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Lahasky v. United States

June 28, 2010

EPHRAM LAHASKY, PETITIONER,
v.
UNITED STATES OF AMERICA, DOUGLAS SHULMAN, COMMISSIONER OF INTERNAL REVENUE, AND NEENA I. SINGH, REVENUE AGENT, RESPONDENTS.



The opinion of the court was delivered by: Seybert, District Judge

MEMORANDUM & ORDER

Pending before the Court is Petitioner Ephram Lahasky's petition to quash the third-party summons Respondents issued in search of Petitioner's financial records, and Respondents' cross-petition to enforce the summons. For the following reasons, the petition to quash is DENIED and the cross-petition to enforce is GRANTED IN PART AND DENIED IN PART.

BACKGROUND

On October 9, 2009, Respondents issued a third-party summons (the "Summons") pursuant to 26 U.S.C. § 7602(a)(2) to Capital One N.A. The Summons named Petitioner and ordered Capital One to produce documents related to Petitioner's account activity. Pet ¶ 5. See Pet. Ex. 1. On October 23, 2009, Petitioner commenced this action seeking to quash the summons, under 26 U.S.C. §§ 7609(a) and (b).*fn1 Petitioner claims that Respondents issued the Summons to harass him, that the documents requested have no relevance to any legitimate purpose, that Respondents already possess all information relevant to his tax liabilities, and that certain procedural requirements were not followed. In response, Respondents oppose Petitioner's petition and, pursuant to 26 U.S.C. §§ 7402(b) and 7604(a),*fn2 filed a cross-petition to enforce the Summons.

DISCUSSION

I. Subject Matter Jurisdiction

26 U.S.C. § 7609(h)(1) limits subject matter jurisdiction to the United States District Court "within which the person to be summoned resides or is found." See also 26 U.S.C. §§ 7402(b) and 7604(a). The phrase "resides or is found" requires that "the summoned party have a physical presence, such as a branch office, within the district" seeking to exercise jurisdiction. Mensh v. U.S., No. 08-CV-4162, 2009 WL 2242295, at *2 (E.D.N.Y. July 27, 2009).

Here, the Summons was mailed to a Capital One location in the Southern District of New York, Pet. Ex. 2. But Petitioner has pled that Capital One has "offices in a number of locations within ... the Eastern District of New York." Pet ¶ 4. And the Court takes judicial notice that Capital One does, in fact, have branch locations within the Eastern District of New York. Thus, this Court may properly exercise subject matter jurisdiction over this action.

II. Standard Of Review

"Because [P]petitioner is a pro se litigant, the [C]court holds his pleadings to 'less stringent standards than formal pleadings drafted by lawyers.'" Mensh, 2009 WL 2242295, at *1 (quoting Haines v. Kerner, 404 U.S. 519, 520, 92 S.Ct. 594, 30 L.Ed. 2d 652 (1972)). "The [C]court interprets the pleadings 'to raise the strongest arguments that they suggest.'" Id. (quoting Triestman v. Fed. Bureau of Prisons, 470 F.3d 471, 474 (2d Cir. 2006)).

III. Enforcement Of The Third-Party Summons

Congress has imposed on the IRS the duty to "make . . . inquiries, determinations, and assessments of all taxes." Mollison v. U.S., 481 F.3d 119, 122 (2d Cir. 2007) (quoting 26 U.S.C. § 6201(a)). In order to increase the IRS's effectiveness in carrying out this mandate, Congress "endowed the IRS with expansive information-gathering authority." U.S. v. Arthur Young & Co., 465 U.S. 805, 816, 104 S.Ct. 1495, 79 L.Ed. 2d 826 (1984). 26 U.S.C. § 7602 is "the centerpiece of that congressional design."*fn3 Id.

Counter-balancing the "broad congressional command" of 26 U.S.C. § 7602, id. at 820, the taxpayer about whom information is being sought may petition, pursuant to § 7609(b), to quash a § 7602 summons. Mollison, 481 F.3d at 122. Confronted with such a petition, the government must establish a prima facie case for enforcing the summons at issue. PAA Mgmt., Ltd. v. U.S., 962 F.2d 212, 215 (2d Cir. 1992). This requires the government to show: "(i) a legitimate purpose exists for the investigation, (ii) the summons may be relevant for that purpose, (iii) the information sought is not already in the possession of the government, and (iv) the procedural and administrative steps required by the Code for serving a summons have been followed." Id. (citing U.S. v. Powell, 379 U.S. 48, 57-58, 85 S.Ct. 248, 13 L.Ed. 2d 112 (1964)).

Once the government has made this showing, designed "to ensure only the basic propriety of [its] investigation," the burden "shifts to the taxpayer to disprove one of the four Powell criteria, or to demonstrate that judicial enforcement would be an abuse of the court's process." Mollison, 481 F.3d at 123 (internal quotations omitted). Such an abuse has taken place when "the summons ha[s] been issued for an improper purpose, such as to harass the taxpayer or to put pressure on him to settle a ...


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