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STRAUSER v. U.S.

February 25, 1982

JOHN E. STRAUSER, PLAINTIFF,
v.
UNITED STATES OF AMERICA, DEFENDANT.



The opinion of the court was delivered by: Shadur, District Judge.

FINDINGS OF FACT AND CONCLUSIONS OF LAW

John E. Strauser ("Strauser") sues the United States under 26 U.S.C. § 7429 ("Section 7429") for judicial review of a termination assessment of income taxes against Strauser by the Secretary of the Treasury (the "Secretary"). This Court has conducted a hearing on the expedited schedule required under Section 7429. After considering all the evidence and the submissions of the parties by their counsel, in accordance with Fed.R.Civ.P. ("Rule") 52(a) the Court finds the facts and states its conclusions of law as follows:

Section 7429

Since 1977 Section 7429 has provided for non-reviewable District Court proceedings dealing with jeopardy and termination assessments under the Internal Revenue Code (the "Code").*fn1 It requires the taxpayer first to request administrative review of the proposed assessment by filing a protest with the Secretary. Strauser did that. Section 7429 then authorizes judicial action to be brought, mandating a speedy decision.

Section 7429(b)(2) provides this Court with narrow criteria for review of the Secretary's action:

    (1) This Court must first determine whether the
  Secretary's action in making any assessment "is
  reasonable under the circumstances." On that score
  Section 7429(g)(1) places the burden of proof on the
  government.
    (2) If the first question is answered "yes," the
  Court must decide whether the amount assessed "is
  appropriate under the circumstances." On that issue
  Section 7429(g)(2) imposes the burden of proof on
  Strauser.

Each determination is made de novo, independent of that by the Secretary. S.Rep.No. 94-938, 94th Cong. 2d Sess. 364 (1976), U.S.Code Cong. & Admin.News 1976, p. 2897 (hereafter cited "Report").*fn2

Neither issue to be decided by this Court implicates a determination of the ultimate merits of Strauser's tax liability if any. Report at 365. If the Court rules in the government's favor Strauser has the right to file suit for refund — hence the congressional decision to make this Court the final voice in reviewing the Secretary's administrative decision.*fn3

Both because this action is not one for resolving Strauser's actual tax obligations and because of the extraordinarily expedited timetable,*fn4 it is not surprising that the statute and case law require considerably less than the usual judicial evidentiary criteria. At the Secretary's level he can rely upon "information" that need not comport with the strict rules of evidence. See Patrick v. United States, 524 F.2d 1109 (7th Cir. 1975). By the same token Section 7429(b)(2) requires this Court to review the "information" (Section 7429(a)(1)) upon which the Secretary relied in making the assessment. Expedited proceedings under the statute have permitted affidavit or other summary presentation. As examples of the numerous cases so holding, see, McAvoy v. United States, 475 F. Supp. 297, 299 (W.D. Mich. 1979); Loretto v. United States, 440 F. Supp. 1168, 1171 (E.D.Pa. 1977).

So much for general background of the statute under which this Court operates here. This opinion will turn to the facts, then return to the legal principles applicable to those facts.

Facts

On December 4, 1981 the Secretary terminated Strauser's taxable year prematurely as of October 31, 1981 and made a termination assessment of $154,156.26 for the ten-month taxable year ended that date. At that time he*fn5 had the following information about Strauser and his activities:*fn6

    (1) Strauser, a young man of about 25, had been
  engaged in lucrative illegal activities involving
  marijuana and other drugs. He was arrested October
  27, 1981, and felony charges were brought against him
  by the State of Illinois after he had been observed
  participating in an apparent sale of a quantity of
  marijuana. After his arrest the United ...

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