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Law School Case Brief

Ballard v. Commissioner - 544 U.S. 40, 125 S. Ct. 1270 (2005)


U.S. Tax Ct. R. 183 governs the two-tiered proceedings in which a special trial judge hears a case, but the U.S. Tax Court itself renders the final decision. The rule directs that, after trial and submission of briefs, the special trial judge shall submit a report, including findings of fact and opinion, to the Chief Judge, and the Chief Judge will assign the case to a Judge of the Court. U.S. Tax Ct. R. 183(b). In acting on the report, the Tax Court judge to whom the case is assigned must give due regard to the circumstance that the special trial judge had the opportunity to evaluate the credibility of the witnesses. U.S. Tax Ct. R. 183(c). Further, fact findings contained in the report shall be presumed to be correct. The final Tax Court decision may adopt the special trial judge's report or may modify it or may reject it in whole or in part.


Taxpayers in three federal judicial circuits received notices of deficiency from the Commissioner of Internal Revenue, charging the taxpayers with failure to report certain payments on their individual tax returns and with tax fraud. The taxpayers filed petitions for redetermination with the Tax Court. The Chief Judge assigned the consolidated case to a special trial judge who, after trial, submitted a U.S. Tax Ct. R. 183(b) report to the Chief Judge, who then issued an order assigning the case to a Tax Court judge for review of the report, and if approved, for adoption. The Tax Court judge issued the Tax Court's decision, holding the taxpayers liable for underpaid taxes and for fraud penalties. That decision, which included a document labeled "Opinion of the Special Trial Judge," stated "The Court agrees with and adopts the opinion of the Special Trial Judge, which is set forth below." On appeal, the Court of Appeals rejected the taxpayers' requests that the special trial judge's report be made available to the taxpayers or be placed under seal in the record on appeal, and affirmed in principal part the Tax Court's decision that the taxpayers were liable for unpaid taxes and for fraud penalties without reviewing the trial judge's opinion. The taxpayers contended, however, that they obtained information that the trial judge in fact disagreed with some findings of the published opinion, and it was subsequently revealed that the standard practice was for a special trial judge and a Tax Court Judge to review the trial judge's report and issue an opinion based on the joint effort. 


In petitioner taxpayers action challenging tax liability determinations of respondent Commissioner of Internal Revenue, which were judicially upheld by adoption of a special trial judge's opinion under U.S. Tax Ct. R. 183, did the court of appeals err in affirming the determinations without reviewing the trial judge's opinion.




Reversing, the Supreme Court of the United States held that Rule 183 did not describe or authorize the collaborative effort with regard to the trial judge's opinion, and such opinion could not be excluded from the record on appellate review. Rule 183(c) required the Tax Court Judge to give due regard to the trial judge's credibility determinations and to presume that factual findings were correct, but informed appellate review was impeded since these standards were meaningless where the judge collaborated in the opinion. Further, the Tax Court's unique practice was contrary to the generally prevailing practice of including a hearing officer's opinion in the appellate record when reviewing a tribunal's operative decision. The cases were remanded for further proceedings.

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