Sole owner can't use Fifth Amendment to prevent IRS request for documents.Mr. Maxey was the sole owner of Maxey & Co. P.C p.c. (post cibum), n a Latin phrase meaning “after meals”; the abbreviation may be used in prescription writing. ., a tax preparation business. He had organized the business as a corporation and was the sole shareholder. In 1996, the IRS An abbreviation for the Internal Revenue Service, a federal agency charged with the responsibility of administering and enforcing internal revenue laws. served a summons summons: see procedure. summons In law, written notification that one is required to appear in court. In civil (noncriminal) cases, it notifies a defendant that he or she must appear and defend (e.g. on Maxey -- as the company's sole agent and owner -- to appear and produce specific corporate documents on the corporation's behalf. Maxey failed to appear before the IRS, which filed a petition seeking to enforce the summons. The IRS contended the requested documents were necessary to determine the accuracy of Maxey's income tax returns for 1992 to 1994, as well as to ascertain whether he had committed any criminal tax offense. The court granted the IRS motion and ordered Maxey to appear and show why the order should not be enforced. The corporation contended Maxey, as Maxey & Co.'s sole agent and employee, was entitled en·ti·tle tr.v. en·ti·tled, en·ti·tling, en·ti·tles 1. To give a name or title to. 2. To furnish with a right or claim to something: to immunity immunity, ability of an organism to resist disease by identifying and destroying foreign substances or organisms. Although all animals have some immune capabilities, little is known about nonmammalian immunity. and priviledge against self-incrimination under the Fifth Amendment to the U.S. Constitution. The Corporation also claimed that if a criminal prosecution was commenced against Maxey personally, evidence of his identity as the custodian bailee (custodian) n. a person with whom some article is left, usually pursuant to a contract (called a "contract of bailment"), who is responsible for the safe return of the article to the owner when the contract is fulfilled. of the company would prejudice his defense. Result: For the IRS. The U.S. district court found neither the corporation nor its sole agent, Maxey, was entitled to assert a Fifth Amendment priviledge against self-incrimination by producing documents sought by the IRS. The court determined the priviledge is purely personal and cannot be used by a corporation. Furthermore, the court found an individual cannot rely on a personal priviledge against self-incrimination to avoid producing a collective entity's records that are in the possession of the individual who represents that entity. The court cited U.S. v. Stone, which held that an agent's status as sole shareholder, officer and agent of the corporation does not excuse production of documents summoned from the corporation. The court further said that, like the agent and shareholder in Stone, Maxey had decided to incorporate his business rather than operate as a sole proprietorship A form of business in which one person owns all the assets of the business, in contrast to a partnership or a corporation. A person who does business for himself is engaged in the operation of a sole proprietorship. . Thus, Maxey must accept the limitations of his personal Fifth Amendment priviledge in light of his capacity as corporate custodian. |
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