                        T.C. Memo. 2005-189



                      UNITED STATES TAX COURT



   PATRICK CARLIN HICKEY, ET AL.,1 Petitioners v. COMMISSIONER
                 OF INTERNAL REVENUE, Respondent



     Docket Nos.   9582-04, 9592-04,    Filed July 28, 2005.
                   9703-04, 10519-04.



     Patrick Carlin Hickey, pro se.

     Robert P. Gettys, for petitioner Sharon JoAnn Hickey.

     Louis H. Hill, for respondent.




     1
       Cases of the following petitioners are consolidated
herewith: Patrick Carlin Hickey, docket No. 9592-04; Sharon
JoAnn Hickey, docket No. 9703-04; and Sharon JoAnn Hickey (and
Patrick C. Hickey, Intervenor), docket No. 10519-04.
                                  -2-

             MEMORANDUM FINDINGS OF FACT AND OPINION


     LARO, Judge:    Petitioners petitioned the Court to

redetermine certain determinations made by respondent as to their

Federal income tax liabilities.    The Court consolidated the cases

for purposes of trial, briefing, and opinion.     Inasmuch as

petitioner Sharon JoAnn Hickey is involved in these cases because

she filed joint 1992 and 1993 Federal income tax returns with

petitioner Patrick Carlin Hickey, we hereinafter use the singular

“petitioner” to refer solely to Patrick Carlin Hickey.     We refer

to Sharon JoAnn Hickey as “Hickey”.     Unless otherwise noted,

section references are to the applicable versions of the Internal

Revenue Code, and Rule references are to the Tax Court Rules of

Practice and Procedure.

     In docket Nos. 9582-04 and 9592-04, petitioner petitioned

the Court on June 8, 2004, to redetermine respondent’s

determination of the following deficiencies, additions to tax,

and penalties:

                           Additions to tax            Penalty
 Year   Deficiency    Sec. 6651(a)(1) Sec. 6654       Sec. 6663
 1989     $23,621          $5,201         $507         $17,716
 1990       2,982             671             0          2,237
 1991      23,964           5,392            48         17,495
 1992      10,728               0             0          8,046
 1993       2,674             165           318          2,006

Respondent reflected this determination in two notices of

deficiency issued to petitioner on March 25, 2004.     Respondent

also determined in the notices of deficiency that petitioner is
                                -3-

liable under section 6651(a)(2) for additions to his 1989, 1990,

1991, and 1993 taxes in amounts to be determined.   In answering

petitioner’s petition in docket No. 9582-04, respondent conceded

that petitioner is not liable for the section 6651(a)(1) and (2)

additions to tax determined for 1989.

     In docket No. 9703-04, Hickey petitioned the Court on

June 10, 2004, to redetermine respondent’s determination of the

following deficiencies, additions to tax, and penalties:

                          Additions to tax           Penalty
 Year   Deficiency   Sec. 6651(a)(1) Sec. 6654      Sec. 6663
 1992     $10,728             $0            $0        $8,046
 1993       2,674            165           318         2,006

Respondent reflected this determination in a single notice of

deficiency issued to Hickey on March 25, 2004.   Respondent also

determined in the notice of deficiency that Hickey is liable

under section 6651(a)(2) for an addition to her 1993 tax in an

amount to be determined.   In answering Hickey’s petition in

docket No. 9703-04, respondent conceded that she is not liable

for the section 6663 penalties determined for 1992 and 1993 and

alleged as to 1992 that she is liable for a $2,145.60 accuracy-

related penalty under section 6662(a) and (d) for substantial

understatement.

     In docket No. 10519-04, Hickey petitioned the Court on

June 21, 2004, for relief under section 6015 from joint liability

for any amount that she is determined to be liable in docket No.

9703-04.   On March 25, 2004, the Commissioner had issued to
                                -4-

Hickey a final notice of determination denying her any such

relief.

     Following a short trial on these cases, inclusive of an

evidentiary hearing on a motion by petitioners to suppress all

documents and testimony (collectively, proffered evidence)

related to the Commissioner’s determinations and allegations of

fraud, we decide whether we shall grant that motion to suppress.2

We hold that we shall not.   Given this holding, petitioners

concede all other issues in these cases, including their

liability for the deficiencies, additions to tax, penalties, and

accuracy-related penalties determined by respondent (except to

the extent conceded by respondent in his answers), and whether

Hickey is entitled to her requested relief under section 6015.

                         FINDINGS OF FACT

     Some facts were stipulated.   We incorporate herein by this

reference the parties’ stipulation of facts and the exhibits

submitted therewith.   We find the stipulated facts accordingly.



     2
       Petitioners’ motion was filed as a motion to dismiss for
cause, or, alternatively, to suppress the proffered evidence. A
dismissal of the deficiency cases generally would require that
the Court enter decisions finding that the deficiencies in tax,
additions thereto, and penalties are the amounts determined in
the notices of deficiency. See Estate of Ming v. Commissioner,
62 T.C. 519 (1974); see also sec. 7459(d); cf. Wagner v.
Commissioner, 118 T.C. 330, 331-332 (2002). Given that result,
which petitioners obviously do not desire, we consider in the
deficiency cases only so much of their motion as relates to
suppression of evidence. We consider their motion in its
entirety in the remaining case.
                                 -5-

Petitioners resided in Kentucky when their petitions were filed

with the Court.    They were married on December 31, 1991, and they

have been husband and wife ever since.    At all relevant times,

petitioner has been a licensed practicing attorney in Kentucky.

     Petitioner filed his 1989 and 1990 Federal income tax

returns on November 18, 1991, using the filing status of

“Single”.   Those returns reported that petitioner had one

dependent (a daughter) for 1989 and two dependents (a son and

daughter) for 1990, and total income of $35,737 for 1989 and

$13,864.30 for 1990.    Petitioner filed his 1991 Federal income

tax return on December 7, 1992, using the filing status of

“Single”.   That return reported that petitioner had two

dependents (a son and a daughter) and total income of $15,532.

Petitioners filed a joint 1992 Federal income tax return on April

15, 1993.   That return reported that petitioners had two

dependents (petitioner’s son and daughter) and total income of

$16,633.    Petitioners filed a joint 1993 Federal income tax

return on November 4, 1994.    That return reported that

petitioners had two dependents (petitioner’s son and daughter)

and total income of $36,696.    Almost all of the total income

reported on these five returns was attributable to petitioner’s

practice as a self-employed attorney.    The 1990 and 1991 returns

reported that petitioner owed tax of $2,125.17 and $3,045.47,

respectively.    The 1992 and 1993 returns reported that
                                -6-

petitioners owed tax of $2,566 and $6,420.50, respectively.

Petitioner did not submit with his 1990, 1991, 1992, or 1993

return the amount of tax reported as owed.

     In December 1992, the Commissioner assigned Michael Cox

(Cox), a revenue officer in the Commissioner’s collection

division, to collect assessed Federal income taxes shown in the

Commissioner’s records to be owed by petitioner.    Cox was not

assigned to audit or examine any of the returns underlying those

taxes, nor did he do so.   On May 6, 1993, Cox concluded that the

taxes were uncollectible, and he closed the case as such.    Cox’s

conclusion was based primarily on his receipt from petitioner of

information on his finances and Cox’s finding at the local

courthouse of no assets recorded in petitioner’s name.

     In 1994, John Voorhees (Voorhees), a special agent in the

Commissioner’s Criminal Investigation Division (CID), was told by

a law enforcement agency that it had been informed that Hickey

was selling prescription drugs illegally.    Later, in May 1994,

Voorhees spoke to one of the agency’s confidential informants and

was told that petitioners kept a large quantity of narcotics at

their home and lived a lavish lifestyle.    The informant told

Voorhees that petitioners had paid for a lavish wedding and

honeymoon in Ireland and that petitioners had primarily used cash

to pay for home improvements (e.g., a Jacuzzi and expensive

windows) and entertainment expenses (e.g., stereo equipment and
                                 -7-

large television sets).   The informant told Voorhees that either

petitioner or Hickey had told the informant that petitioners kept

large amounts of cash in petitioner’s car.   On the basis of this

information, Voorhees began a preliminary investigation of

petitioners to determine whether he should begin a formal

criminal investigation.   Voorhees closed the preliminary

investigation on or about September 18, 1994, concluding that he

had insufficient information to support a criminal investigation

of petitioners.   In connection with that closing, Voorhees

contacted Cox.    Voorhees told Cox the information that Voorhees

had received from the confidential informant and told Cox that he

should consider looking into the ability of petitioner to pay his

delinquent Federal income taxes, as he may be financially able to

do so.   At no time during that conversation, nor at any other

time, did Voorhees advise or direct Cox to do any specific work

as to petitioner from either a civil or criminal point of view.

     On or about October 11, 1994, Cox reopened his collection

case as to petitioner’s delinquent Federal income tax liability.

Seventeen days later, Cox visited petitioner’s residence, a

two-story house that he and his ex-wife had built in 1976 for

$47,000, where Cox observed a fairly new Jeep Wrangler in the

driveway, a new Jacuzzi in the backyard, and a new front door.

Petitioner did not answer Cox’s knock at the door, and Cox left

his business card at the house without speaking either to
                                -8-

petitioner or to Hickey.   On October 31, 1994, petitioner stopped

by Cox’s office without prior notice, and petitioner completed in

part and signed under penalties of perjury a Form 433-A,

Collection Information Statement for Individuals, and a Form

433-B, Collection Information Statement for Businesses

(collectively, financial statements).   Cox informed petitioner at

that meeting that all relevant information on the financial

statements had to be completed in full.   The financial statements

did not indicate that petitioner owned a house or a vehicle.

Petitioner told Cox that petitioner did not own a vehicle, that

his wife owned one vehicle subject to a lien, and that his

daughter owned the house in which he lived although, he stated,

she was a law student and tended not to stay at the house.

Petitioner informed Cox that the house had previously been

transferred to petitioner’s mother when he divorced his ex-wife

and that his mother transferred the house to the daughter when

the mother died in 1989.   Petitioner informed Cox that petitioner

and the daughter split the cost of improvements made to the

house.

     On November 3, 1994, Cox researched the records of the

Department of Motor Vehicles and learned that Hickey was listed

as the owner of two unencumbered vehicles, a 1993 Jeep Wrangler

and a 1993 Jeep Cherokee, with a total assessed value of $42,200.

Cox also researched the pertinent real property records and
                                -9-

learned that petitioner’s daughter was listed as the owner of the

referenced house, which then was assessed at $108,500.   Cox did

not find at either place the recording of any asset in

petitioner’s name.

     As of November 4, 1994, the Commissioner’s records showed

that petitioner owed more than $28,000 in back taxes, interest,

and penalties.   On that day, petitioner gave Cox some additional

financial information, including lien information for the Jeep

Wrangler, and Cox informed petitioner that his financial status

as reported to Cox allowed petitioner to pay at least $400 per

month towards his Federal income tax liability.   Petitioner

replied that he must not have given Cox all of his actual

financial information, as petitioner indicated he was unable to

make that minimum payment, and requested additional time to

disprove the calculated minimum payment.   Later on that day, Cox

recorded in his “Investigative History Sheet” (history sheet) his

plan of action for the case.   His plan stated:

     discuss case with CID for possible fraud, I believe TP
     has submitted a fraudulent financial statement with
     regards to vehicles, Income and possibly Real Property.
     I also believe that his 30-9312 could also be
     fraudulent with regards to his dependents and income.
     TP has $35,000 in vehicles which are free and clear and
     I don’t see where his financial statements or Income
     tax returns support this.

As of this time, Cox did not believe that he had the requisite

firm indication of fraud that would support referring

petitioner’s case to CID.   Instead, Cox thought, he should
                                -10-

investigate further to determine whether the recording of the

house and vehicles in names other than petitioner was in fact

proper.    Cox also was awaiting receipt of additional financial

information that petitioner had told him would be forthcoming.

Cox was not sure at this time that he would refer petitioner to

CID but thought that he should discuss with CID his belief that

petitioner’s case was a potential fraud case.    Cox had a

suspicion at the time that petitioner was not being truthful with

him.

       On November 7, 1994, petitioner met with Cox again and gave

him more financial information.    Petitioner informed Cox at this

meeting that petitioner’s 1994 income to date was $22,180, rather

than $29,000 as previously reported.    Petitioner also changed

certain line items that he had previously reported on the

financial statements.    Petitioner and Cox had no further meetings

after this date.

       On January 3, 1995, petitioner filed for bankruptcy under

chapter 7 of the U.S. Bankruptcy Code.    On the same day, Cox

received a copy of that filing.

       On or about February 8, 1995, Cox attempted to contact

petitioner’s daughter but was unable to do so.    On February 8,

1995, Cox spoke to petitioner’s ex-wife as to the house in which

petitioner lived and the fact that it was listed in the name of

the daughter.    Petitioner’s ex-wife informed Cox that she did not
                                -11-

realize that the house was in the daughter’s name and that the

daughter was a law student who worked part time.    Petitioner’s

ex-wife informed Cox that the daughter and son (of petitioner and

his ex-wife) lived with the ex-wife and that she did not believe

that the daughter could afford to pay any expenses related to the

house.    Following this conversation, Cox believed that he should

discontinue his case as to petitioner and refer him to CID for

criminal prosecution.

       Shortly before April 21, 1995, Cox met with Voorhees for the

first time after reopening the collection case and discussed with

him whether the facts of petitioner’s case, as Cox believed them

to be, supported his making of a criminal referral of petitioner

to CID.    On April 21, 1995, Cox prepared the requisite paperwork

to refer petitioner’s case to CID, and Cox forwarded the case to

CID.    The essence of Cox’s referral was that petitioner was

evading the payment of his assessed Federal income tax liability

in that (1) he claimed that he did not own the house in which he

lived; (2) the house was in the name of his teenage daughter, who

did not work full time; (3) his ex-wife, the daughter’s apparent

custodial parent, had no knowledge of any such ownership by the

daughter; and (4) the house, if in fact owned by petitioner,

could be used to pay his Federal income tax liability.    On or

about June 23, 1995, Voorhees began the criminal investigation of

petitioner pursuant to Cox’s referral and recorded for the first
                                -12-

time in the Commissioner’s computer system that a criminal

investigation of petitioner was underway.   On June 28, 1995,

Voorhees interviewed petitioner for the first time.

     Subsequently, petitioner was indicted by the United States

for various tax offenses for 1989 through 1993, including for

each year income tax evasion under section 7201.    During that

proceeding (criminal case), petitioner moved the District Court

to suppress evidence that he claimed was obtained in violation of

his constitutional rights.    An evidentiary hearing was held as to

the motion, and on January 5, 1999, a magistrate judge issued a

report and recommendation (R&R) denying it.    Nine days later,

petitioner objected to the R&R, and 18 days after that, the

United States responded to those objections.    On February 9,

1999, the District Court overruled petitioner’s objections as

moot, accepted the R&R, and denied petitioner’s motion to

suppress as moot.    The District Court’s actions followed

notification that petitioner would be pleading guilty to part of

the indictment.   On or about March 8, 1999, petitioner pleaded

guilty to a single count of section 7201 tax evasion for 1993.

The other counts in the indictment were dismissed upon motion by

the United States.

     After he had served his sentence stemming from his plea,

petitioner on or about November 5, 2002, petitioned the District

Court for a writ of error coram nobis pursuant to 28 U.S.C. sec.
                               -13-

1651 (2000).   Petitioner asserted that the petition should be

granted because the Commissioner had developed the criminal case

in the guise of a civil investigation even after the civil

investigation had uncovered firm evidence of fraud.   Petitioner

asserted that one of the Commissioner’s civil investigators (Cox)

had improperly collaborated with one of the Commissioner’s

criminal investigators (Voorhees) before petitioner’s case was

referred to CID.   Petitioner asserted that the Commissioner had

improperly conducted a criminal examination under the guise of a

civil examination.   The District Court denied petitioner’s

petition, and that denial was affirmed on appeal.    See Hickey v.

United States, 92 Fed. Appx. 317 (6th Cir. 2004).3

                              OPINION

     Petitioners move the Court to exclude from evidence all of

the proffered evidence because, they argue, Cox and Voorhees

disregarded petitioners’ constitutional rights by criminally

investigating petitioner under the guise of a civil examination




     3
       While the Court of Appeals for the Sixth Circuit generally
disfavors the citation of unpublished decisions, the rules of
that court allow such a citation for the purpose of establishing
res judicata, estoppel, or the law of the case. See 6th Cir.
R. 28(g).
                                -14-

in violation of 2 Audit, Internal Revenue Manual sec. 4565.21(1),

at 14,382 (IRM section 4565.21(1)) and section 7605(b).4


     4
         IRM sec. 4565.21(1) states in relevant part:

     If, during an examination, an examiner uncovers a
     potentially fraudulent situation caused by the taxpayer
     and or the preparer, the examiner shall discuss the
     case at the earliest possible convenience with his/her
     group manager. If the group manager concurs, he/she
     will discuss the case with the District Fraud
     Coordinator (DFC) who, together with the group manager,
     will provide guidance to the examiner on how to
     proceed. Once there is a firm indication of criminal
     fraud all examination activity shall be suspended. If
     the case meets the criminal criteria, found in the Law
     Enforcement Manual (or locally developed criminal
     criteria) a referral will be made to Criminal
     Investigation (CI) via Form 2797. A firm indication of
     fraud is more than mere suspicion or first indication
     of fraud, it is a factual determination which must be
     made on a case by case basis. This determination will
     be made by the DFC and the group manager on each case.
     Under no circumstances will an examiner or group
     manager obtain advice and/or direction from CI for a
     specific case under examination. * * *

Although this section on its face applies solely to “examiners”,
respondent concedes that its provisions also applied to Cox.

     Sec. 7605 provides in relevant part:

     SEC. 7605.    TIME AND PLACE OF EXAMINATION.

          (a) Time and Place.--The time and place of
     examination pursuant to the provisions of section
     6420(e)(2), 6421(g)(2), 6427(j)(2), or 7602 shall be
     such time and place as may be fixed by the Secretary
     and as are reasonable under the circumstances. In the
     case of a summons under authority of paragraph (2) of
     section 7602, or under the corresponding authority of
     section 6420(e)(2), 6421(g)(2), or 6427(j)(2), the date
     fixed for appearance before the Secretary shall not be
     less than 10 days from the date of the summons.

                                                        (continued...)
                                 -15-

Petitioners assert that Cox violated IRM section 4565.21(1) when

he continued a civil examination after finding a firm indication

of fraud.   Petitioners assert that Cox violated IRM section

4565.21(1) when he spoke to Voorhees about the making of

petitioner’s criminal referral to CID.   Petitioners assert that

Cox violated section 7605(b) by conducting a second examination

of petitioner’s books and records.

     With the exception of petitioners’ assertion concerning

section 7605(b), petitioners’ two assertions are the same

assertions that petitioner made in the criminal case and that

were not accepted by either the District Court or the Court of

Appeals for the Sixth Circuit.    See Hickey v. United States,

supra.   Respondent notes that petitioners’ current assertions on

the applicability of IRM section 4565.21(1) are similar to the

assertions that petitioner made in the criminal case in his

motion to suppress and argues that the District Court’s

disposition of that motion may estop petitioners from making

those same assertions here.   Respondent makes no mention of the

fact that petitioner also made the same assertions in connection


     4
      (...continued)
          (b) Restrictions on Examination of Taxpayer.--No
     taxpayer shall be subjected to unnecessary examination
     or investigations, and only one inspection of a
     taxpayer’s books of account shall be made for each
     taxable year unless the taxpayer requests otherwise or
     unless the Secretary, after investigation, notifies the
     taxpayer in writing that an additional inspection is
     necessary.
                               -16-

with his petition for a writ of error coram nobis and that

neither the District Court nor the Court of Appeals for the Sixth

Circuit accepted those assertions.    See Hickey v. United States,

supra.

     We believe that the courts’ decisions in Hickey v. United

States, supra, preclude petitioners from repeating in this

proceeding the same assertions that petitioner made in support of

his petition for writ of error coram nobis.   That petition

contended that Cox improperly collaborated with Voorhees before

petitioner’s case was submitted for criminal referral and that

Cox and Voorhees developed a criminal case against petitioner in

the guise of a civil examination even after Cox had uncovered in

the civil investigation firm evidence of fraud.    Id.   The

District Court rejected those contentions and denied the

petition.5   The Court of Appeals for the Sixth Circuit affirmed

that action, stating:   “the District Court correctly concluded

that the evidence of record does not support * * * [petitioner’s]

contention that IRS agents developed its criminal case against

him in the guise of a civil investigation even after the civil

investigation had uncovered firm evidence of fraud.”     Id. at 319.

“[W]hen an issue of ultimate fact has once been determined by a



     5
       The District Court may also have rejected the same
assertions when it denied petitioner’s motion to suppress. The
record is not clear as to whether the court denied that motion on
its merits or because it was moot.
                                -17-

valid and final judgment, that issue cannot again be litigated

between the same parties in any future lawsuit.”     Ashe v.

Swenson, 397 U.S. 436, 443 (1970); accord Hammer v. INS, 195 F.3d

836, 840 (6th Cir. 1999); see also Jones v. Squier, 195 F.2d 179,

180 (9th Cir. 1952) (“The nature of the writ of error coram nobis

is that it is a civil proceeding in which the judgment of the

court is res judicata at least of the issues tendered and

joined.”); cf. United States v. Balistrieri, 606 F.2d 216, 221

(7th Cir. 1979) (“a coram nobis motion is a step in a criminal

proceeding yet is, at the same time, civil in nature and subject

to the civil rules of procedure”).6

     Even if petitioners were entitled in this case to repeat

petitioner’s previous assertions, they would still not prevail in

that we disagree with each of their three assertions.    Our

decision as to whether Cox had a firm indication of fraud within

the meaning of IRM section 4565.21(1) and failed to suspend his

examination of petitioner turns on the facts in the record at

hand.    See United States v. McKee, 192 F.3d 535, 543 (6th Cir.

1999).    Petitioners bear the burden of proof.   Id. at 542; cf.

United States v. Peters, 153 F.3d 445, 451 (7th Cir. 1998);


     6
       Although the decisions relating to petitioner’s petition
for writ of error coram nobis were not raised by respondent as an
affirmative defense, a Federal court may raise the issue of res
judicata sua sponte. See Holloway Constr. Co. v. U.S. Dept. of
Labor, 891 F.2d 1211, 1212 (6th Cir. 1989); see also Monahan v.
Commissioner, 109 T.C. 235, 250 (1997) (“This Court may raise the
doctrine of issue preclusion sua sponte.”).
                                -18-

United States v. Powell, 835 F.2d 1095, 1098 (5th Cir. 1988).

While they argue that Cox had the requisite firm indication of

fraud by virtue of the fact that he entered in the history sheet

that “I believe TP has submitted a fraudulent financial statement

with regards to vehicles, Income and possibly Real Property”, we

do not believe that this entry establishes that Cox had a firm

indication of fraud as to petitioner within the meaning of IRM

section 4565.21(1).    We read that entry in the context of the

record as a whole as expressing Cox’s then serious suspicion that

petitioner had engaged in an act that could be fraudulent but

which had to be explored further to determine whether it was in

fact fraudulent.    Such a general suspicion of fraud is not a firm

indication of fraud for purposes of IRM section 4565.21(1).    See

United States v. Peters, supra at 455-456 (firm indication of

fraud in the context of IRM section 4565.21(1) is different from

an initial indication of fraud and is more than a mere suspicion

of fraud); cf. United States v. McKee, supra at 543; United

States v. Caldwell, 820 F.2d 1395, 1402-1403 (5th Cir. 1987).

       Our reading of that entry is supported by Cox’s credible

testimony that he did not at the time of the entry believe he had

the requisite firm indication of fraud to refer the matter to

CID.    Our reading is also supported by our finding that Cox did

not know when he made the entry whether petitioner’s omission of

the house and vehicles from his financial statements was proper.
                               -19-

Upon his receipt of the financial statements from petitioner, Cox

did not have clear evidence of tax fraud such that the only

reasonable conclusion was that petitioner willfully set out to

evade his Federal tax liability.   Given that Cox knew at the time

of the entry that the house and vehicles were actually titled in

the public records in names other than petitioner’s, the question

was whether one or more of those assets was actually owned by

petitioner and thus inappropriately omitted from his financial

statements.   Cox needed to, and actually did, perform further

investigation of each asset to make that determination.     It was

only after he completed that and other further investigation that

he verified and firmly believed that petitioner’s financial

statements were fraudulent and deserving of a referral of

petitioner to CID.   By analogy to an observation of the Court of

Appeals for the Sixth Circuit in United States v. McKee, supra at

543, when faced with a similar setting, only the most overzealous

revenue officer would have considered referring petitioner’s case

to CID upon receiving petitioner’s financial statements which on

their face did not appear to be trustworthy but which in fact

reflected the ownership of the house and vehicles as of public

record.   Given the unanswered question as to whether the true

owner of each of those assets was the individual who was actually

listed in those records, or was in fact petitioner, we do not

believe that Cox had such a firm indication of fraud that
                                -20-

required him to refer petitioner’s case to CID in face of that

unanswered question.    See id.; see also United States v. Peters,

supra at 455; United States v. Caldwell, supra at 1402-1403;

Groder v. United States, 816 F.2d 139, 143 (4th Cir. 1987);

United States v. Kaatz, 705 F.2d 1237, 1243 (10th Cir. 1983).

As noted by the Court of Appeals for the Sixth Circuit in United

States v. McKee, 192 F.3d at 544, courts must defer to the

discretion of a civil agent as to whether and when a criminal

investigation is warranted.   See also United States v. Caldwell,

supra at 1402; cf. United States v. Michaud, 860 F.2d 495, 498-

499 (4th Cir. 1988).

     Nor do we believe that a violation of IRM section 4565.21(1)

occurred when Cox spoke to Voorhees just before Cox’s criminal

referral of petitioner.   While petitioners invite the Court to

read IRM section 4565.21(1) narrowly to treat any prereferral

contact between the two as a violation of IRM section 4565.21(1),

we decline that invitation and apply that section as written to

preclude “advice and/or direction from CI for a specific case

under examination.”    Credible evidence in the record establishes,

and we find as a fact, that Cox’s conversation with Voorhees did

not involve advice and/or direction from Voorhees as to Cox’s

criminal referral of petitioner.   The conversation focused solely

on whether CID would accept Cox’s criminal referral of petitioner

if Cox expended the time and energy to make a referral on the
                                -21-

basis of the facts as he believed them to be.    Cox as of the time

of the conversation had gathered all information that he believed

was necessary to show that petitioner owned one or more of the

relevant assets and that petitioner had fraudulently omitted one

or more of those assets from his financial statements.    The

record does not establish that Cox during the conversation sought

or received the advice or direction of Voorhees as to any

information that Cox needed to obtain to build a better criminal

(or civil) case against petitioner.    In fact, the record does not

establish that Cox during or after his conversation with Voorhees

acquired any information at all from or about petitioner.7

     As to petitioners’ third assertion, they argue that Cox

violated section 7605(b) by conducting more than one examination

of petitioner.   We disagree.   Pursuant to section 7605(b), the

Commissioner generally may inspect a taxpayer’s books or records

for a taxable year only once.    “‘[T]he standard is whether the

examination or investigation sought by the IRS is unnecessarily

duplicative of some prior examination’”.    United States v.

Balanced Fin. Mgmt., Inc., 769 F.2d 1440, 1446 (10th Cir. 1985)

(quoting United States v. Davey, 543 F.2d 996, 1000 (2d Cir.

1976)).   Petitioners have not demonstrated that the Commissioner


     7
       While petitioners ask the Court to conclude that Voorhees
directed Cox to reopen his collection case, we do not find that
such was so. Nor do we find, as petitioners ask us to, that Cox
and Voorhees participated in a “joint collaborative effort” in
preparing the referral of petitioner to CID.
                               -22-

met this standard when Cox reopened petitioner’s collection case

or that the Commissioner otherwise improperly inspected

petitioner’s books or records more than once for a taxable year.

Nor have petitioners cited any authority (and we are not aware of

any such authority) that states that the Commissioner may not

reopen a closed collection case on the basis of information that

at the time of reopening tends to show that the amount previously

considered uncollectible may in fact be collectible.    Given the

additional fact that petitioner never resisted giving information

to Cox after he had reopened his collection case, but in fact

gave it to him voluntarily, we conclude that Cox by reopening the

collection case did not perform a prohibited second inspection of

petitioner’s books and records in violation of section 7605(b).

See United States v. Baker, 451 F.2d 352 (6th Cir. 1971); cf.

Miller v. Commissioner, T.C. Memo. 2001-55.

     We sustain respondent’s determinations except to the extent

of his concessions.   We have considered all arguments made by the

parties and have rejected those arguments not discussed herein as

meritless.   In order to reflect the foregoing, including

respondent’s concessions,


                                           An order will be issued

                                      denying petitioners’ motion,

                                      and decisions will be entered

                                      under Rule 155.
