Irs Summonses in Estate Tax Examinations
| Jurisdiction | United States,Federal |
| Citation | Vol. 12 No. 9 Pg. 1426 |
| Pages | 1426 |
| Publication year | 1983 |
1983, September, Pg. 1426. IRS Summonses in Estate Tax Examinations
Almost every lawyer practicing in the state of Colorado has had or will have the opportunity, on behalf of a client, to file a Form 1040 U.S. Individual Income Tax Return, a Form 706 United States Estate Tax Return, or a Form 709 United States Gift Tax Return. At some point, the Colorado lawyer will also have the opportunity to experience a federal income, estate or gift tax examination resulting from the filing of that return.
This article focuses on one aspect of a federal tax examination---the administrative summons. Not every tax examination, to be sure, culminates in the issuance of a summons, but when one is issued, the practitioner should have a general awareness of the ensuing implications. This discussion is slanted toward estate and gift tax examinations because of a seemingly revitalized interest on the part of Internal Revenue Service ("IRS") estate tax attorneys in this area. However, most of what is presented with respect to estate and gift tax examination also applies to income tax examinations.
As the estate tax unified credit is gradually phased in over the coming years, it is likely that fewer estate and gift tax returns will be filed. Those that are filed will, for the most part, involve larger, more complex estates, generating substantial estate taxes. The probability is high that these larger, more complex estates will be examined, and that examination coverage, as a percentage of returns filed, will increase. Although a primary examination issue will always be asset valuation, other issues, including retained life estates, disclaimers and marital and charitable deductions, will require the examining estate tax attorney to seek additional information from the donor or estate representative.
Perhaps one of the more formidable weapons in the IRS's investigative arsenal is the "summons power" embodied in § 7602 of the Internal Revenue Code of 1954 ("Code"), enabling the Secretary (or his delegate) to do the following:
1. He can examine any books, papers, records or other data which "may be" relevant or material to an inquiry for the purpose of ascertaining the correctness of any return or determining the liability of any person for any internal revenue tax.
2. He can summon the person liable for the tax or any person having custody or care of books of account to appear before the Secretary (or his delegate) at a designated time and place named in the summons and to produce such books, papers, records or other data, and to give such testimony under oath, as "may be" relevant or material to the inquiry.
3. He can take such testimony of the person concerned under oath as "may be" relevant or material to such inquiry.
Historically, at least in the Denver District, the full force of § 7602, with few exceptions, has seldom been used in estate and gift tax examinations to secure information from reluctant witnesses. Indeed, the Manual itself instructs...
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