Tax court may not exclude special trial judge report from record on appeal.

• Author: Ballard, Claude M.

A recent Supreme Court decision held that the Tax Court may not exclude the special trial judge's Tax Court Rule 183(b) report from the record on appeal. The Court found that the Tax Court's practice of not disclosing the special trial judge's original report and of obscuring the Tax Court judge's mode of reviewing that report, impedes a fully informed appellate review of the Tax Court decision.

Tax Court Rule 183

Tax Court Rule 183 delineates the procedural framework and substantive standards governing that court's review of special trial judge findings. Rule 183(b) provides that, after the trial and submission of briefs, "the Special Trial Judge shall submit a report, including findings of fact and opinion, to the Chief Judge, and the Chief Judge assign the case to a Judge ... of the Court." Rule 183(c), directed to the Tax Court judge to whom the case is assigned for final decision, reads:

Action on the Report: The Judge to whom ... the case is assigned may adopt the Special Trial Judge's report or may modify it or may reject it in whole or in part, or may direct the filing of additional briefs or may receive further evidence or may direct oral argument, or may recommit the report with instructions. Due regard shall be given to the circumstance that the Special Trial Judge had the opportunity to evaluate the credibility of witnesses, and the findings of fact recommended by the Special Trial Judge shall be presumed to be correct.

In these cases, the Tax Court judge assigned to take action on the special trial judge's report invoked none of the means Rule 183(c) provides to supplement the record. From the record, the Tax Court judge's review of the fact-findings contained in the special trial judge's report rested on the report itself, the trial transcript and the other documents on file. Rule 183(c) guides the appraisal of those filed materials and confirms the clear understanding that, from the start, deference is due fact-findings made by the trial judge.

Under Rule 183 (formerly 182) as it was formulated in 1973, the Tax Court's review of the special trial judge's report was a transparent process. Rule 182(b) provided for service of copies of the special trial judge's report on the parties, and Rule 182(c) allowed parties to file exceptions to the report. However, in 1983, the Tax Court eliminated both of these provisions. It left intact, however, Rule 182(c)'s call for "[d]ue regard" to the special trial judge's credibility...