                     117 T.C. No. 1



                UNITED STATES TAX COURT



GLAXOSMITHKLINE HOLDINGS (AMERICAS) INC., Petitioner v.
      COMMISSIONER OF INTERNAL REVENUE, Respondent



Docket No. 3-01-D.                        Filed July 5, 2001.


     G and R (the applicants) filed a Joint Application
to Perpetuate Testimony Before Commencement of a Case
(joint application) pursuant to Rule 82, Tax Court
Rules of Practice and Procedure. The applicants
propose to take the depositions of two of G’s former
executives, both of whom are septuagenarians, and both
of whom reside in the United Kingdom. The applicants
agree that R is not likely to issue a notice of
deficiency to G in the near future, that the testimony
of the proposed deponents is critical to G’s issues
under examination, and that a trial is likely but not
until 2005 or 2006.

     Held: Because there is a reasonable expectation
that the applicants will be adversaries in an action
cognizable in this Court, and there is a significant
risk that critical testimony will be unavailable when a
trial, if any, is commenced, the applicants’ joint
application will be granted.
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     John B. Magee and Richard C. Stark, for petitioner.

     Theodore J. Kletnick, for respondent.



                                OPINION

     WELLS, Chief Judge:   This matter is before the Court on a

Joint Application to Perpetuate Testimony Before Commencement of

a Case (joint application), filed May 7, 2001.    Unless otherwise

indicated, section references are to sections of the Internal

Revenue Code, as amended, and Rule references are to the Tax

Court Rules of Practice and Procedure.

     GlaxoSmithKline Holdings (Americas), Inc. (Glaxo), and the

Commissioner of Internal Revenue (the Commissioner) filed a joint

application, pursuant to Rule 82, to take the depositions of two

of Glaxo’s former executives.    For convenience, we will refer to

Glaxo and the Commissioner, collectively, as the applicants.

Glaxo has no current petition for redetermination of deficiencies

before the Court.

                            Background

     Glaxo is a holding company for a global pharmaceutical

business headquartered in the United Kingdom.    In 1992, the

Commissioner began an examination of Glaxo’s tax returns for 1989

and 1990.   The Glaxo examination currently encompasses Glaxo’s

tax returns for the years 1989 through 1999.
                                - 3 -

     Glaxo disagrees with the Commissioner’s proposal to increase

Glaxo’s taxable income pursuant to section 482 for the years

under examination.    Since 1994, the applicants have attempted to

resolve their differences through the Advance Pricing Agreement

Program and through the Internal Revenue Service’s Office of

Appeals.

     In December 1999, Glaxo formally requested relief from

double taxation for the taxable years 1989 through 1997 under the

mutual agreement procedures (or so-called competent authority

process) provided in article 25 of the Convention for the

Avoidance of Double Taxation, Dec. 31, 1975, U.S.-U.K., 31 U.S.T.

5668, 5688, as amended by Second Protocol, Apr. 25, 1980, 31

U.S.T. 5707, 5708.    The applicants anticipate that the competent

authority process could be protracted.

     The Commissioner has not issued a notice of deficiency to

Glaxo for the years under examination.    Because of their

commitment to the competent authority process, the applicants do

not anticipate that the Commissioner will issue a notice of

deficiency to Glaxo in the near future.    Assuming that the

Commissioner issues a notice of deficiency to Glaxo, the

applicants expect that the matter will proceed to trial but not

until 2005 or 2006.

     The applicants seek permission to take the depositions of

Sir Paul Girolami (Mr. Girolami) and Sir David Jack (Mr. Jack),
                               - 4 -

former Glaxo executives.   Messrs. Girolami and Jack reside in the

United Kingdom.   Mr. Girolami, presently 75 years of age, served

as Glaxo’s controller, finance director, chief executive, and

chairman of worldwide operations, during the period 1966 through

1994.   Mr. Jack, presently 77 years of age, served vital roles in

Glaxo’s research and development efforts during the period 1961

through 1987.   The applicants agree that Messrs. Girolami’s and

Jack’s testimony will be critical to the resolution of the

section 482 adjustments that the Commissioner has proposed for

the years under examination.

     Citing Messrs. Girolami’s and Jack’s advanced ages, the

importance of their testimony, their foreign residences, and the

substantial delay anticipated in any trial, the applicants

contend that, to prevent a failure of justice, the Court should

issue an order authorizing Messrs. Girolami’s and Jack’s

depositions for the purpose of perpetuating their testimony.    The

applicants report that Messrs. Girolami and Jack consent to the

granting of the joint application.

     The applicants expect to conduct the proposed depositions at

the offices of Glaxo’s counsel in Washington, D.C., so long as

Messrs. Girolami and Jack are capable of traveling to the United

States.   The joint application includes a description of the

substance of the testimony that the applicants expect to elicit

from the proposed deponents.   The joint application states that
                               - 5 -

the proposed depositions will be videotaped and that the

applicants agree to begin Mr. Girolami’s deposition on or about

May 14, 2002, and Mr. Jack’s deposition on or about June 4, 2002.

The applicants have further agreed to a so-called discovery

schedule to permit the Commissioner to make reasonable requests

for information from Glaxo, consult with experts, and make

further preparations in advance of the proposed depositions.

     This matter was called for hearing at the Court’s motions

session held in Washington, D.C.   Counsel for both parties

appeared at the hearing and offered argument in support of the

joint application.   Glaxo filed a Rule 50(c) statement indicating

that:   (1) Actuarial studies suggest that there is an

approximately 40-percent probability that Mr. Girolami will not

survive to the end of 2006 and an approximately 50-percent

probability that Mr. Jack will not survive to the end of 2006;

and (2) health and aging studies suggest that, even if they do

survive to the end of 2006, there would be a significant

likelihood that they would be suffering from substantial memory

lapses or other forms of mental impairment at that time.

                             Discussion

     Rule 82 provides for the taking of depositions before the

commencement of a Tax Court case “to perpetuate testimony or to

preserve any document or thing regarding any matter that may be

cognizable in this Court”.   Rule 82 is derived from rule 27(a) of
                               - 6 -

the Federal Rules of Civil Procedure, and we are guided by

judicial interpretations of Fed. R. Civ. P. 27 in the absence of

our own precedent.   See Reed v. Commissioner, 90 T.C. 698, 700

(1988).

     Rule 82 states that an application must show:   (1) The facts

showing that the applicant expects to be a party to a case

cognizable in this Court but is at present unable to bring it or

cause it to be brought; (2) the subject matter of the expected

action and the applicant’s interest therein; and (3) all matters

required to be shown in an application under paragraph (b)(1) of

Rule 81 except item (H) thereof.   Rule 81(b)(1), as is relevant

here, requires the applicant to show the reason for deposing a

person rather than waiting to call the person as a witness at

trial and the substance of the testimony that the applicant

expects to elicit.   Rule 82 further provides:

     If the Court is satisfied that the perpetuation of the
     testimony or the preservation of the document or thing
     may prevent a failure or delay of justice, then it will
     make an order authorizing the deposition and including
     such other terms and conditions as it may deem
     appropriate consistently with these Rules. * * *

     The instant application states that the applicants expect to

be adversaries in a case cognizable in this Court and that the

case will likely concern, among other items, adjustments to

Glaxo’s taxable income pursuant to section 482.   Although the

Commissioner has not issued a notice of deficiency to Glaxo, and,

therefore, Glaxo presently is unable to file a petition with the
                               - 7 -

Court, we are satisfied that it is likely that the dispute

between Glaxo and the Commissioner over the Commissioner’s

adjustments to Glaxo’s tax returns will proceed to litigation.

See DeWagenknecht v. Stinnes, 250 F.2d 414, 417 (D.C. Cir. 1957).

     The central question posed in the instant application is

whether the perpetuation of the proposed deponents’ testimony may

prevent a failure or delay of justice.     Although no objection to

the proposed depositions has been made, this Court has the

inherent authority to protect the integrity of its Rules

regardless of an objection by a party.     See Masek v.

Commissioner, 91 T.C. 1096, 1100 (1988), supplemented by 92 T.C.

814 (1989).   Accordingly, we will briefly review relevant caselaw

regarding Rule 82.

     In Reed v. Commissioner, supra, we held that the mere

showing that an applicant is currently unable to commence an

action in the Tax Court is insufficient to justify granting an

application under Rule 82.   In denying the application in that

case, we stated in pertinent part:     “The relief provided for by

Rule 82 is an extraordinary measure and invoked only to prevent

the failure or delay of justice.   We will continue to apply the

test * * * which requires that the applicant show that the

testimony will, in all probability, be lost before trial.”     Id.

at 701.

     In Masek v. Commissioner, supra, the applicant/taxpayer
                                 - 8 -

sought to take the depositions of two third-party witnesses.      The

two witnesses were 62 and 69 years of age, respectively.    Upon

review of the application, we explained that the procedure under

Rule 82 was not intended to be used as a discovery device.    See

Ash v. Cort, 512 F.2d 909, 911 (3d Cir. 1975).   We also stated

that, where an application under Rule 82 suggests that the

proposed deposition might be used for discovery purposes, our

decision whether to grant such an application will turn on a

weighing of the discovery aspects of the deposition against the

applicant’s need to perpetuate testimony.    See Masek v.

Commissioner, 91 T.C. at 1100.    In denying the application in

that case, we concluded that the proposed depositions of third-

party witnesses reflected “more than a trace of discovery” and

the applicant/taxpayer had not shown (through medical records or

otherwise) that the proposed deponents’ testimony would likely be

lost before trial.   Id. at 1100-1101.

     In our Supplemental Opinion, Masek v. Commissioner, 92 T.C.

814 (1989), we denied the applicant/taxpayer’s motion to

reconsider our earlier opinion, stating that our focus under Rule

82 “is directed to the risk that the testimony will be

unavailable when a trial commences, and the applicant must

establish that that risk is significant.”    Id. at 815.
                                - 9 -

     With the foregoing as background, we consider the instant

application.   As previously discussed, the application states

facts showing that the applicants reasonably expect to be

adversaries in an action cognizable in this Court.   Because the

matter involves a complex examination concerning numerous issues,

the issuance of a notice of deficiency to Glaxo will be delayed,

and the case is not likely to go to trial until 2005 or 2006.

Against this backdrop, we note that the proposed deponents,

Messrs. Girolami and Jack, are both residents of the United

Kingdom.   Mr. Girolami is presently 75 years of age, and Mr. Jack

is presently 77 years of age.   The applicants agree that the

proposed deponents’ testimony will be critical to the issue of

Glaxo’s policies concerning intercompany transfer pricing during

the years under examination.

     There is no evidence that either of the proposed deponents

is presently ill or otherwise suffering from a chronic medical

condition, see Masek v. Commissioner, 91 T.C. at 1100-1101;

however, other factors support the proposition that there is a

significant likelihood that the proposed deponents’ testimony

will be unavailable when a trial commences in this matter.    In

particular, the proposed deponents’ advanced ages, their

residences abroad, and the potential for substantial delay in a

trial of the Federal tax issues presented in the examination of

Glaxo’s 1989 through 1999 tax returns are all factors which
                               - 10 -

suggest that there is a high probability that critical testimony

will be lost.

     There is no indication that the applicants are attempting to

use the proposed depositions as a discovery device.    Although the

applicants have agreed that the Commissioner will be given an

opportunity to request information from Glaxo in order to prepare

for the depositions, such an exchange of information in advance

of the depositions is perfectly understandable given the

complexity and magnitude of the examination.

     The circumstances presented in the instant application are

somewhat analogous to those presented in Texaco, Inc. v. Borda,

383 F.2d 607 (3d Cir. 1967), where Borda brought a civil

antitrust suit against Texaco which was stayed pending the

determination of a criminal action in which Texaco was named as a

coconspirator.    The District Court had denied Texaco’s

application to take Borda’s deposition in advance of the trial in

the civil case.    On appeal, the Court of Appeals for the Third

Circuit held that the District Court had erred in denying

Texaco’s application to take Borda’s deposition, considering that

Borda was 71 at the time, the events underlying the civil action

dated back some 11 years, and the trial of the matter would not

be conducted in the foreseeable future.    Cf. DeWagenknecht v.

Stinnes, supra (application to take deposition to perpetuate

testimony of witness 74 years of age was granted where claimant
                              - 11 -

was unable to bring action immediately and claim concerned events

and transactions which had taken place many years earlier).

     In sum, the application shows that there is a reasonable

expectation that the applicants will be adversaries in an action

cognizable in the Court and there is a significant risk that

critical testimony may be lost over the next several years

because of Messrs. Girolami’s and Jack’s advanced ages.

Consistent with the preceding discussion, and with the intention

of preventing a failure of justice in this matter, we will grant

the applicants’ Joint Application to Perpetuate Testimony Before

Commencement of a Case, with appropriate terms and conditions to

be set forth in our order.   Insofar as the applicants request

that we include a discovery schedule in our order, we deny the

request.

     To reflect the foregoing,

                                      An order will be issued

                                 granting the applicants’ Joint

                                 Application to Perpetuate

                                 Testimony Before Commencement

                                 of a Case.
