Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca8-04-01349/USCOURTS-ca8-04-01349-0/pdf.json

Parties Involved:
Philip A. Kaiser
Appellant
Douglas M. Mueller
Appellant
United States of America
Appellee

Document Text:

1

The Honorable Henry E. Autrey, United States District Judge for the Eastern

District of Missouri.

United States Court of Appeals

FOR THE EIGHTH CIRCUIT

___________

No. 04-1349

___________

United States of America, *

*

Plaintiff-Appellee, *

* Appeal from the United States

v. * District Court for the

* Eastern District of Missouri.

Philip A. Kaiser; * 

Douglas M. Mueller, *

*

Defendants-Appellants. *

___________

Submitted: January 10, 2005

Filed: February 10, 2005

___________

Before LOKEN, Chief Judge, MORRIS SHEPPARD ARNOLD and MURPHY,

Circuit Judges.

___________

MURPHY, Circuit Judge.

Philip Kaiser and Douglas Mueller appeal from an order enforcing Internal

Revenue Service (IRS) summonses seeking tax shelter information. They argue that

the district court1

 erred in finding that the IRS had a legitimate purpose for its

investigation and that the information sought was relevant to such a purpose. We

affirm.

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After investigating a charitable family limited partnership which two clients of

Kaiser and Mueller had used to obtain significant deductions for charitable

contributions, IRS Agent Cheryl Kiger concluded that the partnership was an abusive

tax shelter. She sought approval from the IRS Lead Development Center for an

investigation into whether Kaiser and Mueller were promoting or distributing abusive

tax shelters, in violation of I.R.C. § 6700, and whether injunctive relief should be

pursued under I.R.C. § 7408. The Center gave its approval on July 23, 2002 and the

case was assigned to Agent Kiger, who first recorded work on the matter in late

December. In the interim Kiger had completed her investigation of the two clients

and issued a report proposing substantial adjustments to their tax liability. In January

Mueller informed Agent Kiger that his clients would protest her report. Both Kaiser

and Mueller had previously succeeded in obtaining reductions of adjustments

proposed by Agent Kiger.

In February 2003 Agent Kiger sent letters notifying Kaiser and Mueller of her

investigation. Kaiser requested a meeting with her, and Kiger and three other IRS

officials met with appellants about the investigation on March 6, 2003. At the end

of the meeting, Agent Kiger issued eight summonses to Kaiser and Mueller. The

summonses requested information concerning a number of tax shelters described on

a website they maintained, a site she had discovered during her earlier investigation

of their clients. The summonses also sought information regarding the purchasers of

these tax shelters. 

Kaiser and Mueller appeared before Agent Kiger on March 17, 2003. Mueller

produced a number of documents but refused to provide the IRS with any materials

disclosing client identities, offering redacted versions in their place. IRS counsel

thereafter referred the summonses to the Department of Justice, which petitioned the

district court for their enforcement.

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Applying the standard articulated in United States v. Powell, 379 U.S. 48, 57-

58 (1964), the district court held that the government had established a prima facie

case for enforcement of the summonses. The court concluded that they had been

issued for the legitimate purpose of determining whether Kaiser and Mueller had

unlawfully promoted abusive tax shelters; that information regarding their dealings

with other clients was material and necessary to determine whether they had acted

unlawfully and whether injunctive relief should be pursued; that the IRS did not

already have the information sought; and that the IRS had completed all of the

necessary administrative steps for a summons to issue. The court also rejected

appellants' argument that it would be an abuse of process to enforce the summonses

because Agent Kiger was motivated to retaliate for their prior success in appealing

her proposals.

Kaiser and Mueller appeal on two separate grounds. First, they argue that the

investigation of their conduct was "lousy with improper purpose" and that the

government has not shown that the IRS had a legitimate basis for its inquiry. They

complain that Agent Kiger had a conflict of interest by investigating their clients and

them simultaneously; that Kiger pursued her investigation in retaliation for their

clients' appeal of her proposed adjustment; that Kiger intended her investigation to

drive a wedge between them and their clients; that Kiger lacked sufficient familiarity

with their clients' charitable family limited partnership to justify her recommendation

of an investigation; and that neither this partnership nor other entities described on

the Kaiser and Mueller website had been listed by the IRS as abusive tax shelters.

Second, appellants argue that the identity of their clients is not relevant to the IRS

investigation and that they had offered the agency all of the records sought, only

redacting identifying information. 

After reviewing the district court's decision for clear error, see Tax Liabilities

of John Does v. United States, 866 F.2d 1015, 1019 (8th Cir. 1989), we cannot say

that enforcement of the summonses was improper. The government demonstrated

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that its investigation was supported by the legitimate purpose of determining whether

Kaiser and Mueller had violated I.R.C. § 6700 and could thus be subject to injunctive

relief under I.R.C. § 7408. See I.R.C. § 7602(b) (summonses permitted for "purpose

of inquiring into any offense connected with the administration or enforcement of the

internal revenue laws"). The government also demonstrated that the client

information sought was directly relevant to these ends. Kaiser and Mueller's

speculative assertions of impropriety do not meet the heavy burden required to

disprove the legitimacy of the IRS investigation nor the relevance of the records it

pursues. United States v. Claes, 747 F.2d 491, 494 (8th Cir. 1984). 

For these reasons we affirm the order of the district court.

______________________________

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