A federal judge told the Internal Revenue Service it cannot serve a John Doe summons on California authorities as part of its effort to find people who evade federal tax on gifts of real estate to family members.
The IRS and the Justice Department wanted the court's permission to seek land transfer documents from the California State Board of Equalization. It said the information would help identify people who had given property to relatives and who may not have reported the gifts on federal tax forms.
In his opinion, issued earlier this week, U.S. District Judge Morrison C. England said the government failed to show that it can't get the information it wants from another, readily available source.
The judge's move to block the summons was a rare one, according to tax lawyers, who say the IRS now has to decide whether to revise its request. England also raised an interesting question of tax and constitutional law, according to Scott Michel, an attorney in the Washington, D.C. office of Caplin & Drydale. That is, whether a "state" is a "person" under the tax code provision that lets the IRS issue administrative summonses in connection with tax examinations.
