9.5.1  Administrative Investigations and General Investigative Procedures (Cont. 1)

9.5.1.5 
Parallel Investigations

9.5.1.5.5  (09-27-2011)
Coordination of Interviews

  1. The civil examiner must advise the special agent assigned to the parallel investigation prior to contacting the promoter or witnesses.

  2. Generally, the special agent should inform promoters of their Fifth Amendment rights before the civil examiner initiates contact or conducts an interview. The civil examiner should explain to the promoter that he/she is conducting a civil investigation but that the information provided will be shared with CI.

  3. If a promoter under investigation inquires about criminal implications or whether he/she is the subject of a criminal investigation before CI has contacted the promoter, the civil examiner must be careful to provide accurate information and never to mislead or misrepresent the facts to the promoter.

  4. When interviewing a subject, examiners and special agents should clearly explain the purpose of their respective investigations, their roles in the investigations, and the potential impact of cooperation by the subject.

  5. When interviewing a witness, examiners and special agents should clearly explain the reason for the contact, their specific roles, and the potential impact of cooperation by the witness.

  6. There is no specific prohibition against conducting joint examiner and special agent interviews of promoters. Examiners and special agents must clearly identify themselves and their roles at these meetings and prepare a joint memorandum of the interview. Examiners should keep a copy of their interview notes and provide the originals to the special agent.

  7. Criminal Investigation may occasionally request that the civil examiner make no contact with the promoter. Title 26 USC §6700 and §6701 do not mandate an initial appointment letter or interview of the promoter. Area Counsel should be involved in any decision to conduct an investigation without contacting the promoter.

  8. Title 26 USC §7602(c)(3)(C) provides an exception to the third party notification requirements for pending criminal investigations. Accordingly, if CI requests that there be no civil contact with the promoter, the third party notification letter (Letter 3164P, Third Party Notification for 26 USC §6700/§6701 Investigations) is not required.

9.5.1.6  (09-27-2011)
Information Sharing

  1. Information sharing among examiners, special agents and government attorneys increases the efficiency of parallel investigations.

  2. Special agents should develop as much evidence as possible before using the grand jury process. This can be done through summonses, search warrants, witness interviews and undercover operations. Unless prohibited by the grand jury secrecy rules of Rule 6(e) of the Federal Rules of Criminal Procedure or the disclosure provisions of 26 USC §6103, information developed by CI may be shared with the civil operating division.

  3. Grand jury information may not be shared with the civil operating division. Judicial districts and appellate courts have diverse rulings on what constitutes grand jury information. The grand jury process may never be used to perfect a civil investigation.

  4. In grand jury investigations, concurrence of the DOJ attorney assigned to the criminal investigation must be secured prior to releasing or allowing civil examiners access to any records in CI's possession in order to avoid inadvertent release of grand jury information.

  5. Title 26 USC §6103(h)(2) allows disclosure of relevant returns and return information to DOJ attorneys personally engaged in a grand jury proceeding or in preparation for a grand jury proceeding. However, unless a Rule (6)e order has been secured from the court, grand jury information cannot be shared with a civil DOJ attorney.

  6. Criminal attorneys have a mandatory obligation to disclose certain information to criminal defendants. Therefore, examiners must provide CI access to all information in the civil examination and attorney files, including documents, interview notes and any other information the civil team gathers. To avoid unnecessary delays, sharing information should be an ongoing process throughout the investigation.

9.5.1.7  (09-27-2011)
Undercover Operations and Search Warrants

  1. In general, civil actions will be temporarily stayed if CI is conducting an undercover operation or developing probable cause to execute a search warrant. Therefore, the benefits of an undercover action or search warrant should be weighed against the need to seek an injunction against a promoter.

  2. Evidence obtained through the execution of a search warrant is generally not grand jury information. Therefore, if such evidence is obtained while grand jury proceedings are ongoing, and the search warrant affidavit does not contain grand jury information, the evidence may be made available to civil examiners. Further, it is the services position that, if grand jury information is included in the affidavit, the items seized during the search may be disclosed even if the affidavit may not be. If the affidavit supporting the warrant has been sealed by the court, consideration should be given to the fact that sharing the items seized in the search with civil examiners or attorneys may result in the affidavit being unsealed. Examiners should seek the guidance of Area Counsel for direction in these circumstances.

  3. Disclosure of evidence obtained through the execution of a search warrant or through an undercover operation must be approved by the assigned DOJ attorney. Requests should be coordinated with CI, Area Counsel and the DOJ.

9.5.1.8  (09-27-2011)
Administrative Summons

  1. In a parallel investigation, if the criminal investigation is being pursued administratively by CI rather than through a grand jury, and if there has been no criminal tax referral to the DOJ with respect to the tax liabilities involved in the civil investigation, civil tax examiners may generally issue an administrative summons to the subject of the investigation.

  2. If an administrative summons is proposed and there has been a referral of the subject to the DOJ for grand jury investigation or criminal prosecution, the civil examiner must discuss the matter with Area Counsel and CT Counsel along with any DOJ attorney assigned to the investigation before issuing the summons (see IRM 4.32.2, The Abusive Tax Avoidance Transactions (ATAT) Process).

  3. Title 26 USC §7602(d) generally prohibits the issuance of an administrative summons if there is a DOJ referral in effect with respect to the subject of the investigation. However, if a DOJ referral is in effect but the liability at issue in the civil investigation is different, the prohibition may not apply. For example, if a DOJ referral is in effect for the subject’s income tax liability, a summons may be issued related to the investigation of the subject’s liability under 26 USC §6700 for the subject’s conduct during the same year (see Treas. Reg. §301.7602-1(c)(4)(ii), example (5)). The above-described discussions should be held to determine whether this exception applies.

9.5.1.9  (09-27-2011)
Assessment of Penalties

  1. Generally, CI should request that the assessment of promoter and preparer penalties be delayed until completion of the criminal investigation. Discussions with CT Counsel should occur before requesting the delay.

  2. An immediate civil assessment should be considered if the promoter is likely to flee the United States, dissipate assets or property, or place assets beyond the reach of the US Government. Special agents should consult with CT Counsel or DOJ attorneys if an immediate assessment is contemplated.

9.5.1.10  (09-27-2011)
Participant Lists

  1. Criminal Investigation may provide a participant list or client list to civil examiners assigned to promoter investigations.

  2. If CI does not have a participant list or client list, civil examiners should be given access to the available non-grand jury information, such as bank records, in order to establish a particular list or client list. In grand jury investigations, the use of CI evidence must be approved by the DOJ attorney assigned to the criminal investigation to prevent unintentional release of grand jury information.

  3. Special agents should review the participant list and exclude those considered potential subjects in the criminal investigation.

9.5.1.10.1  (09-27-2011)
Coordinating Participant Examinations Arising from Parallel Investigations

  1. The civil operating divisions will generally conduct income tax examinations of participant returns concurrently with criminal investigations. The special agent should keep apprised of all civil compliance actions with respect to participants.

  2. Special agents must be mindful of pending civil statutes of limitations and the potential loss of tax revenues. Subject to the precautions described in the preceding subsections, special agents should make every effort to provide the civil operating divisions with information to facilitate participant examinations, such as participant lists or other information which may expedite the participant examination process.

  3. Civil and special agents and their respective counsel should carefully consider whether any tax theories or positions advanced in the participant examinations are inconsistent with those that may be taken in the criminal case.

9.5.1.11  (09-27-2011)
Prosecution Recommendations

  1. Original tax returns, photocopies, transcripts, and/or all evidentiary matters relevant and material to the determination of whether or not criminal proceedings should be recommended should be obtained for inclusion as exhibits to the prosecution recommendation report. Summaries may be substituted for lengthy transcripts. For a detailed discussion of prosecution recommendation reports, see IRM 9.5.8, Investigative Reports.

9.5.1.12  (09-27-2011)
General Investigative Issues - Burden of Proof

  1. In criminal cases, the government bears the burden of proving all the elements of the offense "beyond a reasonable doubt."

  2. The burden of proof remains on the government throughout the trial, although the burden of going forward with evidence may shift from one side to the other. For a more detailed discussion of the burden of proof, see IRM 9.6.4, Trial.

9.5.1.13  (09-27-2011)
Proof of Venue

  1. The term "venue" means the district or geographic area in which the trial must be held. In general, venue lies in the judicial district in which the crime was committed. See Federal Rule of Criminal Procedure 18. If the crime consists of a failure to comply with a legal requirement, venue lies where the compliance should have occurred. A defendant may move to transfer venue because of prejudice or for the sake of convenience. For a more detailed discussion of venue, see IRM 9.6.4, Trial.

  2. The burden of proving proper venue is an essential part of the government’s case. The standard for proving venue is by a preponderance of the evidence, not proof beyond a reasonable doubt.

  3. For purposes of proving venue, special agents should gather information relating to:

    1. the address of the taxpayer’s residence at the time the alleged offense was committed

    2. the principal business address of the taxpayer at the time the alleged offense was committed

    3. the place where the records were maintained, where the return was prepared, and where the return was signed

    4. the location of the post office where the return was mailed

    5. the location of the IRS office where the return was delivered if the return was not mailed

    6. any other pertinent evidence that may establish venue

9.5.1.14  (09-27-2011)
Types of Evidence

  1. In general, evidence is the means by which an alleged fact is established or disproved. Evidence may be presented orally through witness testimony, and/or by the introduction of records or other physical objects.

  2. Direct evidence is evidence that tends to prove a disputed fact without any inference or presumption. Evidence is direct when the principal facts in dispute are sworn to by those who have actual knowledge of them by means of their senses. Direct evidence may take the form of admissions or confessions made in or out of court.

  3. Circumstantial evidence is evidence that tends to prove a disputed fact by inference. A jury may properly find that circumstantial evidence outweighs conflicting direct evidence if the inference is more convincing than any other explanation offered. Circumstantial evidence is the only type of evidence generally available to show those elements of a crime that exist in the mind of the perpetrator, such as intent or motive. Therefore, proof of "willfulness" in most Internal Revenue violations is based on circumstantial evidence.

  4. In addition to proving willfulness, circumstantial evidence such as evidence of increases in net worth, expenditures, or bank deposits is also frequently used to prove unreported income. When gathering evidence regarding a subject’s expenditures, it is important to remember that the agent’s testimony alone will not be sufficient. Rather, the government must be prepared to call third-party payees as witnesses or introduce other independent testimonial or documentary evidence to establish the purpose of the payments. Failure to do so would create a so-called "Greenberg problem," named after a First Circuit case of that name.

  5. To save time and expense, a trial judge may accept certain facts without requiring proof if the facts are commonly known or can be easily discovered. This is known as "judicial notice."

9.5.1.15  (09-27-2011)
Oral and Documentary Evidence

  1. Evidence may be presented orally through witnesses, and/or by the introduction of records or other physical objects. Oral testimony consists of statements made by living witnesses while under oath or affirmation. For a detailed discussion of the use of witnesses at trial (see IRM 9.6.4). Documentary evidence includes formal writings such as judicial and official records, contracts and deeds, as well as more informal writings such as letters, memoranda, books, and records belonging to private persons and organizations. Maps, diagrams, and photographs are also classified as documentary evidence.

  2. Generally, both oral and documentary evidence are needed to support a criminal tax case. Written records of transactions, such as purchases and sales of real and personal property, loans, etc. are not sufficient to prove that the transactions occurred. Therefore, witnesses must be produced who will testify about the transactions and attest to the authenticity of the documents. During the investigation, parties to the transactions should be questioned to determine whether the documents or entries truthfully relate all the facts and/or if there are additional facts or circumstances that should have been recorded. The following examples illustrate this principle:

    1. To support an allegation of unreported sales, witnesses should be interviewed to determine: whether checks and invoices represent all the transactions that occurred; whether the documents truthfully record the events; whether additional sums might have been paid or refunded; whether there were any other methods of payment or other parties to the transactions; and whether there is other relevant information.

    2. A contract of sale, settlement sheet, closing statement or recorded deed does not necessarily reflect all the facts involved in a real estate transaction. Payments over and above those shown in the instrument, as well as the use of nominees, may be revealed by questioning the parties to the transaction. Mortgages and other encumbrances may not actually exist even though recorded documents list them. Proof of real estate transactions should, therefore, include the testimony of the parties involved.

9.5.1.16  (09-27-2011)
Chain of Custody

  1. See IRM 9.4.9, Search Warrants, Evidence, and Chain of Custody for procedures on preserving the chain of custody, identification of evidence, and transfer of evidence.

9.5.1.17  (09-27-2011)
Admissibility: General Principles

  1. When conducting an investigation, special agents should be aware of the rules that determine whether the evidence gathered will be admissible at trial. The admissibility of evidence in Federal trials is governed by the Federal Rules of Evidence (FRE) and by case law. In addition, rules for the admissibility of certain forms of documentary evidence in Federal courts are provided in 28 USC §1731 – §1745.

  2. Evidence obtained through an illegal search or seizure is inadmissible at trial.

  3. The inadmissibility of evidence for one purpose or as to one party does not preclude its use for another purpose or party (FRE 105). For example, tax returns for years prior to those charged in an indictment may be used to corroborate the starting point for a net worth computation, even though such returns would be inadmissible as proof of the offenses charged.

9.5.1.18  (09-27-2011)
Relevancy

  1. Evidence must be relevant in order to be admissible. Evidence is relevant when it tends to make the existence of a fact that is of consequence to the determination of the action more or less probable than it would be without the evidence (FRE 401).

  2. Not all relevant evidence is admissible. The rules of evidence may preclude the admission of relevant evidence on other grounds.

  3. Special agents should report all facts obtained concerning the subject of an investigation, even if there is doubt as to the relevancy of particular facts. There are no absolute standards for relevancy, and judges have broad discretion in determining what evidence is relevant.

9.5.1.19  (09-27-2011)
Requirement of Authentication or Identification

  1. Evidence must be properly authenticated or identified in order to be admissible (FRE 901). In other words, when physical evidence is presented in the courtroom, other evidence must often be presented to prove that the evidence is what it is claimed to be.

  2. Federal Rules of Evidence 901 provides a list of examples of ways in which evidence may be authenticated.

  3. Certain public documents and records are self-authenticating (see FRE 902).

9.5.1.20  (09-27-2011)
Hearsay

  1. One form of evidence that is generally inadmissible, subject to certain exceptions, is hearsay. Hearsay is defined as an out-of-court statement (i.e., an oral or written assertion, or nonverbal conduct intended as an assertion) offered in evidence to prove the truth of the matter asserted. Under FRE 802, hearsay statements are inadmissible at trial unless an exception applies. Lack of opportunity for cross-examination and unreliability are the principal reasons for excluding hearsay testimony.

  2. An example of inadmissible hearsay would be a special agent’s testimony that a third party told him or her certain checks written by the defendant were personal in nature. The personal nature of the checks may instead be proven through the defendant's admissions, records and testimony, as well as through third party records.

  3. Prior statements made by a witness while testifying at a trial or hearing under oath and subject to cross-examination is not hearsay (FRE 801(d)(1)(A)). This does not include testimony taken by a special agent for use in an affidavit.

  4. A statement offered against a party (known as an “admission by party-opponent”) is not hearsay if it is one of the following:

    1. the party’s own statement

    2. a statement shown to have been adopted or believed by the party

    3. a statement made by a person authorized by the party to make a statement concerning the subject

    4. a statement by the party’s agent or servant concerning a matter within the scope of the agency or employment, and made during the existence of the relationship

    5. a statement made by a co-conspirator during the course and in furtherance of the conspiracy

9.5.1.20.1  (09-27-2011)
Hearsay Exceptions: Availability of Declarant Immaterial

  1. Federal Rules of Evidence 803 lists a number of exceptions to the hearsay rule, which apply regardless of whether the declarant (i.e., the person who made the statement) is available as a witness. These exceptions include the following:

    1. Present Sense Impression -- A statement describing an event or condition made while the declarant was perceiving the event or condition, or immediately thereafter.

    2. Excited Utterance -- A statement relating to a startling event or condition made while the declarant was under the stress of excitement caused by the event or condition. For example, in order to prove there were betting slips at a bookmaking establishment, a witness might be permitted to testify that someone shouted, "Burn the betting slips!" during a raid.

    3. Then-Existing Mental, Emotional, or Physical Condition -- A statement of the declarant's then-existing state of mind, emotions, or physical condition.

    4. Statements for Purposes of Medical Diagnosis or Treatment -- Statements made for purposes of medical diagnosis or treatment and describing a patient's medical history, past or present symptoms, or the cause of those symptoms.

    5. Recorded Recollection -- A memorandum or record concerning a matter about which a witness once had knowledge but now has insufficient recollection to enable him to testify fully and accurately. For example, if a special agent has taken a statement from a witness, and the witness no longer recollects the facts in his statement, the statement may be read at trial as a record adopted by the witness, regardless of whether the witness had signed it.

    6. Records of Regularly Conducted Activity -- A record in any form of events, conditions, opinions, or diagnoses, made at or near the time by (or from information transmitted by) a person with knowledge, if kept in the ordinary course of business.

    7. Public Records and Reports -- Records of public offices or agencies regarding the activities of the office or agency, or matters observed by the office or agency (excluding matters observed by law enforcement personnel during the course of criminal investigations).

    8. Market Reports, Commercial Publications -- Market quotations, tabulations, lists, directories, or other published compilations, generally used and relied upon by the public or by persons in particular occupations.

    9. Reputation as to Character -- Reputation of a person's character among associates or in the community.

    10. Judgment of Previous Conviction -- Evidence of a final judgment, entered after a trial or upon a plea of guilty (but not upon a plea of nolo contendere), adjudging a person guilty of a crime punishable by death or imprisonment in excess of 1 year, to prove any fact essential to sustain the judgment, but not including, when offered by the government in a criminal prosecution for purposes other than impeachment, judgments against persons other than the accused. The pendency of an appeal may be shown but does not affect admissibility.

9.5.1.20.2  (09-27-2011)
Hearsay Exceptions: Declarant Unavailable

  1. Federal Rules of Evidence 804 lists exceptions to the hearsay rule that only apply if the declarant is unavailable as a witness.

  2. Unavailability as a witness includes situations in which the declarant:

    1. is exempted by ruling of the court on the ground of privilege from testifying concerning the subject matter of his or her statement

    2. persists in refusing to testify concerning the subject matter of his or her statement despite an order of the court to do so

    3. testifies to a lack of memory of the subject of his or her statement

    4. is unable to be present or to testify at the hearing because of death or then existing physical or mental illness or infirmity

    5. is absent from the hearing and the proponent of the declarant’s statement has been unable to procure the declarant’s attendance by process or other reasonable means

    Note:

    A declarant is not unavailable as a witness if the above-described exemption, refusal, claim of lack of memory, inability, or absence is due to the procurement or wrongdoing of the proponent of the declarant’s statement for the purpose of preventing the witness from attending or testifying.

  3. Pursuant to FRE 804, the following are not excluded by the hearsay rule if the declarant is unavailable as a witness:

    1. Former Testimony -- Testimony given as a witness at another hearing or in a deposition of the same or a different proceeding, if the party against whom the testimony is now offered had an opportunity to develop the testimony by direct, cross, or redirect examination.

    2. Statement Under Belief of Impeding Death -- In a prosecution for homicide or in a civil action or proceeding, a statement made by a declarant under the belief that his or her death was imminent, concerning the cause or circumstances of what he or she believed to be impending death. This exception is applicable only in homicide investigations or related civil actions. Dying declarations are not normally relevant to tax investigations.

    3. Statement Against Interest -- A statement that was at the time of its making so far contrary to the declarant's pecuniary or proprietary interest, or so far tended to subject him or her to civil or criminal liability, or to render invalid a claim by him or her against another, that a reasonable man or woman in the declarant’s position would not have made the statement unless he or she believed it to be true.

    4. Statement of Personal or Family History -- A statement concerning the declarant's own birth, adoption, marriage, divorce, legitimacy, relationship by blood, adoption, or marriage, ancestry, or other similar fact of personal or family history, even though declarant had no means of acquiring personal knowledge of the matter stated; or a statement concerning the foregoing matters or the death of another person, if the declarant was related to the other by blood, adoption, or marriage or was so intimately associated with the other's family as to be likely to have accurate information concerning the matter declared.

    5. Forfeiture by Wrongdoing -- A statement offered against a party that has engaged or acquiesced in wrongdoing that was intended to, and did, procure the availability of the declarant as a witness.

9.5.1.20.3  (09-27-2011)
Residual Exception to Hearsay Rule

  1. Under FRE 807, a statement not specifically covered by any of the foregoing exceptions but having equivalent circumstantial guarantees of trustworthiness is not excluded by the hearsay rule, if the court determines that:

    1. The statement is offered as evidence of a material fact.

    2. The statement is more probative of the point for which it is offered than any other evidence the proponent can procure through reasonable efforts.

    3. The general purposes of the Federal Rules of Evidence and the interests of justice will best be served by admission of the statement into evidence.

    Note:

    A statement may not be admitted under this exception unless the proponent of it makes known to the adverse party sufficiently in advance of the trial or hearing to provide the adverse party with a fair opportunity to prepare to meet it, his intention to offer the statement and the particulars of it, including the name and address of the declarant.

9.5.1.21  (09-27-2011)
Best Evidence Rule

  1. Federal Rules of Evidence 1002, known as the best evidence rule, requires that the content of a writing, recording or photograph be proven by producing the original writing, recording or photograph, except as otherwise provided by the FRE or by statute.

  2. The best evidence rule applies only where the proponent seeks to prove the content of the writing, recording or photograph. Facts other than content may be proven without producing the original. For example, the fact that a sales contract was entered into may be proven by testimony alone, even though testimony would not be sufficient to prove the terms of the contract.

9.5.1.22  (09-27-2011)
Secondary Evidence

  1. Evidence produced in place of an original document is classified as "secondary evidence." Examples of secondary evidence include copies of documents (with certain exceptions described below) and witness testimony as to the documents’ contents.

  2. If there is no genuine question as to the authenticity of the original writing, recording or photograph, and no other reason exists for requiring the original, a duplicate is admissible (FRE 1003). There must be satisfactory evidence that the secondary evidence correctly reflects the contents of the original.

  3. Further, secondary evidence of the contents of a document may be admissible if:

    1. The original document was lost or destroyed (unless it was lost or destroyed in bad faith).

    2. The original document cannot be obtained by any judicial process or procedure.

    3. The original document is in the opposing party’s possession, the opposing party was on notice that the contents would be a subject of proof at trial, and the opposing party does not produce the original.

    4. The original document is not closely related to a controlling issue (FRE 1004). The party seeking to introduce the secondary evidence must have used all reasonable means to obtain the original document.

  4. One example of a situation in which secondary evidence was held admissible occurred in a case where the government was unable to produce the defendants’ original books and records because they were in the defendants’ possession, and the Fifth Amendment protection against self-incrimination prevented the court from ordering the defendants to produce the books and records. In that case, the Fourth Circuit held that, so long as the government demonstrated that the original books and records were in the defendant’s possession, the government could present testimony of government agents as to the contents and photostatic copies of certain pages from the books and records.

  5. If the original document has been destroyed by the party who offers secondary evidence of its contents, that person bears the burden of proving that the destruction was accidental or was done in good faith.

9.5.1.23  (09-27-2011)
Admissibility of Copies of Business and Government Records

  1. If a business, institution, member of a profession or government agency keeps certain records in the regular course of business and makes copies (i.e., photographic, photostatic or microfilmed reproductions) of those records in the regular course of business, such copies are admissible as originals whether the true originals have been destroyed or not, so long as the copies are accurate reproductions and are satisfactorily identified (see 28 USC §1732). Similarly, properly authenticated copies or transcripts of government records and papers are admissible as originals (see 28 USC §1733). Together, 28 USC §1732 and §1733 are known as the "Federal Shop Book Rule."

  2. This rule is particularly applicable to bank records, because it is common bank practice to microfilm ledger sheets, deposit tickets and checks.

  3. The Federal Shop Book Rule does not exclude from evidence any document or copy thereof that is otherwise admissible under the FRE. Conversely, the mere fact that a copy has been made in the regular course of business is not enough to make it admissible. The rules of admissibility and relevancy must still be applied, just as for any other evidence.

9.5.1.24  (09-27-2011)
Admissibility of Copies Not Made in the Regular Course of Business

  1. A copy of a document that is not made in the regular course of business is considered secondary evidence of the contents of the original and may be admissible if the original cannot be produced and a valid reason has been given for failing to produce it. In addition, a court may permit an original document, such as a tax return, to be placed in evidence and then substituted with a copy if there is no defense objection.

  2. Title 26 USC §7513 gives the IRS authority to have returns and other documents copied. When copies of documents are obtained during an investigation, they should be initialed on the back, after comparison with the original, by the individual who made the copy or the special agent who obtained the document that was copied. The date of the comparison should also be noted after the initials, and the source of the original document should be identified on the back of the copy or on an initialed attachment or memorandum. This procedure will ensure proper authentication at trial.

9.5.1.25  (09-27-2011)
Admissibility of Transcripts

  1. Transcriptions of documents are admissible under the same principles governing the admission of photographic or photostatic reproductions. Special agents should ensure that transcripts are properly authenticated by carefully comparing the transcript with the original and certifying that the transcript is correct. The certification must indicate when, by whom and where the transcript was made, as well as the source from which it was taken. Each page should be numbered to show that it forms part of a larger whole (e.g., "page 1 of 5," "page 2 of 5," etc.). When a partial transcript is made, it should be so indicated (e.g., "excerpt from page 5 of the cash receipts book" ).

9.5.1.26  (09-27-2011)
Admissibility of Charts, Summaries and Calculations

  1. The contents of lengthy writings, recordings or photographs which cannot conveniently be examined in court may be presented in the form of a chart, summary or calculation (see FRE 1006). The originals, or duplicates, must be made available for examination and/or copying by the other parties, and the court may order that they be produced in court.

  2. Charts are particularly effective in net worth investigations to summarize the items and computations upon which the allegation of additional income is based. Summaries are frequently used to simplify the presentation of a series of transactions upon which a specific item investigation is based. For example, with respect to the purchase and resale of used automobiles, a schedule showing the details of the transactions may be admitted into evidence after the introduction of pertinent records and testimony. However, care should be exercised in the preparation of charts and summaries to avoid prejudicial headings or titles. For example, a chart listing a series of unreported sales should not be entitled "Fraudulently Omitted Sales."

  3. A schedule prepared by the investigating agent from the taxpayer's books and records may be admissible as secondary evidence of the contents thereof. It should be properly certified and authenticated in a similar manner to that used for transcripts.

9.5.1.27  (09-27-2011)
Admissibility of Agent’s Notes, Diaries, Workpapers, and Memoranda

  1. Although not ordinarily presented as evidence, the notes, diaries, workpapers and memoranda made by an agent during an investigation may be used to refresh the memory of a witness while testifying or before testifying, at the court’s discretion. If used in this way, the opposing party is entitled to have the writings produced at trial and to offer into evidence those portions that relate to the witness’s testimony (see FRE 612). Under certain circumstances, such writings may also be introduced by the opposing party for impeachment purposes (see FRE 613). Because an agent’s notes, diaries, workpapers and memoranda may be used in court, such documents must be carefully prepared to ensure their accuracy.

9.5.1.28  (09-27-2011)
Admissibility of Computer Records

  1. Computer records are generally admissible upon a showing that they fall within FRE 803(6), an exception to the hearsay rule for records "kept in the course of a regularly conducted business activity." The courts have indicated that computer records may generally be admitted as business records if they were kept pursuant to a routine procedure that tended to ensure their accuracy.

  2. The standard for authenticating computer records is the same as that for authenticating other records. Thus, before a party may move for admission of a computer record, the party must produce evidence "sufficient to support a finding that the [computer record] in question is what its proponent claims" FRE 901(a).

  3. Challenges to the authenticity of computer records often take one of the following three forms:

    1. The opposing party may question whether the records were altered, manipulated, or damaged after they were created. Absent specific evidence that tampering occurred, the courts have responded to such claims with skepticism.

    2. The opposing party may challenge the reliability of the computer program that generated the records. Courts have indicated that the government can overcome this challenge by demonstrating that the records are trustworthy and by affording the opposing party an opportunity to investigate their accuracy.

    3. The opposing party may challenge the authenticity of computer-stored records by questioning the identity of their author. Unlike handwritten records, computer-stored records offer their authors an unusual degree of anonymity. For example, internet technologies permit users to send e-mails that are effectively anonymous. Therefore, circumstantial evidence may be needed to prove the authorship and authenticity of a computer record. For example, to show that a defendant engaged in an online conversation with an undercover IRS agent in an Internet chat room devoted to tax evasion, the government might offer a printout of the Internet chat conversation, along with billing records obtained from the internet service provider and a document found in the defendant’s home bearing the undercover agent’s contact information.

  4. If a computer record offered into evidence contains only computer-generated data untouched by human hands, the record does not contain hearsay. In such cases, the government must establish the authenticity of the record but does not need to establish that a hearsay exception applies.

  5. Under FRE 1001(3), any printout or other legible output of computer stored data, if shown to reflect the data accurately, is an "original." Thus, an accurate printout of computer data always satisfies the best evidence rule.

9.5.1.29  (09-27-2011)
Official Government Records

  1. The admissibility of official records and copies or transcripts is governed by 28 USC §1733, which provides as follows:

    1. Books or records of account or minutes of proceedings of any department or agency of the United States, shall be admissible to prove the act, transaction or occurrence as a memorandum of which the same were made or kept.

    2. Properly authenticated copies or transcripts of any books, records, papers or documents of any department or agency of the United States shall be admitted into evidence equally with the originals thereof.

9.5.1.30  (09-27-2011)
Authentication of Official Records

  1. The method of authenticating official records is set forth in Federal Rule of Civil Procedure 44, which is made applicable to criminal trials by Federal Rule of Criminal Procedure 27. An official record may be proven by an official publication of the record or a copy attested by the officer with legal custody of the record and accompanied by a certificate that the officer has custody. The certificate must be made under seal by a judge or any public officer in the district or political subdivision where the record is kept.

    Note:

    Verification of the official status of Disclosure Officers is not required on authenticated copies of IRS documents certified to by Disclosure Officers over their seal of office (Delegation Order 11-5).

  2. Tax returns that have been filed, or certified copies of filed tax returns, are admissible under 28 USC § 1733 as official records of the IRS (see 26 USC §6103). The procedures and required forms for certifying tax returns and other official records are set forth in IRM 11.3, Disclosure of Official Information. Although tax returns and other official records are usually offered into evidence through an IRS representative, authenticated copies are generally admissible without a representative.

  3. A Certificate of Assessments, Payments, and Other Specified Matters, Form 4340 (for manually-processed returns), or a Transcript of Account, Form 4303 (a computer transcript), is customarily offered into evidence through a representative of the IRS as a transcript of the records to which it relates. However, these forms, if properly authenticated in accordance with Federal Rule of Civil Procedure 44, are admissible without the presence of an IRS representative.

  4. An official record may be self-authenticating under FRE 902.

9.5.1.31  (09-27-2011)
Proof of Lack of Official Record

  1. It is sometimes desirable or necessary to prove that a search of official files has resulted in a finding that there is no record of a certain document. For example, in a prosecution for failure to file an income tax return, the government, in addition to introducing oral testimony, may wish to introduce documentary evidence that a search has disclosed no record of such return. Under Rule 44(b) of the Federal Rules of Civil Procedure, which is made applicable to criminal trials by Federal Rule of Criminal Procedure 27, a written statement that a diligent search of designated records did not reveal the record or entry at issue is admissible as evidence that the records contain no such record or entry, so long as the statement is properly authenticated.

  2. Procedures and a standard form for the certification of a lack of records by the Disclosure Officer are provided in IRM 11.3.6, Disclosure of Official Information, Seals and Certifications.

9.5.1.32  (09-27-2011)
Presumptions

  1. A presumption is an assumption of fact that the law requires or permits the jury to make.

9.5.1.32.1  (09-27-2011)
Conclusive Presumptions

  1. A conclusive presumption must be accepted by the jury and cannot be rebutted. In general, conclusive presumptions are unconstitutional because they conflict with the presumption of innocence and interfere with the fact-finding role of the jury.

9.5.1.32.2  (09-27-2011)
Rebuttable Presumptions

  1. A rebuttable presumption is one that may be overcome by evidence to the contrary. Examples of rebuttable presumptions include the following:

    1. In criminal investigations, a defendant is presumed to be innocent until proven guilty beyond a reasonable doubt.

    2. The signature on a tax return is presumed to be authentic. See 26 USC §6064. However, the government must be prepared to prove the authenticity of a signature.

    3. Every person is presumed to know the law, and ignorance of the law is no excuse for its violation. However, this presumption does not relieve the government from proving willfulness in criminal tax cases. The government must prove that the law imposes a duty on the defendant, and that the defendant voluntarily and intentionally violated that duty. Evidence of such actions as hiding assets or backdating documents may disprove a defendant's claim of a misunderstanding of the law.

    4. A person signing an instrument is presumed to have knowledge of its contents.

    5. A person of ordinary intelligence is presumed to intend the natural and probable consequences of his voluntary acts. Although this presumption in itself will not relieve the burden of proving willfulness, it does permit inferences to be drawn from the acts of the defendant which may constitute circumstantial proof of willfulness.

    6. Proof that a letter, properly stamped and addressed, was mailed and was not returned to the return address creates a presumption that it was received.

9.5.1.33  (09-27-2011)
Privilege Against Self-Incrimination

  1. The Fifth Amendment of the Constitution provides that no person "shall be compelled in any criminal case to be a witness against himself." Therefore, a witness (whether or not the witness is the defendant) cannot be compelled to answer any question that may incriminate him/her.

  2. The Fifth Amendment privilege against self-incrimination protects only evidence that is testimonial or communicative in nature from compelled disclosure. Thus, the privilege would not apply to private business records seized under a search warrant, provided the individual claiming the privilege was not asked to identify the documents.

  3. The privilege applies only to natural persons and not to corporations or other entities. It generally cannot be asserted on behalf of another person.

  4. Voluntary disclosure of an incriminating fact waives the privilege for that and all other relevant facts where no further incrimination would result.

9.5.1.34  (09-27-2011)
Privileged Communications

  1. Communications may be "privileged," i.e., protected from compelled disclosure in litigation or other proceedings, if they take place within certain relationships. Courts have generally held that a privilege may apply to a communication only if the following general conditions are satisfied:

    1. The communication must be made with the belief that it will not be disclosed.

    2. The element of confidentiality must be essential to the relationship between the parties.

    3. The relationship must be one that in the opinion of the community ought to be fostered.

    4. The injury to the relationship by the disclosure of the communication must be greater than the benefit gained by the correct disposition of the litigation or other proceeding.

  2. There are a number of generally recognized privileges in Federal judicial proceedings, including the attorney-client privilege, spousal privileges, the clergy-communicant privilege (also known as "priest-penitent" privilege), and the government-informant privilege. By contrast, there is no Federal privilege for communications between parent and child, physician and patient (except where the physician is a psychotherapist), or journalist and confidential source.

9.5.1.34.1  (09-27-2011)
Attorney - Client Privilege

  1. In general, the attorney-client privilege protects the confidentiality of communications between a client and his or her attorney, so long as the communications are related to the purpose of seeking legal advice and the client does not waive the privilege. When it applies, the privilege covers corporate as well as individual clients.

  2. The mere existence of an attorney-client relationship does not mean that every communication between the client and the attorney is privileged. Rather, the communication must have been made in confidence for the purpose of obtaining legal advice from the attorney. If the communication were made for the purpose of preparing a tax return or obtaining business advice, it would generally not be privileged. Similarly, if the communication were made in the presence of a third party rather than in confidence, it would generally not be privileged.

  3. The attorney-client privilege applies only to communications and not to the facts underlying a communication. Therefore, if a client has knowledge of certain facts, those facts do not become privileged simply because the client has discussed them with an attorney. In addition, the attorney-client privilege generally does not protect the identity of a client, nor does it protect the nature of the fee arrangement between the attorney and the client.

  4. Communications with an accountant employed by an attorney or retained by a taxpayer at the attorney's request to perform services essential to the attorney-client relationship may be protected by the attorney-client privilege.

    Note:

    Although there is a separate, statutory privilege for certain communications between taxpayers and non-attorney tax practitioners (such as accountants), that privilege does not apply to criminal matters (see 26 USC §7525(a)(2)).

  5. The attorney-client privilege does not apply if the client sought the attorney’s advice for the purpose of engaging in, assisting, or furthering the commission of a future crime or fraud, even if the attorney was unaware of this improper purpose. The burden of proof for this "crime-fraud exception" to the attorney-client privilege is on the party seeking to invoke the exception.

9.5.1.34.2  (09-27-2011)
Spousal Privileges

  1. There are two spousal privileges: the marital communications privilege and the adverse testimony privilege.

9.5.1.34.3  (09-27-2011)
Marital Communications Privilege

  1. Communications made privately between spouses during a valid marriage are generally privileged.

  2. The marital communications privilege is not extended to communications made prior to the marriage or after divorce, and it does not apply to communications made in the presence of a third party. Further, the privilege applies only to communications, not to acts, and it does not protect communications concerning a joint criminal enterprise.

  3. Privileged communications made during marriage remain privileged after termination of the marriage.

  4. The marital communications privilege may be asserted by either spouse.

9.5.1.34.4  (09-27-2011)
Adverse Testimony Privilege

  1. When one spouse is called as a witness against the other, the testifying spouse alone has the privilege of refusing to testify adversely as to any act observed or any non-confidential communications made before or during the marriage. The spouse may neither be compelled to testify nor prevented from testifying.

9.5.1.34.5  (09-27-2011)
Clergy-Communicant Privilege

  1. The Federal courts recognize a privilege that protects confidential communications made to a clergy person in his or her capacity as such. However, this privilege has not been extended to financial transactions, such as contributions made through a clergyman.

9.5.1.34.6  (09-27-2011)
Informant - Government Privilege

  1. The informant-government privilege allows enforcement agencies to withhold from disclosure the identity of persons who furnish them with information concerning violations of law.

  2. The purpose of the privilege is to preserve the anonymity of informants and thereby encourage citizens to communicate their knowledge of the commission of crimes to law enforcement officials. Thus, the contents of a communication are not privileged unless they tend to reveal the informant’s identity.

  3. This privilege differs from the others described above in that it may be waived only by the government.

  4. Where disclosure of an informant's identity or the content of the communication would be relevant and helpful to the defense or is essential to a fair determination, the trial court may order disclosure. If the government then withholds the information, the court may dismiss the indictment.

Exhibit 9.5.1-1 
STATE MAPPING FOR POA/CAF PROGRAM

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Exhibit 9.5.1-2 
STATE MAPPING FOR POA/CAF PROGRAM

STATE IRS CAMPUS
Alabama OSC
Alaska OSC
Arizona OSC
Arkansas OSC
California OSC
Colorado OSC
Connecticut MSC
Delaware MSC
Florida OSC
Georgia OSC
Hawaii OSC
Idaho OSC
Illinois MSC
Indiana MSC
Iowa OSC
Kansas OSC
Kentucky MSC
Louisiana OSC
Maine MSC
Maryland/DC MSC
Massachusetts MSC
Michigan MSC
Minnesota OSC
Mississippi OSC
Missouri OSC
Montana OSC
Nebraska OSC
Nevada OSC
New Hampshire MSC
New Jersey MSC
New Mexico OSC
New York-city MSC
New York-upstate MSC
North Carolina MSC
North Dakota OSC
Ohio MSC
Oklahoma OSC
Oregon OSC
Pennsylvania MSC
Rhode Island MSC
South Carolina MSC
South Dakota OSC
Tennessee OSC
Texas OSC
Utah OSC
Vermont MSC
Virginia MSC
Washington OSC
West Virginia MSC
Wisconsin MSC
Wyoming OSC
International PSC

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