Discovery
Discovery
Black’s Law Dictionary defines trial discovery as:
“the pre-trial devices that can be used by one party to obtain facts and information about the case from the other party…”
It’s hard to exaggerate the importance of discovery for petitioners in a Tax Court case. Because we have the burden of proving a negative, we must rely on getting as many of our facts as possible agreed to by our opponent. An oft forgotten maxim of trial practice is that there is no fact that can be brought out at a trial that cannot be discovered before the trial. The general rules for discovery start at Rule 70, where they have this to say about informal discovery:
“…the Court expects the parties to attempt to attain the objectives of discovery through informal consultation or communication before utilizing the discovery procedures provided in these Rules.”
For that reason we begin with informal discovery between the parties, or “informal communication” as the rules call it. The court is not involved until the formal process begins, and then only if one side or the other chooses to move the court to compel answers. Generally the IRS already has all or nearly all the evidence it plans to use at the trial. They put their case together in the audit phase of their examination or during the administrative correspondence leading up to a collection hearing. The petitioner, on the other hand, has often been asking the IRS questions for years and receiving no answers. In discovery, however, answering is not optional. If a Notice of Deficiency has been rushed out to you to avoid the three year statute of limitations[2] deadline on assessing taxes, your situation may be different. In that case the IRS might not have a great deal of information about your case and will very likely try to get it from you in discovery. You should know that when a Notice of Deficiency has been filed, not only does the IRS have to stop any efforts to collect money you may owe, but they also may not summons any third parties for information while the case is pending. Pay attention to what they do after you receive your notice. You may move the court to stop collections and audit actions. The parties are allowed and even expected to gather evidence from each other and third parties for presentation at the trial. In order to uncover evidence relevant to the case, ...
[2] Statutes of limitation are laws of the federal government or the states setting maximum time periods during which certain actions can be brought or rights enforced. After the expiration of the time period, no action may be taken regardless of whether it would have been lawful earlier. The assessment of taxes is subject to such statutes.