Free Response to Motion - District Court of Federal Claims - federal

Case 1:05-cv-00748-CCM

Document 22-8 Filed 12/29/2006 Page 1 of 2 U.S. Department v.. Justice
Tax Division
Please reply to: Court of Federal Claims Section

Facsimile No. (202) 514-9440 Trial Attorney: Cory A. Johnson
Attorney's Direct Line: 202-307-3046

P.o. Box 26

Ben Franklin Station Washington, D.C. 20044

EJO'C:DG:CAJohnson 154-2322 CMN 2005105383

October 30, 2006
Via U.S. Mail

Robert E. Kolek
Schiff Hardin LLP

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6600 Sears Tower Chicago, II 60606
Re: Stobie Creek Investments v. United States
Dear Bob:

I am wrting in response to your letter of September 28th and our telephone discussion of your interrogatories and October 12th. As you requested, we have reviewed again certain of
document requests. We continue to believe that they go far beyond the bounds of permissible

discovery.

Requests for Discovery of Internal IRS Deliberations

Your requests for documents (Requests Nos. 12, 14 - 16) concernng internal IRS deliberations preceding the promulgation of règulations and notices, and concernng individual the term "liability," canot produce any information bearng on IRS employees' interpretations of
the issues in this case. The law is what it is. The opinions, reasoning or conclusions of employees will not change that law, and are irrelevant to the application of

IRS the law to the facts in

this case. See, e.g. Flamingo Fishing Corp. v. United States, 31 Fed. Cl. 655,658 (1994). Just the Treasury (who as you are not be entitled to depose the Commissioner or Secretar of ultimately promulgates regulations) concernng their opinions about the development of Treasury "liability," you are not entitled to this tye of Regulations and their meanng, or the meanng of
document discovery either.

Additionally, the cour does not even have jursdiction in this case over the issue for which you claim this discovery might be relevant. A reasonable cause defense to penalties based on an alleged good faith interpretation of "liability" cannot be raised in this TEFRA parnership proceeding; it can only be asserted in a subsequent refund case brought by an individual parter
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Exhibit 7

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Case 1:05-cv-00748-CCM

Document 22-8

Filed 12/29/2006

Page 2 of 2

-2of

Stobie Creek. See 26 D.S.C. §§ 6221, 6230(c)(4); Treas. Reg. § 301.6221-1; and Santa

Monica Pictures v. Commissioner, T.C. Memo, 2005-104 (U.S. Tax Court, 2005).

Requests for Discovery of the Process and
Reasonig Leadig to Issuance of

the FP AA

Your discovery requests (Document Request Nos. 5, 7 -11 and Interrogatories Nos. 4, 5, 10) that seek to "go behind" the FP AA are clearly improper. This is a de novo proceeding in
which the cour will determine the parership items of Stobie Creek pursuant to its own

the law to the facts. See 26 U.S.C. 6226(f); TFID III-E Inc. v. United States, 342 application of F.Supp. 94 (2004); and Cook v. United States, 46 Fed. Cl. 110(2000). Discovery ofthe IRS permissible discovery. See e.g., process that led to the FPAA, therefore, is beyond the scope of
Flamingo, supra, and Greenberg's Express, Inc. v. Commissioner, 62 T.C. 324 (1974'"

As you know, we have, neverteless, produced to you all the documents that the IRS obtained from Shumaker, Loop & Kendrck, Jenkens & Gilchrst and Deutsche Ban relating to
Stobie Creek. Weare also producing to you all the documents we are obtaining in discovery in this case. Weare not curently aware of any other documents relating to the underlying

transactions.
For these reasons, and those set fort in our discovery responses, we do not intend to
withdraw our objections. Please do not hesitate to call me if

you wish to discuss these matters

fuer.

cc: Stuar D. Gibson