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U.S. Supreme Court

Tiffany Fine Arts, Inc. v. United States, 469 U.S. 310 (1985)

Tiffany Fine Arts, Inc. v. United States

No. 83-1007

Argued October 31, 1984

Decided January 9, 1985

469 U.S. 310


Petitioners are a holding company and its tax-shelter-promoting subsidiaries. The Internal Revenue Service (IRS) issued summonses to petitioners pursuant to § 7602(a) of the Internal Revenue Code, which empowers the IRS to serve summons on any person, without prior judicial approval, if the information sought is necessary to ascertain that person's tax liability. The summonses requested petitioners' financial statements for certain fiscal years, as well as the names of persons who had licenses from petitioners to distribute a certain medical device. When petitioners refused to comply with the summonses, the Government brought an enforcement action in Federal District Court. Petitioners opposed enforcement on the ground that the IRS's request for the licensees' names indicated that the IRS's "primary purpose" was to audit the licensees, not petitioners. Petitioners contended that, if the IRS wanted the licensees' names, it could not proceed solely under § 7602(a), but would have to comply also with the "John Doe" summons procedures of § 7609(f), which requires the IRS to obtain prior judicial approval to serve a summons seeking information on the tax liability of unnamed taxpayers. The District Court found that the IRS had made a sufficient showing of its interest in auditing petitioners' returns and enforced the summonses. The Court of Appeals affirmed, holding that § 7609(f) applies only when the IRS issues a summons to an identifiable party with whom it has no interest in order to investigate the unnamed third parties' tax liabilities.

Held: Where, pursuant to § 7602(a), the IRS serves a summons on a known taxpayer with the dual purpose of investigating both that taxpayer's tax liability and unnamed parties' tax liabilities, it need not comply with § 7609(f), as long as all the information sought is relevant to a legitimate investigation of the summoned taxpayer. Where the summoned party is itself being investigated, that party's self-interest provides sufficient protection against the evils that Congress sought to remedy when it enacted § 7609(f), which serves as a restraint on the IRS's exercise of its summons power in the "John Doe" context. Here, on the record, the licensees' names "may be relevant" to the legitimate investigation

Page 469 U. S. 311

of petitioners, and thus the summonses were properly enforced. Pp. 469 U. S. 314-324.

718 F.2d 7, affirmed.

MARSHALL, J., delivered the opinion for a unanimous Court.

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