Opinion ID: 491532
Heading Depth: 2
Heading Rank: 2

Heading: Alleged Inadequacies in IRS Investigation

Text: 10 Ruth contends that the district court improperly restricted his attempts to challenge the adequacy of the IRS investigation that led to the section 6672 assessment against him. Ruth sought to call the investigating IRS agent as a witness and to introduce sections of the IRS manual describing procedures to be followed when investigating a section 6672 case. Ruth is correct in arguing that the presumption of correctness that accompanies an assessment can in rare cases be overcome by destroying the foundation of the assessment itself (in contrast to confronting the merits of the tax liability). However, Ruth misunderstands the scope of this approach. 11 In general, courts will not look behind an assessment to evaluate the procedure and evidence used in making the assessment. E.g., Raheja v. Commissioner, 725 F.2d 64, 66 (7th Cir.1984). Rather, courts conduct a de novo review of the correctness of the assessment, imposing the risk of nonpersuasion on the taxpayer. In certain quite limited circumstances, however, courts recognize that an assessment should not be accorded even a rebuttable presumption of correctness. For example, when the assessment is shown to be without rational foundation or arbitrary and erroneous, the presumption should not be recognized. See United States v. Janis, 428 U.S. 433, 441-42, 96 S.Ct. 3021, 3025-26, 49 L.Ed.2d 1046 (1976); Helvering v. Taylor, 293 U.S. 507, 514-15, 55 S.Ct. 287, 290-91, 79 L.Ed. 623 (1935). 12 The district court properly declined to permit Ruth to conduct extensive inquiries into the procedures which produced the assessment in this case. The question at issue is whether Ruth was a responsible person who willfully violated section 6672 duties. As long as the procedures used and the evidence relied upon by the government to determine the assessment had a rational foundation, the inquiry focuses on the merits of the tax liability, not on IRS procedures. It is clear in the present case that the assessment had a rational foundation. The investigating agent conducted interviews with officers and employees of Custom Packaging, including Ruth, distributed questionnaires, reviewed extensive documentation of the affairs of Custom Packaging and notified Ruth of the likelihood of an assessment, inviting him to respond. This investigation resulted in assessments against five individuals associated with Custom Packaging. Nothing in Ruth's offer of proof showed that the investigation leading to the assessment was without any rational foundation. We cannot conclude that the district court abused its discretion in declining to admit evidence of mere procedural improprieties in the assessment.