Opinion ID: 204030
Heading Depth: 3
Heading Rank: 1

Heading: Relevance to a legitimate purpose

Text: The appellants' first substantive argument is that the information sought by the summonses is not relevant to a legitimate purpose. They set forth three supporting reasons: first, that the transactions in which they are engaged are different from the DAD shelter described in the CIP; second, that the IRS improperly targeted Hartigan's (and others') motives; and third, that the summonses were overbroad. We start our analysis by noting that the concept of relevance under § 7602 is broader than that under the Federal Rules of Evidence. Zugerese Trading LLC v. Internal Revenue Service, 2009 WL 1706583, No. 08-30894 (5th Cir. June 18, 2009) ( citing Arthur Young & Co., 465 U.S. at 813-14 n. 11, 104 S.Ct. 1495). Moreover, the IRS may investigate merely on suspicion that the law is being violated, or even just because it wants assurance that it is not. Powell, 379 U.S. at 57, 85 S.Ct. 248 ( quoting United States v. Morton Salt Co., 338 U.S. 632, 642-43, 70 S.Ct. 357, 94 L.Ed. 401 (1950)). The gist of the appellants' first argument is that the transactions at issue here are not unlawful DAD shelters. Given the broad sweep of the IRS's investigative powers, however, such a determination is beyond the scope of the inquiries undertaken by the district court and this court in the summons enforcement context. See Superior Trading, 2008 WL 5192379 at , n. 10 (court in summons enforcement proceeding need not address whether transactions were lawful). The function of the [court] in an enforcement proceeding is not to test the final merits of the claimed tax deduction, but to assess within the limits of Powell whether the IRS issued its summons for a legitimate tax determination purpose. Howa Trading, 2008 WL 2323872 at  ( citing United States v. White, 853 F.2d 107, 116 (2nd Cir.1988)). Accordingly, we reject the appellant's argument that the claimed legality of their transactions provides a basis to quash the summonses. The appellants next argue that the motives of Hartigan and other persons or entities involved in the transactions at issue are completely irrelevant to the IRS's investigation. Again, given the wide breadth of relevance in the present context, we disagree. In a broad sense, the IRS is investigating the validity of the partnerships themselves for purposes of assessing the validity of the claimed tax losses. Thus, the IRS is permitted to inquire as to whether the parties intended to join together as partners to conduct business activity for a purpose other than tax avoidance. Andantech LLC v. Comm'r, 331 F.3d 972, 978 (D.C.Cir.2003). Next, the appellants' overbreadth argument focuses on the summonses' inclusion of the term, all documents, which, they claim, makes the summonses overbroad as a matter of law. The two cases upon which they rely, however, do not support this proposition. Both United States v. Theodore, 479 F.2d 749 (4th Cir. 1973) and Racca v. United States, 2007 WL 1108872, No. C06-1822RSM, (W.D.Wash. Apr. 11, 2007), contain fact-specific analyses that do not necessarily apply beyond their particular circumstances. Indeed, there are no cases that universally proscribe the use of all documents language. To the contrary, as the Fifth Circuit noted in rejecting an overbreadth claim in one of the many cases involving the same players and issues present here, a summons is not overbroad if it describes the requested material with sufficient particularity to permit the summoned party to respond adequately. Zugarese Trading, 2009 WL 1706583 at . [8] Here, the use of the term all documents is limited by reference to particular subject matters. We therefore conclude that the summonses are not overly broad.