third-party recordkeeper with respect to the
accountant's records of a sale of property by the accountant to another
person. Generally and under normal circumstances when the accountant is
giving advice to a client, the accountant is a third-party recordkeeper.
The corporation in this case is in much the same position as the
accountant who is himself dealing with another person. A corporation can
act only through its officers, and Mr. Rawles is its Secretary and
Registered Agent. Therefore, Mr. Rawles, inspite of being an attorney, is
in the position of a second party and not in the position of an
independent attorney rendering advice to the taxpayer, as contemplated by
the statute. Mr. Rawles is not a third-party recordkeeper and the
taxpayers are not entitled to bring this petition to quash the summons.
The petition to quash the summonses issued to Mr. Rawles must be
As I said earlier, the government also issued a summons to Mr. Lee
Frank, the Schlicks' accountant. Mr. Frank in his regular work is already
a third-party recordkeeper and based on this, the Schlicks have a right
to file their petition to quash the summons served on him.
Under the statute § 7609(b)(2)(A), the United States may seek to
compel compliance with the summons in the same proceeding as the motion
to quash. In seeking to compel compliance, the IRS has the burden of
persuasion with respect to the enforcement of the summons. This burden can
be satisfied under the guidelines of U.S. v. Powell, 379 U.S. 48, 85
S.Ct. 248, 13 L.Ed.2d 112 (1964) because the new law did not change the
substantive law governing enforcement of summonses. Under Powell, the
government must show that 1) the investigation was conducted pursuant to
a legitimate purpose, 2) the inquiry may be relevant to the purpose, 3)
the information sought is not already within the Commissioner's
possession, and 4) the administrative steps required by the "code have
been followed. The response and the affidavit of the Government have
established the Powell requirements.
The burden has shifted to the taxpayer to demonstrate substantial facts
showing that a genuine issue exists, U.S. v. Kis, 658 F.2d 526 (7th Cir.
1981). The taxpayers have not provided any facts which establish a
material defense. The court in U.S. v. Kis, agreed with the approach of
the Third Circuit in U.S. v. Garden State National Bank, 607 F.2d 61 (3d
Cir. 1979) which "requires that the taxpayer answer the Government's case
through responsive pleadings, supported by affidavits, that allege
specific facts in rebuttal." 658 F.2d 526, 539 (7th Cir. 1981) (emphasis
in original). The taxpayer has failed to do this in the case at hand. "If
at this stage the taxpayer cannot refute the government's prima facie
Powell showing or cannot factually support a proper affirmative defense,
the district court should dispose of the proceeding on the papers before
it and without an evidentiary hearing." Id. at 539. Accordingly, this
court denies the Petition to Quash the summons issued to Lee Frank.
In summary, the Petition to Quash the summonses issued to Frederick D.
Rawles is dismissed. The Petition to Quash the summons issued to Lee H.
Frank is denied. Mr. Frank is ordered to comply with the summons served
upon him within 30 days of the entry of this order.
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