The U.S. District Court recently ruled that the subject of a third party request could not have his attorney present at a proceeding involving his CPA. The court in U.S. v. Robert McEligot ruled on April 6 that Lawrence Lui’s attorney was not entitled to be present at an IRS summons of his CPA, Robert McEligot.

The IRS issued a summons on McEligot in connection with a civil tax audit of Lui for 2005-2012, the period of time during which McEligot served as Lui’s CPA. McEligot attended the summons hearing but refused to answer questions unless Lui’s attorney was allowed to be present. The IRS refused to allow Lui’s attorney to attend the hearing and brought suit to enforce the summons, requiring McEligot to answer IRS questions. The IRS argued that it is not required to allow Lui to be present at the summons, and should not allow him to be present during the questioning of a third-party witness.

The court, relying on Donaldson v. United States, 400 U.S. 517 (1971), held that a taxpayer’s ability to intervene before a hearing officer and the court in order to challenge a summons was “permissive,” rather than “mandatory.” Id. at 529. A number of circuit courts have also held that a taxpayer does not have a mandatory right to be present at the interview of a summoned party. The court held that because a taxpayer does not have an absolute right to be present at a third party IRS summons, it is required to balance opposing equities. It considered 1) the fact that the government had an interest in obtaining information in an efficient, non-adversarial format, 2) the government only intended to question McEligot at the hearing regarding Lui’s tax liabilities for 2005-2012 and 3) the government did not seek to question McEligot regarding his representation of Lui during the audit.

Using the factors listed above, the court found that no attorney-client privilege or work product privilege would be implicated. Without a privilege or any factors to persuade the court that the taxpayer should be allowed to be present during a third-party summons, the court held that McEligot’s motion to dismiss the summons should be denied. The case highlights the need to ensure that a taxpayer’s position is well represented in the case of a third-party summons.

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