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    1) The court affirmed the district court's order enforcing two IRS summonses seeking information about the appellant's income tax liability for 1977-1978. 2) The appellant challenged the constitutionality and authority of the IRS to issue summonses and the jurisdiction of the district court to enforce them, but the court rejected these arguments as without merit. 3) The appellant also argued the summonses were issued in bad faith, but the court found the IRS had made a prima facie showing the summonses were for a legitimate purpose and the appellant failed to prove extraordinary circumstances of bad faith.

    Original Description:

    Filed: 1980-11-14 Precedential Status: Precedential Citations: 634 F.2d 394 Docket: 80-1559

    Original Title

    United States of America and Bradley P. Whites, Special Agent of the Internal Revenue Service v. Northwestern National Bank, Through Wallace B. Hanson, Vice-President and First Baltic Branch, First National Bank of Sioux Falls, Through Lynn Aspaas, Vice-President v. Robert A. Larsen, Intervenor-Appellant, 634 F.2d 394, 1st Cir. (1980)

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    1) The court affirmed the district court's order enforcing two IRS summonses seeking information about the appellant's income tax liability for 1977-1978. 2) The appellant challenged the constitutionality and authority of the IRS to issue summonses and the jurisdiction of the district court to enforce them, but the court rejected these arguments as without merit. 3) The appellant also argued the summonses were issued in bad faith, but the court found the IRS had made a prima facie showing the summonses were for a legitimate purpose and the appellant failed to prove extraordinary circumstances of bad faith.

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    United States Court of Appeals, Eighth Circuit

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    1) The court affirmed the district court's order enforcing two IRS summonses seeking information about the appellant's income tax liability for 1977-1978. 2) The appellant challenged the constitutionality and authority of the IRS to issue summonses and the jurisdiction of the district court to enforce them, but the court rejected these arguments as without merit. 3) The appellant also argued the summonses were issued in bad faith, but the court found the IRS had made a prima facie showing the summonses were for a legitimate purpose and the appellant failed to prove extraordinary circumstances of bad faith.

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    of 3

    634 F.

    2d 394
    80-2 USTC P 9787

    UNITED STATES of America and Bradley P. Whites, Special


    Agent of the Internal Revenue Service, Appellees,
    v.
    NORTHWESTERN NATIONAL BANK, through Wallace B.
    Hanson,
    Vice-President; and First Baltic Branch, First
    National Bank of Sioux Falls, through
    Lynn Aspaas, Vice-President, Respondents,
    v.
    Robert A. LARSEN, Intervenor-Appellant.
    No. 80-1559.

    United States Court of Appeals,


    Eighth Circuit.
    Submitted Nov. 11, 1980.
    Decided Nov. 14, 1980.

    Robert A. Larsen, appellant-without counsel.


    M. Carr Ferguson, Asst. Atty. Gen., Michael L. Paup, Daniel F. Ross,
    Philip I. Brennan, Attys., Tax Division, Dept. of Justice, Washington,
    D.C., filed brief, for appellees; Terry L. Pechota, U.S. Atty., of counsel.
    Before BRIGHT, ROSS and McMILLIAN, Circuit Judges.
    PER CURIAM.

    Appellant, Robert A. Larsen (Taxpayer), appeals from an order of the district


    court1 enforcing two IRS summonses for the purpose of determining his
    income tax liability for 1977-78. Taxpayer in his pro se appeal asserts three
    principal challenges to the enforcement of the summonses: (1) the
    constitutionality of the IRS to issue the summonses and of the district court to
    enforce them; (2) the authority of the IRS and the jurisdiction of the district

    court on the basis that Federal Reserve notes are not legal tender and that only
    dollars containing gold or a mixture of gold and silver are constitutionally
    taxable; and (3) the issuance of the summonses was not in good faith. We
    affirm and dissolve the stay pending appeal.
    2

    Taxpayer's constitutional challenge to the authority of the IRS to issue


    summonses and of the district court to enforce them is in reality a constitutional
    attack on the underlying statutory authority of the IRS, 26 U.S.C. 7602, and
    of the district court, 26 U.S.C. 7402(b) and 7604(a). Taxpayer's
    constitutional attack on these statutes is without merit. Our court upheld the
    constitutionality of the challenged statutes in United States v. National Bank of
    South Dakota, 620 F.2d 193 (8th Cir. 1980). In addition, Taxpayer's arguments
    that Federal Reserve notes are not taxable dollars and that the only "legal
    tender dollars" are those which contain a mixture of gold and silver have been
    consistently rejected by this court. United States v. Moon, 616 F.2d 1043,
    1047-48 (8th Cir. 1980).

    Finally, Taxpayer has also failed to overcome the government's prima facie
    showing of good faith. Through the testimony of its agent, Bradley P. Whites,
    at the show cause hearing, the IRS made a prima facie showing that (1) the
    investigation was being conducted for a legitimate purpose; (2) the inquiry was
    relevant to that purpose; (3) the information sought was not already in the
    Commissioner's possession; and (4) the administrative steps required by the
    Internal Revenue Code have been properly followed. United States v. LaSalle
    National Bank, 437 U.S. 298, 313-14, 98 S.Ct. 2357, 2365-66, 57 L.Ed.2d 221
    (1978).

    Taxpayer asserts that the sole purpose of the investigation was criminal. In
    support of this assertion, he points to the testimony of Special Agent Bradley P.
    Whites that the investigation was conducted through the Criminal Investigation
    Division of the IRS, and to a letter dated March 3, 1980, which he received
    from the group manager of the Criminal Investigation Division notifying
    Taxpayer that he was being investigated for possible criminal violations and for
    a determination of his income tax liability for 1977-78. The letter also
    reminded Taxpayer of his fifth amendment rights and warned him that any
    information or documents that he may turn over to the IRS might be used
    against him if a criminal proceeding would ever be undertaken.2 This evidence
    only proves that a joint criminal and civil investigation was undertaken. It does
    not prove bad faith, especially in the light of the additional testimony of Agent
    Whites that the investigation was carried on in cooperation with the
    Examination Division and that the IRS had not recommended a criminal
    prosecution of Taxpayer to the Department of Justice. Noting the inseparability

    of criminal and civil goals in an IRS investigation, the courts have been
    extremely reluctant to find bad faith in the absence of a recommendation of a
    criminal prosecution to the Department of Justice. See, e. g., United States v.
    First National Bank of New Jersey, 616 F.2d 668, 671 (3d Cir. 1980). While
    there might be some extraordinary circumstances with which a taxpayer might
    prove bad faith in the absence of a recommendation to prosecute, Taxpayer has
    failed to prove any such extraordinary circumstance. See United States v.
    Garden State National Bank, 607 F.2d 61, 66-70 (3d Cir. 1979); United States
    v. Genser, 595 F.2d 146 (3d Cir. 1979) (Genser II ).
    5

    We conclude that the district court properly ordered the summonses enforced.
    The order of the district court enforcing the summonses is affirmed and the stay
    pending appeal is dissolved.

    The Honorable Fred J. Nichol, United States Senior District Judge for the
    District of South Dakota

    The relevant parts of the letter read:


    As you know, you are being investigated for possible criminal violations of the
    Internal Revenue Code for 1977 and 1978. This includes a determination of
    your correct income tax liability for those years. On January 8, 1980 Mr.
    Whites attempted to talk to you about this in Sioux Falls; however, you refused
    to talk to him.
    This letter does not constitute your solicitation for corrected or amended tax
    returns from you. You are still under investigation for possible criminal
    violations of the Internal Revenue laws, and as such you should be aware of
    your rights under the 5th Amendment to the U. S. Constitution. Thus, any
    information or documents you may send to us could be used against you in any
    criminal proceedings which may be undertaken. In this regard, you may wish to
    seek the assistance of an attorney before responding in the future.

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