In litigation, the IRS will often seek to short circuit a proceeding by filing an early, pre-discovery motion for summary judgment. Taxpayers, in turn, often resist those motions by submitting documentary evidence and affidavits to raise genuine issues of material fact or to highlight the need for further discovery. Inevitably, the IRS argues in rebuttal that such affidavits should be disregarded because they are “self-serving” and (often) uncorroborated with independent evidence. However, the IRS’s historically safe argument just became a whole lot harder to make due to a recent unanimous decision by the full U.S. Court of Appeals for the Eleventh Circuit.
In United States v. Stein, the government filed a pre-discovery motion for summary judgment to collect on outstanding tax assessments along with interest and penalties.. In opposition, the taxpayer proffered an affidavit attesting to the fact that she had already paid the taxes the government claimed she owed. The district court granted the government’s motion and rejected the taxpayer’s affidavit. The district court found the affidavit to be uncorroborated and not relevant. A panel of the Eleventh Circuit agreed, holding that her “general and self-serving assertions . . . failed to rebut the presumption [of correctness] established by. . . the assessments.” The panel’s holding was based on the court’s prior decision in Mays v. United States, 763 F.2d 1295 (11th Cir. 1985), which suggested that self-serving and uncorroborated statements in a taxpayer’s affidavit cannot defeat a summary judgment motion.
It was on this point that the full Eleventh Circuit disagreed and overruled Mays. In doing so, the court held that under Federal Rule of Civil Procedure 56, an affidavit that is both self-serving and uncorroborated can raise a genuine issue of material fact and defeat an otherwise proper motion for summary judgment. The text of the rule does not forbid such affidavits or require corroboration. Because Tax Court Rule 121 closely mirrors Federal Rule of Civil Procedure 56, the court’s rationale will apply with equal force regardless of fora.
This is significant because experience has shown that the IRS will often rely on publically available statements (particularly financial statements) to file and win pre-discovery motions for summary judgment. Now, a taxpayer has strong authority with which to counter the IRS and force the litigation to move into discovery, thus, giving taxpayers the opportunity to more fully develop the record. It is a significant victory for taxpayers.