February 1, 2007

Tax Court Judge Can Rewrite Facts of Case That He/She Did Not Hear

Houston Tax Attorney Blog

Houston Tax Attorney

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The tax court released a 400+ page opinion involving the Supreme Court’s ruling in the Ballard v. Commissioner case today.  This case continues the Ballard dispute saga that casts a shadow on whether the U.S. Tax Court is an impartial judicial forum.

The Ballard Dispute

The readers of this blog will recall the Ballard case involved the Supreme Court holding that the tax court had failed to follow its own rules and it then tried to downplay the significance of its rule violation.  Specifically, the issue in the Ballard case was whether a judge who did not actually hear the case could re-write a report (four years later!) that summarized the case that was written by the judge that presided over the case.

The Supreme Court, citing the tax court’s own rules, issued a judicial opinion that clearly and unambiguously says that the answer is “no.” The idea is that the judge that heard the witnesses and saw the evidence presented is in a better position to judge the matter at hand, not a judge who is unfamiliar with the case.

The Court Changes its Rules

After the Ballard opinion, the U.S. Tax Court amended its rules of procedure.

These amended rules essentially provide that the judge who did not hear the case can “adopt, modify, or reject the” recommendations of the judge who did hear the case and the judge who did not hear the case can correct “manifestly unreasonable findings of fact or [make] additional findings of fact, so long as any additional facts find direct support in the case record.”

In this first case applying this new rule, the U.S. Tax Court now exercises its authority to disregard and supplement the recommendations of the judge who actually heard the case. The U.S. Tax Court does this by analyzing the words used in the judge’s report and other documentary evidence – in the process disregarding testimony from IRS employees and from the taxpayer that the judge was not present to hear.

Lingering Questions About Impartiality

A lay person may expect the judge who hears the facts to be the final authority on what the facts are and are not. That is why you have the judge hear the facts in person, rather than just sending in video or audio tapes for the judge to review.  A lot of what goes on in the courtroom does not get included the record; therefore, a review of the record is inadequate to decide what the facts are in a case.

A lay person may also question whether the new rule comports with the sense of justice, fairness, and, most importantly, finality that is a hallmark of our judicial system. Having a second judge judge and rewrite the facts years after the case is heard will only result in taxpayer confusion and distrust.

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