t c memo united_states tax_court andrew j young and sondra r young petitioners v commissioner of internal revenue respondent docket no filed date p-w filed joint federal_income_tax returns with p-h for the and taxable years p-h settled the and tax years with r p-w seeks relief from joint_and_several_liability under sec_6015 with respect to the and tax_liabilities held p-w is entitled to relief from joint_and_several_liability pursuant to sec_6015 with respect to her and taxable years andrew j young and sondra r young pro sese robert h berman and timothy r berry for respondent memorandum findings_of_fact and opinion wherry judge on date respondent issued a notice_of_deficiency to andrew j and sondra r young in the notice respondent determined a deficiency in income_tax for of dollar_figure and a penalty of dollar_figure under sec_6662 the notice also determined a deficiency in income_tax for of dollar_figure a penalty of dollar_figure under sec_6662 and an addition_to_tax of dollar_figure under sec_6651 on date petitioner mr young timely filed a petition on behalf of himself and his spouse for redetermination of the deficiencies penalties and addition_to_tax for and with this court however petitioner mrs young did not sign the petition at that time a stipulation of settlement signed by mr young but not mrs young was filed with this court on date the stipulation of settlement resolved the deficiencies penalties and addition_to_tax at issue in the case for mr young that same day mrs young filed an amendment to the petition in which she stated 1unless otherwise indicated all section references are to the internal_revenue_code in effect at all relevant times all rule references are to the tax_court rules_of_practice and procedure 2the petition was not filed with this court until date but it was timely mailed on date see sec_7502 that she ratified and affirmed the petition filed on date and that i like to claim innocent spouse relief respondent subsequently determined that mrs young was entitled to sec_6015 innocent spouse relief mr young disagrees the sole issue for decision is whether mrs young is entitled to relief from joint_and_several_liability under sec_6015 for the years at issue mrs young filed for bankruptcy on date causing the court to stay the proceedings in this case on date mrs young’s bankruptcy case was closed on date and this court lifted its stay on date findings_of_fact some of the facts have been stipulated the stipulations with accompanying exhibits are incorporated herein by this reference at the time the petition was filed mr young and mrs young resided in california during the years at issue mr young was employed as a mortgage banker and was the sole source_of_income reported on form_w-2 wage and tax statement for the couple mrs young holds a degree in real_estate from the 3the effect of this amendment was to treat mrs young as if she had signed the petition as of the date filed date we also treat her claim for innocent spouse relief as an affirmatively pleaded defense to the determined deficiencies penalties and additions to tax 4certain of mrs young’s debts were discharged as a result of the bankruptcy proceeding but none of them are relevant to our decision in this case university of miami and held an active california real_estate license during the years at issue the youngs filed joint form sec_1040 u s individual_income_tax_return for the years at issue the returns for both years were prepared by darol smith an enrolled_agent as designated by the internal_revenue_service irs and signed by mr young and mrs young on line of the form_1040 the youngs reported losses of dollar_figure from schedule c profit or loss from business these schedule c losses were claimed to have resulted from the operation of the following businesses r v r us motor home rental travel max travel agent and youngs charter fishing boat the return for reported total schedule c losses of dollar_figure these losses were claimed to have resulted from the operation of the following businesses home pro realty inc real_estate evening star limousine limousine rental youngs charter motor home rental and travel agent following the issuance of the above-referenced notice_of_deficiency and the timely tax_court petition the case was set for trial but then continued twice in order to permit mrs young to file a claim for innocent spouse relief with respondent respondent to review mrs young’s claim and make a determination as to her eligibility for relief and mr young to have sufficient time to prepare to intervene in the proceedings if he chose to do so on date mrs young filed form_8857 request for innocent spouse relief with respondent mrs young indicated on the form that she was requesting relief for the years at issue and that she and mr young had been living apart since date mrs young stated that she signed the returns for the years at issue but did not prepare or review them before signing and had no knowledge of drew’s mr young’s income or the deductions he was claiming she also indicated that she had access to joint bank accounts during the years at issue but only to the extent mr young deposited funds in the accounts sufficient to cover household expenses on date mr young filed with respondent’s cincinnati service_center form questionnaire for non-requesting spouse mr young indicated on the form that for the years at issue mrs young prepared or helped prepare the returns gathered receipts gave tax documents to mr smith and asked mr smith to explain items or amounts on the returns he stated that 5mrs young also indicated on the form that she was claiming relief for the tax_year however as explained infra note the tax_year is not at issue during the years at issue mrs young had helped in the fishing boat travel agent and motor home rental activities for which the deductions on schedule c had been claimed in respondent’s pretrial memorandum he stated that the schedule c losses reported for the years at issue were disallowed because petitioners were unable to show that these activities were engaged in for profit demonstrate that the expenses were ordinary and necessary business_expenses and substantiate the expenses however respondent determined that mrs young did not have actual knowledge of the erroneous schedule c deductions that gave rise to the deficiencies and that these erroneous items were entirely allocable to mr young accordingly respondent conceded that mrs young is entitled to full relief from joint_and_several_liability under sec_6015 for the years at issue at trial mrs young contended that the last time she had played a meaningful role in the preparation of a federal_income_tax return was the year she indicated that for the years at issue she did not review the returns before signing stating you came home you pointed at the line you said sign 6at trial respondent acknowledged that the pretrial memorandum erroneously stated that the year at issue was respondent confirmed that mrs young was entitled to full relief under sec_6015 for the tax years and and that the entire amount of the now-settled deficiencies penalties and addition_to_tax for those years was allocable to mr young mrs young acknowledged that for the years at issue the couple incurred expenses to repair the boat and the motor home which they owned however no evidence was introduced indicating that mrs young viewed these expenses as anything but personal expenses mrs young also acknowledged that her real_estate license hung in the real_estate offices and that she was colisted as a selling agent on a property sold during mrs young initially conceded that she had sold east gray lane one of the properties listed by the real_estate activity in but later retracted this statement by denying any involvement in the real_estate activity for either of the years at issue mrs young testified that she allowed her name to be colisted with that of another agent larry friedman on that property in order to facilitate the sale of the property to friends of hers but she did not have any personal involvement in the actual sale mr young also testified at trial contrary to mrs young’s testimony he stated that mrs young was in fact dealing in real_estate during but contended that she simply was misremembering mr young also indicated that mrs young was involved in the preparation of the return he concluded by testifying that he never asked mrs young to sign any_tax returns without first reading them and that mrs young always had copies of the returns mrs young did not dispute the deficiencies penalties or addition_to_tax for the years at issue at any point during the trial therefore the only issue for decision is whether mrs young is entitled to relief from joint_and_several_liability under sec_6015 i jurisdiction opinion in cases involving requests for innocent spouse relief our jurisdiction is typically founded on the filing of a petition following the commissioner’s determination that the requesting spouse is not entitled to relief see sec_6015 this case does not fit that typical mold respondent has conceded that mrs young is entitled to innocent spouse relief mrs young’s claim for innocent spouse relief was raised in the amended and ratified petition as an affirmative defense to the determined deficiencies this court has jurisdiction to redetermine the deficiencies in this case because a valid notice_of_deficiency was issued and a petition was timely filed see rule a c 93_tc_22 abeles v 7mrs young did not sign the stipulated federal_income_tax settlement document and therefore would have been entitled to dispute the deficiencies penalties and addition_to_tax at trial on their merits however because these issues were not raised at trial we will treat them as abandoned see 50_tc_24 commissioner 91_tc_1019 in cases like this where a taxpayer raises innocent spouse relief as an affirmative defense this court need s no additional basis for our authority to render an opinion on such issues because the affirmative defense is part of the deficiency proceeding over which we have jurisdiction see 114_tc_276 ii overview of statutory relief from joint_and_several_liability in general spouses who elect to file a joint federal_income_tax return are jointly and severally liable for the entire amount of tax reported on the return as well as for any deficiency subsequently determined sec_6013 however sec_6015 provides three avenues of relief from joint_and_several_liability sec_6015 permits relief if the requesting spouse establishes inter alia that in signing the return she did not know and had no reason to know that there was an understatement_of_tax sec_6015 allows a separated or divorced spouse to request an allocation of liability to the nonrequesting spouse if the requesting spouse did not have actual knowledge of the items giving rise to the understatement_of_tax and sec_6015 allows the irs or the court to confer equitable relief depending on the particular facts and circumstances but only in situations where relief under sec_6015 and c is not available iii burden_of_proof and standard of review the spouse requesting relief generally bears the burden_of_proof in sec_6015 cases rule a 119_tc_306 aff’d 101_fedappx_34 6th cir an exception is found in sec_6015 which places upon the commissioner the burden of proving that a spouse electing relief under subsection c had actual knowledge at the time of signing the return of any item giving rise to the deficiency sec_6015 a procedural problem arises where the commissioner bears this burden of proving actual knowledge but favors granting relief and the only party opposing relief is the nonrequesting spouse mr young in this case the court has resolved the conflict by determining whether actual knowledge has been established by a preponderance_of_the_evidence as presented by all three parties pounds v commissioner tcmemo_2011_202 stergios v commissioner tcmemo_2009_15 accordingly mrs young bears the burden_of_proof in this case generally but we will determine whether actual knowledge has been established by a preponderance of all the evidence presented the standard of review in determining whether relief is warranted under subsection b c or f of sec_6015 is de novo 132_tc_203 we will review the record de novo iv relief under sec_6015 respondent has conceded that mrs young is entitled to full relief from joint_and_several_liability under sec_6015 for this reason and because it is the subsection that best fits mrs young’s situation we will focus our review of mrs young’s eligibility for relief on subsection c sec_6015 allows a requesting spouse to allocate the items giving rise to the deficiency to the nonrequesting spouse if certain requirements are met to be eligible for sec_6015 relief the electing spouse must establish that the spouses filed joint returns for the years at issue at the time the election for relief was made the spouses were legally_separated or divorced or had not been members of the same household at any time during the previou sec_12 months and the election for relief was made after a deficiency was asserted but no later than two years after the commissioner began collection activities none of the parties dispute that these requirements are satisfied relief under sec_6015 is not available where the commissioner or in this case all three parties proves that the requesting spouse had actual knowledge at the time such individual signed the return of any item giving rise to a deficiency which is not allocable to such individual under subsection d sec_6015 emphasis added the items giving rise to the deficiency in this case were losses resulting from erroneous schedule c deductions in determining whether a requesting spouse had actual knowledge of an improperly deducted item on the return more is required than the requesting spouse’s knowledge that the deduction appears on the return or that the former spouse operated an activity at a loss 116_tc_198 a requesting spouse has actual knowledge of an erroneous deduction if the requesting spouse has knowledge of the factual circumstances which made the item unallowable as a deduction king v commissioner t c pincite sec_1_6015-3 income_tax regs respondent disallowed the schedule c losses because the activities in which the losses occurred were not engaged in for profit and the unsubstantiated expenses were not ordinary and necessary business_expenses our inquiry will focus on whether mrs young had actual knowledge of these two factual circumstances for each of the five schedule c activities considered separately at the time she signed the returns for the years at issue a limousine rental_activity the record is devoid of any evidence that mrs young was even aware of the limousine rental_activity or any related_income or expenses therefore the parties have failed to prove that mrs young had actual knowledge of the facts that led to disallowing the losses claimed to have resulted from this activity b motor home rental fishing boat and travel agent activities it is clear from the record that mrs young was aware of and occasionally paid for expenses related to the couple’s motor home and fishing boat for the years at issue however mrs young’s testimony was clear that she did not pay the expenses out of business accounts and that she never viewed those expenses as anything but personal expenses having not reviewed the returns before signing them mrs young was unaware that these expenses were being reported as schedule c business_expenses see demattos v commissioner tcmemo_2010_ requesting spouse denied relief where she was aware of the deductions and prepared the returns mrs young also acknowledged that during the years at issue she would book travel for herself and mr young but she denied performing this service for nonfamily members for a fee we are convinced that mrs young was also unaware these expenses were being reported as schedule c business_expenses mr young’s testimony failed to overcome this testimony by mrs young mr young did indicate on his nonrequesting spouse questionnaire that mrs young had participated in these activities but at trial he failed to provide specific details on mrs young’s level of participation absent specifics beyond his bald allegation we are inclined to believe mrs young’s testimony that she viewed the expenses related to these activities as purely personal see sykes v commissioner tcmemo_2009_197 requesting spouse denied relief where she had intimate knowledge of the business dealings and frequently discussed the business with her husband the parties have failed to show by a preponderance_of_the_evidence that mrs young had actual knowledge that the expenses related to these activities were claimed as deductions and were not ordinary and necessary business_expenses nor have the parties shown that she knew that these activities were not engaged in with a primary purpose of making a profit c real_estate activity the level of mrs young’s involvement in the real_estate activity is not as clear cut mrs young’s real_estate license hung in the offices and she was listed with contact information as a colisting agent on at least one property sold during mrs young’s trial testimony regarding her involvement in the real_estate activity was decidedly less convincing than her testimony regarding her involvement in the other schedule c activities at one point she acknowledged selling at least one property in but she later retracted this by denying any personal involvement in any real_estate activity for the years at issue she went as far as to say that she did not even know where the real_estate offices were mr young disagreed and reiterated at the trial that she had dealt in real_estate in on this point neither party’s testimony was especially compelling regardless there is still insufficient evidence to conclude that mrs young had actual knowledge of the factual circumstances that led to the disallowed deductions relating to the real_estate activity knowledge of and involvement in an activity by itself is insufficient to demonstrate actual knowledge of the circumstances leading to the disallowance of the item on the return compare king v commissioner t c pincite the taxpayer assisted minimally in the operation of the activity and was aware that it was not profitable but was granted relief because the commissioner failed to specifically demonstrate that the taxpayer knew that her former spouse did not have the primary objective of making a profit with phemister v commissioner tcmemo_2009_201 the taxpayer had actual knowledge of the facts that made the deductions unallowable where she ran the day- to-day operations and was well aware of the facts including the defective recordkeeping that led to the conclusion that the activity was not an activity engaged in for profit clearly mrs young was aware of the real_estate activity during the years at issue however mr young has failed to demonstrate anything more than at best minimal participation in the activity mrs young did not have day-to-day control or unique factual knowledge as did the taxpayer in phemister accordingly we conclude that mrs young did not have actual knowledge that the expenses related to the real_estate activity were not ordinary and necessary business_expenses nor have the parties shown that mrs young knew that making a profit was not the primary motive for undertaking the real_estate activity for all five of the schedule c activities there is not sufficient evidence to establish that mrs young had actual knowledge of the facts which caused respondent to disallow the losses claimed to have resulted from those activities therefore mrs young is entitled to relief from liability to the extent the disallowed items are properly allocable to mr young under sec_6015 v allocation of deficiency under sec_6015 if a requesting spouse qualifies for relief under sec_6015 that spouse’s liability for the deficiency is limited to the amount allocable to her as determined under sec_6015 sec_6015 provides that the items giving rise to the deficiency on the joint_return are to be allocated to the individuals filing the return in the same manner as the items would have been allocated if the individuals had filed separate returns sec_6015 in other words an erroneous item is allocated to the spouse to whom the erroneous item is attributed 125_tc_211 there is no evidence in the record that mrs young had any knowledge of the limousine rental activities the expenses related to the motor home rental fishing boat and travel agent activities were all viewed by mrs young as personal nonbusiness expenses mrs young was aware of the real_estate activity but had only minimal involvement if any in that activity during the years at issue conversely mr young was the driving force behind the expenses_incurred for these activities during the years at issue importantly he was the party who knew that these expenses would be claimed as tax deductions for the years at issue we agree with respondent that all five schedule c activities and the erroneous deductions related thereto are attributable to mr young see king v commissioner t c pincite therefore no amount of either deficiency is allocable to mrs young and she is entitled to full relief from joint_and_several_liability under sec_6015 for the years at issue the court has considered all of the parties’ contentions arguments requests and statements to the extent not discussed herein we conclude that they are meritless moot or irrelevant to reflect the foregoing decisions will be entered under rule


t c no united_states tax_court thomas j and bonnie f ratke petitioners v commissioner of internal revenue respondent docket no 9641-01l filed date after this court ruled for ps in the instant collection case ps moved for an award of costs under sec_7430 i r c and then for sanctions under sec_6673 i r c in connection with these motions ps seek discovery of a memorandum sent by r’s initial trial counsel to r’s national_office at the time r’s answer was filed in the instant case and the unredacted version of the responding memorandum sent a few months later by r’s national_office r provided to ps a redacted version of the latter memorandum r resists discovery of the unredacted memoranda claiming work product doctrine privilege this opinion supplements ratke v commissioner tcmemo_2004_86 ps contend the memoranda are not work product at the current stage of the litigation ps are entitled to discovery even if the memoranda are work product and r waived the privilege held both memoranda were work product when prepared for the case in chief and continue to be work product in the current stage of the litigation held further having examined both memoranda in_camera we conclude that neither memorandum contains information sufficiently important to outweigh the privacy and other concerns underlying the work product doctrine held further r’s brief reference in the motion papers to the memoranda but not to either memorandum’s contents does not amount to a testimonial use of either memorandum that would constitute an implied waiver of the work product doctrine privilege jack b schiffman for petitioners robert m fowler for respondent opinion chabot judge this matter is before us on petitioners’ motion for award of reasonable litigation and administrative costs under section as well as petitioners’ motion for sanctions under sec_6673 in the instant collection proceeding the issue for decision is whether two memoranda unless indicated otherwise all section references are to sections of the internal_revenue_code_of_1986 as in effect for proceedings commenced on the day the petition in the instant case was filed prepared in connection with the case in chief are protected from discovery under the work product doctrine privilege in connection with these motions background when the petition was filed in the instant case petitioners resided in glendale arizona petitioners timely filed their federal_income_tax return petitioners showed a dollar_figure tax_liability for on date respondent sent to petitioners a notice_of_deficiency that determined a dollar_figure deficiency liability of dollar_figure minus the dollar_figure liability shown on petitioners’ tax_return and a dollar_figure penalty under sec_6662 on date petitioners sent a petition to the court docket no hereinafter sometimes referred to as the case disputing the entire amounts of the deficiency and penalty so determined also on date petitioners sent to respondent a second amended tax_return form 1040x amended u s individual_income_tax_return showing a tax_liability of dollar_figure and showing that this was dollar_figure greater than the liability they had previously reported on date respondent made an additional_assessment of the dollar_figure shown on this form 1040x along with interest and notified petitioners of this additional_assessment the parties settled the case and on date the court entered a decision pursuant to the parties’ stipulated agreement that petitioners had a dollar_figure deficiency and no addition_to_tax under sec_6662 on date respondent assessed this dollar_figure deficiency and sent to petitioners a notice_and_demand for dollar_figure on date respondent sent to petitioners a final notice - notice_of_intent_to_levy and notice of your right to a hearing relating to on date petitioners filed form request for a collection_due_process_hearing on date respondent mailed to petitioners a notice_of_determination concerning collection action s under sec_6320 and or on date petitioners filed their petition in the instant case on date petitioners filed an amended petition on date respondent filed the answer to this amended petition this answer was signed by ann m welhaf hereinafter sometimes referred to as welhaf acting associate area_counsel and dated date welhaf also prepared a memorandum dated date addressed to assistant chief_counsel procedure and administration collection bankruptcy and summons attn alan levine chief branch cbs this memorandum hereinafter sometimes referred to as the welhaf memorandum is summarized by respondent as follows this memorandum is a request for advice from ms welhaf to the office of associate chief_counsel procedure administration of respondent’s national_office concerning proposed legal arguments to be made at trial in the pending litigation this request was made while this case was docketed the author recommends several legal arguments to be made in the litigation subject_to national_office approval the memorandum also sets forth the factual background concerning this case mitchell s hyman senior technical reviewer branch collection bankruptcy and summons sent a memorandum dated date hereinafter sometimes referred to as the hyman memorandum which is summarized by respondent as follows this memorandum responded to ms welhaf’s date memorandum seeking advice concerning the proposed legal arguments to be made at trial in the pending litigation the date memorandum concluded that the irs was authorized by sec_6201 to make an assessment pursuant to the amended_return filed by petitioners petitioners were equitably estopped from contesting the validity of the assessment the stipulated settlement was a valid contract the amended_return did not pursuant to the court’s order respondent provided the welhaf memorandum to the court for in_camera inspection together with a summary the summary was filed and served on petitioners after inspecting the welhaf memorandum the court concludes that respondent’s summary is a fair description of the welhaf memorandum pursuant to the court’s order respondent provided the unredacted hyman memorandum to the court for in_camera inspection together with a summary the summary was filed and served on petitioners after inspecting the unredacted hyman memorandum the court concludes that respondent’s summary is a fair description of the unredacted hyman memorandum constitute a waiver of the restrictions on assessment and that petitioners were not precluded by sec_6330 from arguing that the assessment violated sec_6213 on date the court issued a notice of trial in the instant case in due course the instant case was continued the instant case was again set for trial the court dealt with motions by both sides the trial was held briefs were filed the court issued tcmemo_2004_86 holding for petitioners and the court entered decision that respondent may collect only dollar_figure for taxable_year as set forth in the court’s date decision the decision that ended the case on petitioners’ motion this decision was vacated petitioners then moved for an award of costs under sec_7430 and later moved for sanctions under sec_6673 at some point respondent provided to petitioners a redacted version of the hyman memorandum in connection with the latter motions the parties have stipulated the redacted hyman memorandum petitioners now seek to discover the unredacted welhaf memorandum and the unredacted hyman memorandum respondent claims that the memoranda are protected work product and refuses petitioners’ discovery requests we directed respondent to submit these memoranda for in_camera inspection along with an explanation of why the memoranda should not be disclosed to petitioners in whole or in part see supra note sec_2 and both the welhaf memorandum and the hyman memorandum were prepared as part of respondent’s counsel’s efforts to prepare legal theories and plan strategy for the instant case a preliminary discussion petitioners want to discover the welhaf memorandum and the unredacted hyman memorandum see rules respondent objects to discovery of these memoranda on the ground that both memoranda are privileged see rule b a party opposing discovery on such a ground has the burden of establishing that the information sought is privileged 112_tc_304 104_tc_677 the privilege respondent claims is the one resulting from the work product doctrine see rules committee notes 60_tc_1058 if the party opposing discovery establishes that the information sought is work product then discovery will not be required unless the court determines that in the situation before it the information sought should nevertheless be disclosed 329_us_495 ames v commissioner t c pincite unless indicated otherwise all rule references are to the tax_court rules_of_practice and procedure b parties’ contentions respondent contends that both the entire welhaf memorandum and the redacted portions of the hyman memorandum are protected from discovery pursuant to the work product doctrine respondent maintains that a both memoranda are work product b to the extent the memoranda include fact work product petitioners cannot show a substantial need or undue_hardship because they are well aware of all the facts in this case and c to the extent the memoranda include opinion work product the memoranda are absolutely protected from disclosure or in any event are not disclosable because petitioners have not made a far stronger showing than the ‘substantial need’ and ‘without undue hardship’ standard petitioners assert that the work product doctrine is not absolute relying on rule b of the federal rules of civil procedure they contend that they need to have access to the welhaf memorandum in order to determine whether welhaf ‘cherry picked’ the facts favorable to her position and did not include facts unfavorable to her position this information would be relevant to a substantial_authority under sec_7430 and b sanctionable misconduct under sec_6673 and rule a has the effect of requiring disclosure so that the parties can stipulate to the matters relevant to the motions before the court petitioners contend that the same considerations apply to the unredacted hyman memorandum petitioners also maintain that the memoranda were prepared for the case in chief and are not work product with respect to the post-decision application_for litigation costs and sanctions finally petitioners maintain that respondent’s efforts to use the redacted version of the hyman memorandum as support for its claim of substantial justification under sec_7430 should be treated as a waiver of the work product doctrine privilege for the entire hyman memorandum c summary and conclusions both the welhaf memorandum and the hyman memorandum are work product and so are privileged the privilege is qualified we examined both memoranda in_camera and conclude that exceptions to this privilege do not apply and this privilege has not been waived accordingly neither memorandum is required to be disclosed in the present proceeding d analysi sec_1 in general we set forth this court’s general view of the work product doctrine in 63_tc_404 as follows the work product doctrine was given its first thorough exposition in the federal courts in 329_us_495 in that case the supreme court held that materials prepared in anticipation of litigation including witness’ statements were not subject_to discovery as a matter of right because such discovery would be harmful to the orderly prosecution and defense of legal claims in adversary proceedings work product as a term of art is used to describe such protected materials see hickman v taylor supra pincite the holding in hickman v taylor supra has been specifically incorporated in the federal rules of civil procedure as rule b further the work product doctrine is given negative recognition in the tax_court rules_of_practice and procedure in that even though it is not mentioned in the body of the rules it is dealt with in the notes of our rules committee to rule b these notes state in pertinent part as follows the other areas ie the work product of counsel and material prepared in anticipation of litigation or for trial are generally intended to be outside the scope of allowable discovery under these rules and therefore the specific provisions for disclosure of such materials in frcp b have not been adopted cf 329_us_495 t c are the memoranda work product the welhaf memorandum describes welhaf’s intended arguments in defending the instant case and asks for concurrences or opinions regarding these intended arguments the hyman memorandum responds to the elements of the welhaf memorandum the welhaf memorandum was sent about the time respondent filed for a summary of the discovery evolution that led to 329_us_495 and interpretations of the law since see wright miller marcus federal practice and procedure civil 2d secs that treatise and its most recent pocket part are hereinafter sometimes referred to as wright miller marcus the answer in the instant case the hyman memorandum was sent before the instant case was first noticed for trial thus both memoranda were prepared as part of respondent’s counsels’ efforts to prepare legal theories and plan strategy for the instant case hickman v taylor u s pincite it follows that both memoranda are work product for the instant case petitioners contend that both memoranda were prepared for the case in chief and are not work product with respect to the post-decision application_for costs and sanctions we disagree firstly the instant case is the same litigation for which the memoranda were prepared the litigation for which the memoranda were prepared will not be concluded by entry of decision until petitioners’ motions under sec_7430 and sec_6673 have been dealt with we have not found and petitioners have not directed our attention to any case law indicating that one lawsuit should be segmented for purposes of determining whether a document is work product secondly in ames v commissioner supra we dealt with a document prepared by the commissioner’s counsel in anticipation of criminal tax prosecution the taxpayer sought production of rule f provides that the disposition of the sec_7430 motion shall be included in the decision entered in the case indeed when the court entered decision for petitioners in the instant case after issuing tcmemo_2004_86 petitioners moved to vacate the decision so that they would be permitted to file their sec_7430 motion that document in the civil tax proceeding that followed the criminal tax case we concluded in ames that there was sufficient nexus between the criminal litigation for which the document had originally been prepared and the civil litigation before this court so that the document qualified as work product in the civil litigation ames v commissioner t c pincite- additionally the court_of_appeals for the tenth circuit noted that it appears every circuit to address the issue has concluded that at least to some degree the work product doctrine does extend to subsequent litigation 136_f3d_695 10th cir and cases cited therein compare the foregoing with 93_tc_521 in which we concluded that the fact that the work product at issue was prepared approximately a decade ago in distinctly different litigation was one of three factors that collectively led us to rule that the work product doctrine privilege did not protect against disclosure in that case in this respect the instant case is clearly distinguishable from hartz mountain industries a fortiori a document prepared for the same litigation as in the instant case qualifies as work product see discussion in ames v commissioner t c pincite n see also bernardo v commissioner t c pincite n see generally wright miller marcus sec nn we hold that both memoranda are work product for purposes of the litigation as to petitioners’ motions under sec_7430 and sec_6673 extent of the privilege the privilege resulting from the work product doctrine7 is qualified it may be overcome by an appropriate showing ames v commissioner t c pincite hartz mountain industries v commissioner t c pincite rule b of the federal rules of civil procedure requires a showing of substantial need and an inability to otherwise obtain the substantial equivalent without undue_hardship that rule sets aside disclosure of the mental impressions conclusions opinions or legal theories of an attorney or other representative of a party concerning the litigation as to such opinion work product the court_of_appeals for the ninth circuit to which the instant case is appealable has summarized the standards in 976_f2d_573 9th cir as follows a party seeking opinion work product must make a showing beyond the substantial need undue_hardship test required under rule b for non-opinion work product 449_us_383 101_sct_677 66_led_584 see wright miller marcus sec nn and the supreme court however has so far declined to decide whether opinion work product is absolutely protected from discovery id pincite s ct pincite we agree with the several courts and commentators that have concluded that opinion work product may be discovered and admitted when mental impressions are at issue in a case and the need for the material is compelling both elements are met here in a bad faith insurance claim settlement case the strategy mental impressions and opinion of the insurer’s agents concerning the handling of the claim are directly at issue further holmgren’s need for the exhibits was compelling see generally wright miller marcus sec petitioners contend that our rule a requires respondent to provide ms welhaf’s memorandum in its entirety so rule a provides in pertinent part as follows rule stipulations for trial a stipulations required general the parties are required to stipulate to the fullest extent to which complete or qualified_agreement can or fairly should be reached all matters not privileged which are relevant to the pending case regardless of whether such matters involve fact or opinion or the application of law to fact included in matters required to be stipulated are all facts all documents and papers or contents or aspects thereof and all evidence which fairly should not be in dispute the requirement of stipulation applies under this rule without regard to where the burden_of_proof may lie with respect to the matters involved documents or papers or other exhibits annexed to or filed with the stipulation shall be considered to be part of the stipulation that counsel can stipulate as to which facts were set forth and which facts were not set forth omitted in ms welhaf’s memorandum to the chief counsel’s office respondent contends as far as ms welhaf’s opinion work product is concerned it is respondent’s view that such opinion work product is absolutely protected from disclosure we reject both sides’ contentions insofar as they would preclude us from conducting an appropriate balancing of interests in sec_7430 and sec_6673 disputes we decline to adopt either side’s approach in an effort to give meaningful effect to the relevant public policies in a practical way in the instant case we chose to conduct in_camera inspections of the two unredacted memoranda we recognize that other courses of action may be preferable in other circumstances application to this case having conducted an in_camera review of the welhaf memorandum and the unredacted hyman memorandum we conclude there is neither a substantial need to discover any of the fact-based work product nor compelling need to discover any of the opinion work product a redacted version of the hyman memorandum was provided to petitioners the redacted version of the hyman memorandum discloses the statements about matters of fact but not all of the legal strategies or opinions set forth in the unredacted hyman memorandum the statements about matters of fact presented in the redacted memorandum are identical to those presented in the unredacted hyman memorandum petitioners have the redacted version of the hyman memorandum and so we conclude that petitioners are in possession of the fact-based work product we further conclude that as to the legal strategies and opinions the redacted version of the hyman memorandum and respondent’s summary of the unredacted version of the hyman memorandum supra note sec_2 and taken together provide a fair representation of the legal strategies and opinions in the unredacted version of the hyman memorandum because petitioners were provided with a fair representation of the unredacted legal strategies and opinions and the redacted portions would not impact the outcome of petitioners’ motions under sec_7430 and sec_6673 in the instant case we conclude that petitioners do not have a compelling need to discover this opinion work product petitioners’ desire to discover the unredacted version of the hyman memorandum is outweighed by the protection afforded by the privacy privilege under the work product doctrine the welhaf memorandum presents statements about matters of fact that are substantially_similar to those presented in the redacted version of the hyman memorandum because petitioners are already in possession of the equivalent fact-based work product in the form of the redacted version of the hyman memorandum we conclude that petitioners have neither a substantial need to discover the fact-based work product in the welhaf memorandum nor an inability to obtain a substantial equivalent of this fact-based work product without incurring undue_hardship the welhaf memorandum suggests and analyzes various positions respondent might take in the litigation in the instant case there is no smoking gun in the welhaf memorandum establishing that respondent’s position in the underlying litigation was not substantially justified and thereby possibly entitling petitioners to litigation costs under sec_7430 nor is there a smoking gun in the welhaf memorandum that would prove respondent’s attorney unreasonably and vexatiously multiplied the proceedings and thereby entitle petitioners to litigation costs under sec_6673 because the welhaf memorandum would not impact the outcome of petitioners’ motions under sec_7430 and sec_6673 in the instant case we conclude there is no compelling need to discover the memorandum petitioners’ desire to discover the welhaf memorandum is outweighed by the protection afforded by the privacy privilege under the work product doctrine accordingly we sustain respondent’s contention that the work product doctrine privilege protects both memoranda from discovery waiver petitioners contend that even if the memoranda were privileged under the work product doctrine respondent should be treated as having waived the privilege because to permit respondent to withhold ms welhaf’s factual representation to the chief counsel’s office from the ratkes would allow respondent to use the work product doctrine as both a sword and shield litigation tactic in this post-decision proceeding for litigation costs and sanctions as opined by the federal_circuit in echostar 448_f3d_1294 fed cir we recognize that the line between factual work product and opinion work product is not always distinct especially when as here an attorney’s opinion may itself be factual work product when faced with the distinction between where that line lies however a court should balance the policies to prevent sword-and-shield litigation tactics with the policy to protect work product id pincite the overarching goal of waiver in such a case is to prevent a party from using the advice he received as both a sword by waiving privilege to favorable advice and a shield by asserting privilege to unfavorable advice see fort james corp v solo cup co f 3d pincite fed cir in re martin marietta corp f 2d pincite 4th cir 676_f2d_793 d c cir w hen a party seeks greater advantage from its control_over work product than the law must provide to maintain a healthy adversary system then the balance of interests recognized in hickman shifts to the extent the work- product immunity could have such an effect it is waived id pincite in hartz mountain industries v commissioner t c pincite we summarized the waiver rules as follows protection derived from the work product doctrine is not absolute 422_us_225 further the work product doctrine like the attorney-client_privilege may be waived united_states v nobles supra protection afforded by the work product doctrine to opinion work product may also be waived see 676_f2d_793 d c cir 110_frd_688 s d n y in hartz mountain industries and each of the three cited cases therein the relevant court concluded that the proponent of the privilege attempted to present a one-sided view of a critical matter in dispute and refused to sustain the privilege in that setting in nobles a defendant in a criminal case was not permitted to present testimony of an investigator unless the defendant turned over to the prosecution those portions of the investigator’s report that related to the investigator’s expected testimony when the defense called its investigator as a witness the trial_court ruled that the investigator’s report after inspection and editing in_camera would have to be turned over to the prosecutor the defense stated that the report would not be turned over whereupon the trial_court ruled that the investigator would not be permitted to testify 422_us_225 the supreme court held that the trial court’s preclusion sanction was an entirely proper method of assuring compliance with its disclosure order id pincite in hartz mountain industries v commissioner t c pincite we ruled as follows finally petitioner has waived the work product doctrine by making a testimonial use of work product materials see in re sealed case supra pincite coleco industries inc v universal city studios supra pincite petitioner submitted affidavits from its in-house counsel to support its internal position with respect to the antitrust litigation by offering this selective disclosure of work product to establish its intent petitioner has waived all work product protection relevant to the same issue and fairness requires discovery of all work product that pertains to petitioner’s antitrust settlement intentions coleco industries inc v universal city studios supra thus although partial disclosure is not necessarily fatal to a claim of work product doctrine privilege a testimonial use of the disclosed material may result in a conclusion that in fairness the related material must be disclosed even though it would otherwise be protected from disclosure this has some similarity to fed r evid under which a party may interrupt another party’s presentation in order to require the introduction at that time of certain evidence which ought in fairness to be considered contemporaneously with the other party’s evidence in 448_f3d_1294 fed cir defendants to a willful patent infringement suit asserted the defense of reliance on advice of counsel the court_of_appeals ruled work-product waiver extends only so far as to inform the court of the infringer’s state of mind the overarching goal of waiver in such a case is to prevent a party from using the advice he received as both a sword by waiving privilege to favorable advice and a shield by asserting privilege to unfavorable advice id pincite we note that in response to petitioners’ sec_7430 motion respondent refers to the two memoranda and respondent’s actions under sec_6110 resulting in disclosure of the redacted hyman memorandum as we view it respondent’s references to the two memoranda are in the course of a recital of sequence of events the references are not by way of a contention that the existence of the two memoranda or the text of the redacted hyman memorandum is evidence showing that respondent’s position was substantially justified within the meaning of sec_7430 petitioners have not directed our attention to any attempt by respondent to make a testimonial use of either of the two memoranda hartz mountain industries v commissioner t c pincite or to use either of the two memoranda as a sword in re echostar communications corp f 3d pincite we conclude that respondent has not waived the work product doctrine privilege with respect to the hyman memorandum we do not understand petitioners to contend that respondent waived the privilege with respect to the welhaf memorandum except as a derivative of their contention as to the hyman memorandum we hold that the privilege has not been waived as to either memorandum conclusion the unredacted memoranda are privileged from disclosure under the work product doctrine privilege neither memorandum includes material such that the need to discover the work product is compelling finally respondent has not waived the protection of the work product doctrine privilege an appropriate order will be issued denying petitioners’ request to discover the unredacted memorandadollar_figure we note that the parties have stipulated the text of the redacted hyman memorandum as a joint exhibit relating to petitioners’ sec_7430 and sec_6673 motions we have concluded that respondent’s references to the two memoranda in materials filed with the court up to now do not constitute a use leading to waiver of the work product doctrine privilege


internal_revenue_service number release date index number --------------- ------------ ----------------------------- ------------------------------------- ------------------------------------- ein ---------------- department of the treasury washington dc person to contact ------------------------- id no ------------ telephone number -------------------- refer reply to cc ita - plr-115253-05 date date - dear ---- --------- this is in reference to a form_1128 application to adopt change or retain a tax_year submitted on behalf of the above-named taxpayer requesting permission to change its accounting_period for federal_income_tax purposes from a taxable_year ending march to a taxable_year ending december effective date the taxpayer has requested that the form_1128 be considered timely filed under the authority contained in sec_301_9100-3 of the procedure and administration regulations section of revproc_2002_37 2002_1_cb_1030 provides that a taxpayer must file a form_1128 on or before the due_date including extensions of the federal_income_tax return for the first effective tax_year according to the information submitted the taxpayer did not file an extension for the first effective tax_year thus the taxpayer’s form_1128 requesting to change its accounting_period to a tax_year ending date was due on or before date the information furnished also indicates that the application_for the change in accounting_period was filed late because of an error or misunderstanding however this application_for sec_301_9100-3 relief was filed within days of the return's due_date sec_1_442-1 of the income_tax regulations provides that in order to secure the commissioner's consent to a change in annual_accounting_period the taxpayer must file an application on form_1128 with the commissioner within such time and in such manner as is provided in administrative procedures published by the commissioner but for a timely filing the taxpayer's form_1128 would be subject_to the automatic consent procedures of revproc_2002_37 sec_301_9100-3 provides that requests for extensions of time for regulatory elections that do not meet the requirements of sec_301_9100-2 automatic extensions such as the present situation must be made under the rules of sec_301_9100-3 requests for relief subject_to sec_301_9100-3 will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good_faith and that the granting of relief will not prejudice the interests of the government based on the facts and representations made it is held that the taxpayer has acted reasonably and in good_faith and that the granting of relief will not prejudice the interests of the government accordingly the requirements of the regulations for the granting of relief have been satisfied in this case and the taxpayer's late filed form_1128 requesting permission to change from a taxable_year ending march to a taxable_year ending december effective december ------- is considered timely filed the ruling contained in this letter is based upon facts and representations submitted by the taxpayer and accompanied by a penalties of perjury statement executed by an appropriate party this office has not verified any of the material submitted in support of the request for a ruling verification of the factual information representations and other data may be required as part of an examination process this ruling addresses the granting of sec_301_9100-3 relief only no opinion is expressed or implied concerning the tax consequences of any other matter specifically no opinion is expressed as to whether the taxpayer is permitted under the internal_revenue_code and applicable regulations to change to the tax_year requested in the subject form_1128 a copy of this letter_ruling and taxpayer's form_1128 are being forwarded to the service_center where the taxpayer files its federal_income_tax returns with instructions that the form_1128 be considered timely filed and processed in accordance with established procedures under revproc_2002_37 the taxpayer must file a federal_income_tax return for the short_period necessary to effect the change within days of the date of this ruling the taxpayer should attach copies of this ruling and the form_1128 to that return in accordance with the provisions of a power_of_attorney currently on file we are sending a copy of this letter_ruling to the taxpayer’s authorized representative this ruling is directed only to the taxpayer that requested it sec_6110 provides that it may not be used or cited as precedent enclosures sincerely yours william a jackson branch chief branch office of associate chief_counsel income_tax accounting copy of this letter copy for sec_6110 purposes


internal_revenue_service number release date index number 45c ---------------------- ------------------------ ----------------------- ------------------------------- department of the treasury washington dc third party communication date of communication month dd yyyy person to contact ------------------------ id no ------------- telephone number ---------------------- refer reply to cc psi b06 plr-112529-17 date date re ----------------------------------------------------------------------- legend taxpayer --------------------------- ------------------------ company b ------------------------------------------------------ company c --------------------- company d --------------------------------------- company e ------------------------ company f ------------------------------------- state a state b country drug -------------- ---------- ------------- ----------------------------- ----------------------------------------------------------------------------------------- condition -------------------------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------ ------------------------------------------------------ plr-112529-17 condition ------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------ ---------------------------------------------------------------------------------- ------- ------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------ ------------------------------- date date date date date date -------------------- ------------------------ ---------------------------- -------------------------- ---------------------- -------------------- dear --------------- this letter responds to a request for a private_letter_ruling dated date and subsequent correspondence submitted on behalf of taxpayer by your authorized representatives concerning sec_45c of the internal_revenue_code the relevant facts as represented in your submissions are set forth below facts taxpayer is a state a corporation with its headquarters in state b taxpayer is wholly owned by company b a state a corporation which is wholly owned by company c a state a limited_liability_company company c is the wholly owned subsidiary of company d a state a limited_liability_company which is the wholly owned subsidiary of company e a country corporation company d files a consolidated_return for the taxpayer consolidated_group on date company c acquired company b and its subsidiary company f which held the rights to drug company f was then renamed as taxpayer and continues to be the legal owner of drug on date the fda granted drug orphan drug designation under sec_526 of the fdca for the treatment of condition on date company f submitted a new drug application nda to the food and drug administration fda to obtain marketing approval for drug company f submitted the drug nda under sec_505 of the federal food drug and cosmetic act fdca under which all ndas are submitted plr-112529-17 and subsequently amended the pending nda several times prior to its eventual approval in a letter dated date the fda approved the drug nda for the treatment of drug for the treatment of condition under the accelerated approval program described in sec_506 of the fdca and fda regulations pincite c f_r part subpart h the sec_506 accelerated approval provision of the fdca authorizes the fda to approve an application_for a product for a serious or life-threatening disease or condition including a fast track product upon a determination that the product has an effect on a surrogate endpoint that is reasonably likely to predict an effect on irreversible morbidity or mortality or other clinical benefit taking into account the severity rarity or prevalence of the condition and the availability or lack of alternative treatments as set forth in sec_506 of the fdca the fda can subject a product approved under accelerated approval to the limitation that the sponsor conduct appropriate post-approval studies to verify and describe the predicted effect on irreversible morbidity or mortality or other clinical benefit depending on the outcome of the required confirmatory studies or if the sponsor fails to conduct the required studies the fda could move to withdraw the approval of an accelerated approval product sec_506 of the fdca authorizes the fda to expedite the withdrawal of an accelerated approval for several reasons including if a sponsor fails to conduct any required post-approval study of the drug with due diligence or a study required to verify and describe the predicted effect on irreversible morbidity or mortality or other clinical benefit of the product fails to verify and describe such effect or benefit specific requirements of the accelerated approval program are described in the fda’s accelerated approval regulations which predate the fdca sec_506 accelerated approval provisions in the drug approval letter the fda cites to those regulations explaining that the nda as amended is approved under the provisions of accelerated approval regulations cfr effective on the date of this letter marketing of this drug product and related activities must adhere to the substance and procedures of the referenced accelerated approval regulations the drug approval letter further provides --------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------- -------------------------------- plr-112529-17 regarding the confirmatory study that the fda required for drug as described in the date drug approval letter the fda required a post marketing requirement pmr study to verify the drug clinical benefit also included in the approval letter was a schedule with the trial requirements and required completion dates following the acquisition of company b taxpayer reviewed the pmr study for drug and determined that the study was not feasible given the required sample size and limited patient population for the orphan indication taxpayer met with the fda on date to discuss an alternative study design and revised completion milestones the fda agreed with taxpayer’s proposal for an amended study design in a letter dated date the fda released taxpayer from the original pmr and conveyed a new pmr additionally pmr completion dates were updated taxpayer represents that company f submitted the nda to obtain marketing approval for drug under sec_505 of the fdca final approval of the nda is under sec_505 of the fdca as contemplated in sec_45c further taxpayer represents that the pmr study is being carried_out_under an exemption under sec_505 of the fdca or regulations issued under such section applicable to the nda application ruling requested taxpayer requests a ruling that taxpayer’s qualified_clinical_testing_expenses as defined in sec_45c may include expenses for clinical trials that occur after the date the fda granted drug accelerated approval under cfr and which were required as a condition of the accelerated approval of that nda and before the date taxpayer receives fda notification that such drug condition of approval post- marketing study requirements are no longer necessary for the safe and effective use of drug or the date the fda determines that the required drug post-marketing study verifies and describes the drug’s clinical benefit pursuant to cfr law and analysis sec_45c provides a general_business_credit in an amount equal to percent of the qualified_clinical_testing_expenses for the taxable_year sec_45c defines the term qualified_clinical_testing_expenses as the amounts which are paid_or_incurred by the taxpayer during the taxable_year which would be described in sec_41 if sec_41 were applied with certain modifications set forth in sec_45c sec_45c provides that sec_41 shall be applied by substituting clinical_testing for qualified_research each place it appears in sec_41 and sec_45c defines the term clinical_testing as any human_clinical_testing which is carried_out_under an exemption for a drug being tested for a rare_disease_or_condition under sec_505 of the fdca or regulations issued under that plr-112529-17 section which occurs i after the drug is designated under sec_526 of the fdca and ii before the date on which an application with respect to such drug is approved under sec_505 of the fdca sec_45c applies sec_41 by i substituting clinical_testing for qualified_research each place it appears in paragraphs and of sec_41 and ii substituting percent for percent in sec_41 sec_1_28-1 of the income_tax regulations provides in relevant part that the term clinical_testing means any human_clinical_testing which occurs before the date on which an application_for the designated drug is approved under sec_505 of the fdca sec_45c does not refer to accelerated approval which was first formally established in the fda’s new drug antibiotic and biological drug product regulations accelerated approval fed reg date the fda regulations the preamble to the fda regulations states these new procedures are intended to provide expedited marketing of drugs for patients suffering from such illnesses when the drugs provide meaningful therapeutic benefit compared to existing treatment in congress wanted to expand the fda’s authority to approve drugs on an accelerated basis and as part of the food and drug administration safety and innovation act fdasia provided statutory rules in sec_506 that are largely consistent with the fda rules for accelerated approval although provisions governing accelerated approval are now also found in sec_506 of the fdca those provisions were not added to the fdca until enactment of the fdasia in they were not part of the fdca in when the orphan drug act was first enacted establishing the tax_credit and the type of clinical_testing that would be eligible for the credit the accelerated approval process is described in sec_506 of the fdca which includes various provisions governing expedited approval of drugs for serious or life-threatening disease or conditions for accelerated approval drugs the initial approval is based only on an effect on a surrogate endpoint or an intermediate clinical endpoint that is reasonably likely to predict a drug’s clinical benefit for the drug to be able to remain on the market a post-approval study is typically required as a condition of approval to verify and describe the anticipated clinical benefit when a confirmatory study is required for an accelerated approval drug as is the case of drug and the study is not conducted the fda could withdraw approval of the drug post-marketing studies required as conditions of approval for accelerated approval drugs are clinical_testing within the meaning of sec_45c accelerated approval is not a final approval as contemplated by the cross reference to sec_505 in sec_45c the preamble to the fda regulations states where a drug’s approval under these provisions is based on a surrogate endpoint or on an effect on a clinical endpoint other than survival or plr-112529-17 irreversible morbidity the applicant will be required to conduct clinical studies necessary to verify and describe the drug’s clinical benefit and to resolve remaining uncertainty as to the relation of the surrogate endpoint upon which approval was based to clinical benefit or the observed clinical benefit to ultimate outcome the requirement for any additional study to demonstrate actual clinical benefit will not be more stringent than those that would normally be required for marketing approval it is expected that the studies will usually be underway at the time of approval the proposed_regulations have been revised to clarify that required post- marketing studies must also be adequate and well-controlled the preamble further provides that approval under these procedures is dependent on compliance with certain additional requirements such as timely completion of studies to document the expected clinical benefit in sec_901 of the fdasia congress provided that in enacting sec_506 of the fdca it hoped to provide the fda additional authority to grant approval for drugs in limited circumstances without compromising or altering the high standards of the fda for the approval of drugs sec_506 and provides that fdasia amendments to the fdca are intended to encourage the secretary to utilize innovative and flexible approaches to the assessment of products under accelerated approval for treatments for patients with serious or life-threatening diseases or conditions and unmet medical needs and that n othing in this section shall be construed to alter the standards of evidence under subsection c or d of sec_505 based on the foregoing we conclude that taxpayer’s qualified_clinical_testing_expenses as defined in sec_45c may include expenses for clinical trials that occur after the date the fda granted drug accelerated approval under cfr and which were required as a condition of the accelerated approval of that nda and before the date it receives fda notification that such drug condition of approval post- marketing study requirements are no longer necessary for the safe and effective use of drug or the date the fda determines that the required drug post-marketing study verifies and describes the drug’s clinical benefit pursuant to cfr except as specifically set forth above no opinion is expressed or implied concerning the federal_income_tax consequences of the above described facts under any other provision of the code or regulations this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent this ruling is based upon information and representations submitted by taxpayer and accompanied by penalty of perjury statements executed by an appropriate party plr-112529-17 while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representatives sincerely david a selig senior counsel branch office of associate chief_counsel passthroughs and special industries enclosure copy


t c no united_states tax_court joseph p freije petitioner v commissioner of internal revenue respondent docket no 17294-07l filed date the issue is whether r’s determination upholding the notice_of_federal_tax_lien nftl issued to p which was based upon p’s income_tax_liability for was an abuse_of_discretion p argues we do not have jurisdiction because the tax_year was before the court in an earlier case see 125_tc_14 freije i p also takes the position that no tax is due for r counters that freije i did not reach the assessment in this case that the assessment in this case was not decided in freije i and that the underlying tax_liability cannot be before this court because p failed to petition the court after receiving the notice_of_deficiency for held freije i addressed an assessment for made without the issuance of a notice_of_deficiency and the assessment based upon the notice_of_deficiency for was not addressed in freije i the second assessment created a distinct right of hearing subject_to a separate review by this court held further the second notice_of_determination issued regarding is a valid basis for our jurisdiction and freije i does not foreclose the collection action for addressed in the present case held further r’s determination to proceed with the nftl to collect p’s tax_liability for was not an abuse_of_discretion joseph p freije pro_se diane l worland for respondent goeke judge this matter is before the court on petitioner’s motion for summary_judgment respondent’s cross- motion for summary_judgment pursuant to rule and petitioner’s motion to dismiss for lack of jurisdiction as supplemented the issue involves respondent’s determination upholding the notice_of_federal_tax_lien nftl arising from petitioner’s income_tax_liability for for the reasons explained herein we shall grant respondent’s motion for summary 1unless otherwise indicated all rule references are to the tax_court rules_of_practice and procedure and all section references are to the internal_revenue_code as amended judgment deny petitioner’s motion for summary_judgment and deny petitioner’s motion to dismiss for lack of jurisdiction as supplemented findings_of_fact at the time the petition was filed petitioner resided in indiana petitioner was involved in a prior case before this court 125_tc_14 freije i the resolution of that case has some bearing on the pending motions in this case in freije i the court found that respondent could not proceed with a proposed levy with respect to petitioner’s and tax years as set forth in the notice_of_determination issued date in addition in freije i the court directed respondent to proceed with a series of account transfers and payment postings subsequently in an order dated date the court determined that it did not have jurisdiction in freije i to address respondent’s collection activity related to the nftl which is the subject of the case at hand the relationship between freije i and this case has confused petitioner primarily because he failed to accept the date order the resolution in freije i did not address the federal_income_tax liability which is the subject of the present case the liability in freije i arose from the disallowance of claimed estimated_tax payments and the disallowance of certain itemized_deductions certain of the disallowed deductions should not have been the basis for assessment before the issuance of a notice_of_deficiency the liability in this case arose after the issuance of a notice_of_deficiency dated date the notice_of_deficiency in the notice_of_deficiency respondent disallowed certain costs reflected on schedule c profit or loss from business filed as part of petitioner’s tax_return adjustments respondent had not previously made no petition was filed in response to the notice_of_deficiency and on date respondent assessed the deficiency of dollar_figure for the disputed notice_of_determination in freije i was issued on date and did not include the assessment on date the present case involves respondent’s efforts to collect the balance of the assessment of date on date respondent filed an nftl at the county recorder’s office johnson county franklin indiana with the taxpayers listed as petitioner and his spouse and reflecting the liability as an unpaid balance of dollar_figure for petitioner timely requested a hearing upon receiving notice of the nftl filing the declaration of the settlement officer assigned to petitioner’s case indicates that petitioner did not submit a proposed installment_agreement an offer-in-compromise any claim for spousal defenses nor any collection alternatives to the nftl the declaration further indicates that the settlement officer verified that the procedural requirements of assessment were met and that the required notification to petitioner was timely petitioner has not offered any argument or assertion that is inconsistent with these declarations petitioner’s request for an administrative hearing demonstrates that petitioner simply maintained that on the basis of freije i no collections could be made for on date respondent sent petitioner a notice_of_determination sustaining the nftl filed on date on date petitioner timely petitioned this court on date petitioner filed a motion for summary_judgment respondent filed a response to petitioner’s motion for summary_judgment on date and simultaneously filed a motion for summary_judgment on date petitioner filed his response to respondent’s motion for summary_judgment on date petitioner filed a motion to dismiss for lack of jurisdiction as supplemented on date on date this case was called for hearing on the parties’ pending motions petitioner appeared and was heard at the conclusion the court took all pending motions under advisement for disposition opinion jurisdiction and res_judicata sec_6320 incorporates the procedures of sec_6330 in proceedings where the commissioner has filed an nftl sec_6330 provides that this court has jurisdiction to review a timely filed petition after the issuance of a notice_of_determination respondent issued a notice_of_determination on date regarding the nftl filed this determination did not concern the same assessment involved in freije i petitioner timely filed a petition with this court despite these facts supporting our jurisdiction petitioner maintains that we do not have jurisdiction because freije i should have addressed all collection issues regarding petitioner fails to recognize that freije i involved respondent’s efforts to collect via a levy and the present case involves a lien action separate hearings are permitted for lien and levy collection actions sec_6320 sec_6330 petitioner’s argument also raises a question which goes beyond jurisdiction-- whether the outcome in freije i bars any further collection action for as a matter of res_judicata freije i did not address the second assessment for as the court explained in its order of date we recognized that it was not necessary or appropriate for the court lacked jurisdiction to address the subsequent assessment for that petitioner would be provided an opportunity for a new collection review hearing for the second assessment and that freije i related only to the first assessment in deficiency cases it has long been recognized that the tax court’s jurisdiction once it attaches extends to the entire subject of the correct_tax for the particular year 309_f2d_760 as a general_rule where the tax_court has entered a decision for a taxable_year both the taxpayer and the commissioner with certain exceptions are barred from reopening that year 104_tc_221 petitioner in effect argues for the imposition of this rule in the context of our jurisdiction under sec_6320 and sec_6330 for the reasons set forth below petitioner’s position is incorrect sec_6320 provides that a person shall be entitled to only one hearing under this section with respect to the taxable_period to which the unpaid tax specified in subsection a a relates the secretary promulgated sec_301 d q a-d1 proced admin regs which provides questions and answers --the questions and answers illustrate the provisions of this paragraph d as follows q-d1 under what circumstances can a taxpayer receive more than one cdp hearing under sec_6320 with respect to a tax period a-d1 the taxpayer may receive more than one cdp hearing under sec_6320 with respect to a tax period where the same type of tax for the same period is involved but where the amount of the unpaid tax has changed as a result of an additional_assessment of tax not including interest or penalties for that period if a taxpayer was not permitted a second administrative hearing as a result of an additional_assessment petitioner’s argument that freije i resolves this case would be more significant if that were the case it might be expected that the court would have jurisdiction over all assessments for the year at issue in order to ensure that the taxpayer was afforded judicial review of all of the assessments however the regulation offers taxpayers a separate review where as in this case there is a distinct assessment sec_6320 and sec_6330 address situations where the commissioner is attempting to collect tax that has been assessed since in certain circumstances the commissioner may assess tax more than once for the same tax period it is quite reasonable that a taxpayer can have a separate opportunity for a hearing regarding each of the distinct assessments respondent is properly proceeding here under a new assessment which makes different adjustments than were made under the prior assessment we held the first assessment to be procedurally flawed because it included more than adjustments based on mathematical errors and was made without issuance of a notice_of_deficiency before making the second assessment which was based on different adjustments from the first respondent sent the notice_of_deficiency therefore freije i does not control the outcome in this case summary_judgment summary_judgment is intended to expedite litigation and avoid unnecessary and expensive trials fla peach corp v commissioner 90_tc_678 the court may grant summary_judgment where there is no genuine issue of any material fact and a decision may be rendered as a matter of law rule b 98_tc_518 affd 17_f3d_965 7th cir the moving party bears the burden of proving that there is no genuine issue of material fact and the court will view any factual material and inferences in the light most favorable to the nonmoving party 85_tc_812 rule d provides that where the moving party properly makes and supports a motion for summary_judgment an adverse_party may not rest upon the mere allegations or denials of such party’s pleading but must set forth specific facts by affidavits or otherwise showing that there is a genuine issue for trial sec_6320 provides that a taxpayer having received notice from the secretary of the filing of an nftl under sec_6323 shall have a right to a fair administrative hearing before the internal_revenue_service office of appeals sec_6320 provides that an appeals_office hearing generally shall be conducted consistently with the procedures set forth in sec_6330 d and e this court cannot consider the merits of the underlying tax_liability associated with the second assessment for because this assessment was based upon the notice_of_deficiency and there is no assertion that petitioner did not receive the notice_of_deficiency to the contrary respondent has produced a copy of the notice_of_deficiency and a copy of u s postal service form_3877 firm mailing book for accountable mail which demonstrates that the notice_of_deficiency was mailed to petitioner at the mailing address shown on the petition and on the notice_of_determination that address is petitioner’s address of record in this case accordingly under sec_6330 petitioner was not authorized to raise the underlying liability at his appeals_office hearing and we may not consider it see 114_tc_176 where the validity of the underlying tax_liability is not properly at issue we will review the commissioner’s administrative determination for an abuse_of_discretion 114_tc_604 there is no basis for an abuse_of_discretion argument because petitioner did not raise any issues before the settlement officer other than the underlying liability which was barred by sec_6330 as explained above and the settlement officer properly weighed the intrusiveness of the proposed collection action against the need for the efficient collection_of_taxes petitioner makes numerous other arguments about respondent’s conduct and the actions of this court petitioner also seeks sanctions against respondent none of these arguments has merit because they are not relevant to the court’s analysis of the present controversy accordingly we are satisfied that no genuine issue of material fact exists requiring trial and thus summary_judgment is appropriate and that respondent’s determination to sustain the lien filing was not an abuse_of_discretion thus we will grant respondent’s motion for summary_judgment and deny petitioner’s motion for summary_judgment further we find that this court has jurisdiction as to the tax_year accordingly we will deny petitioner’s motion to dismiss for lack of jurisdiction as supplemented to reflect the foregoing an appropriate order and decision will be entered