Estate of S. Jayne Esgar v. USA et al

Filing 13

ORDER REGARDING PETITION TO QUASH THIRD-PARTY SUMMONS (DOCKET NO. 1). The 1 Petition to Quash Third Party Summons is denied. The United States' 10 Motion for Summary Denial of Petition to Quash Internal Revenue Summons and Motion for Enforcement of Summons Issued to Legacy Bank is granted. By Magistrate Judge Michael J. Watanabe on 1/16/14.(mnfsl, )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Civil Action No. 13-cv-02254-PAB-MJW
ESTATE OF S. JAYNE ESGAR,
Petitioner,
v.
UNITED STATES OF AMERICA,
DANIEL I. WERFEL, Commissioner of Internal Revenue, and
CASINOVA O. HENDERSON, Revenue Agent,
Respondents.

ORDER REGARDING
PETITION TO QUASH THIRD-PARTY SUMMONS (DOCKET NO. 1)

Entered by Magistrate Judge Michael J. Watanabe
This matter is before the court on Petition to Quash Third Party Summons
(docket no. 1). The court has reviewed the subject motion (docket no. 1), the
Memorandum of Law in Support of the Petition to Quash Third-Party Summons (docket
no. 3), the United States’ Notice of Restoration of Appropriations, Motion for Summary
Denial of Petition to Quash Internal Revenue Summons, and Motion for Enforcement of
Summons Issued to Legacy Bank (docket no. 10), United States’ Memorandum in
Support of Motion for Summary Denial of Petition to Quash Internal Revenue Summons
and Motion for Enforcement of Summons Issued to Legacy Bank (docket no. 10-1), and
United States’ Reply in Support of Motion for Summary Denial of Petition to Quash
Internal Revenue Summons, and Motion for Enforcement of Summons Issued to [Third
Party Record Keeper] Legacy Bank (docket no. 12). In addition, the court has taken

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judicial notice of the court’s file and has considered applicable Federal Rules of Civil
Procedure and case law. The court now being fully informed makes the following
findings of fact, conclusions of law, and order.
FINDINGS OF FACT AND CONCLUSIONS OF LAW
The court finds:
1.

That I have jurisdiction over the subject matter and over the parties
to this lawsuit;

2.

That venue is proper in the state and District of Colorado;

3.

That each party has been given a fair and adequate opportunity to
be heard;

4.

That this case involves the examination of an Estate Tax Return of
Petitioner Estate of S. Jayne Esgar [hereinafter “Petitioner”] by
Respondents. In particular, the information sought by Respondents
centers around the value of Legacy Bank stock held by Petitioner in
2011. IRS Revenue Agent Casinova O. Henderson [hereinafter
“Henderson”] is auditing the 2011 Estate Tax Return for the
Petitioner and is “attempting to ascertain the correction of the
return.” See Declaration of Casinova O. Henderson, docket no. 102, at ¶ 4;

5.

That Petitioner seeks an Order from this court quashing the ThirdParty Summons served upon Third-Party Record Keeper Legacy
Bank, a Colorado corporation. In support, Petitioner argues that
Respondents cannot meet the “relevancy and materiality” test

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required by United States v. Powell, 379 U.S. 48 (1964), and
Respondents are already in possession of much of the information
requested in the summons. Further, Petitioner argues that the
summoned information will not cause additional estate tax to be
owed by Petitioner as a result of the unlimited marital deduction.
Lastly, Petitioner argues that the summons is nothing more than a
“fishing expedition” completely void of any “realistic expectation”
that the information sought “may be relevant,” or result in any
increase in tax liability. Thus, Respondents allegedly cannot make
any showing of a “realistic expectation rather than an idle hope” of
finding something, as required by United States v. City Nat. Bank &
Trust Co., 642 F.2d 388, 389 (10th Cir. 1981) (quoting United States
v. Harrington, 388 F.2d 520, 524 (2nd Cir. 1968));
6.

That Respondents argue that they have meet their requirements
under Powell, supra. In Powell, the Supreme Court noted that the
IRS can issue a summons “merely on suspicion that the law is
being violated, or even just because it wants assurance that it is
not.” See Powell, 379 U.S. at 57. Respondents further argue that
the Declaration of Respondent Casinova O. Henderson, Revenue
Agent (docket no. 10-2), clearly articulates the purpose and
legitimacy of the challenged summons directed to Legacy Bank. In
particular, Henderson states in her Declaration (docket no. 10-2)
that the “books, papers, records, and other data sought by the

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summons may be relevant for the purpose of ascertaining the
correctness of Petitioner’s Form 706 Estate Tax Return for 2011.”
Declaration (docket no. 10-2) at ¶ 9;
7.

That Respondents have the authority to issue a summons to the
Third-Party Record Keeper Legacy Bank pursuant to 26 U.S.C. §
7602. The authority to issue a summon includes “ascertaining the
correctness of any return.” 26 U.S.C. § 7602(a). Thus, the
summons was issued for a proper purpose. The Respondents’
summons authority extends to the issuance of a summon to a thirdparty record keeper such as banks and financial institutions. See
26 U.S.C. §§ 7602(a), 7603(b), 7609. See also Neece v. IRS, 922
F.2d 573, 576 n.4 (10th Cir. 1990) (outlining the requirements for
issuance of a third-party summons);

8.

That the information sought in the summons to the Third-Party
Record Keeper Legacy Bank may be relevant to the purpose of the
audit examination of the Petitioner Estate of S. Jayne Esgar’s
Estate Tax Return for 2011 being conducted by Respondents,
noting that such information may demonstrate the correctness of
the Estate Tax Return for 2011. Thus, this court finds the
information being sought is relevant;

9.

That the summons to the Third-Party Record Keeper Legacy Bank
is not being used as “fishing expedition;”

10.

That the Declaration (docket no. 10-2 at ¶ 7) by Henderson states

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that a spreadsheet purporting to list the sales of shares of Legacy
Bank from the Representative of the Estate, which is being sought
in the summons, is “not already in the possession of the Internal
Revenue Service;”
11.

That the summons meets the administrative steps required by the
Internal Revenue Service. See summons served on Third-Party
Record Keeper Legacy Bank, the copy of the summons on the
Petitioner’s Representative and Executor, the Declaration (docket
no. 10-2, ¶¶ 6 and 8) by Henderson, and docket no. 10-4; and

12.

That Respondents have met all of the requirements under Powell,
supra.
ORDER

WHEREFORE, based upon these findings of fact and conclusions of law this
court ORDERS:
1.

That the Petition to Quash Third Party Summons (docket no. 1) is
DENIED;

2.

That the United States’ Motion for Summary Denial of Petition to
Quash Internal Revenue Summons and Motion for Enforcement of
Summons Issued to Legacy Bank (Docket No. 10) is GRANTED;

3.

That the Third Party Record Keeper Legacy Bank shall appear
before Respondent Casinova Henderson, Internal Revenue
Service, Estate & Gift Tax Group, 1206 50 State Street, 12th Floor,

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Trenton, NJ 08608, and produce the information sought in
Respondents’ summons (docket no. 10-3) to Ms Henderson in the
Matter of Estate of Jayne S. Esgar. The parties shall meet and
confer with the Third Party Record Keeper Legacy Bank and set a
new date and time for delivery of the information sought in the
Respondents’ summons (docket no. 10-3) and for testimony by the
Third Party Record Keeper Legacy Bank; and
4.

That each party shall pay their own attorney fees and costs for this
petition and motion.

Done this 16th day of January 2014.
BY THE COURT

s/Michael J. Watanabe
MICHAEL J. WATANABE
U.S. MAGISTRATE JUDGE