summons) relating to the tax liability of Pronto. Appeal No. 83-1463 relates to the enforcement of eighteen IRS summonses to eight banks, an accounting firm, and a law firm formerly involved in Pronto's affairs to produce records relating to the tax liabilities of either Pronto or the Linsteadts; the Linsteadts were permitted to intervene as interested parties in the latter enforcement proceedings. From the enforcement orders, the Linsteadts alone appeal.

1. Relevance Claims

The Linsteadts challenge both sets of summonses on the ground that insufficient evidence was adduced at the enforcement proceeding to support the inference that the requested materials are relevant to the tax investigations of themselves and Pronto. As to the summonses served upon them as officers of Pronto, the Linsteadts claim that the government introduced no evidence to satisfy its burden to show the relevance of the requested materials. As to the third party summonses, the Linsteadts object that the government did not offer sufficient proof to show how certain of the documents requested, particularly inter office memos and correspondence files, could be either relevant or necessary to the government's investigation.

While the Internal Revenue Service need not show probable cause to obtain enforcement of a tax summons, it must show that the information requested in the summons is "relevant" to a legitimate tax investigation, with the taxpayer having the burden to prove an abuse of the court's process by the enforcement proceedings. United States v. Powell, 379 U.S. 48, 57-59, 85 S.Ct. 248, 255, 13 L.Ed.2d 112 (1964). We have described the relevance showing as "minimal" and noted that the requisite showing may be made by a simple affidavit filed with the petition to enforce by the agent who issued the summons, with the burden then shifting to the taxpayer to disprove the prima facie case established by the IRS or to demonstrate that the enforcement of the summons would in other ways constitute an abuse of the court's process. United States v. Davis, 636 F.2d 1028, 1034 (5th Cir.1981), cert. denied, 454 U.S. 862, 102 S.Ct. 320, 70 L.Ed.2d 162 (1981). The standard used to assess the "relevance" of an Internal Revenue summons is "whether the summons seeks information which 'might throw light upon the correctness of a taxpayer's return.' " United States v. Wyatt, 637 F.2d 293, 300 (5th Cir.1981).

These standards have been met in the enforcement proceedings here challenged.

As an initial matter, it is evident that the very nature of the information requested by the summons goes far to establish its relevance to a tax investigation. The summonses served on the Linsteadts as officers of Pronto request production of "[a]ll books and records, correspondence, notes, workpapers, and memoranda (original, photostatic copies, or reproductions) in your possession or under your control of/or relating to PRONTO, INC. for tax years 1978, 1979 and 1980...."

This paragraph is followed by a detailed list of the types of financial records sought in the general request. The records requested by the summons included cash receipts and sales journals, cash disbursement and purchase journals, bank statements, cancelled checks, sales and purchase invoices, payroll records, records relating to the purchase, sale, or depreciation of assets, and all documents related to the computation and filing of the Linsteadts' or Pronto's 1978-80 income taxes. The same language is used in the summonses requesting information from third parties, except where the summons specified that it related to the individual tax liability of the Linsteadts, rather than to the corporate tax liability of Pronto.

Plainly, the information requested is the raw material from which tax liability may be computed, and which thus may shed light upon the correctness of the taxpayers' returns. The relevance of the requested information is further supported by the affidavits and the hearing testimony of the special agent assigned to the Linsteadt and Pronto tax investigation. The agent stated that it is necessary to examine the books and records requested by the summonses in order to determine the correct tax liabilities of the Linsteadts and Pronto. In the enforcement proceeding...

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