United States

Taxpayer successfully resists request for offshore account records

Taxpayer asserts Fifth Amendment defense in offshore account case


On Aug. 1, 2016, the 2nd U.S. Circuit Court of Appeals reversed a lower court’s decision ordering enforcement of an IRS summons in an offshore account investigation. In reaching its decision, the court ruled against the government’s assertion of the ’foregone conclusion’ doctrine, which allows the government to require delivery of documents held by a taxpayer without violating the taxpayer’s Fifth Amendment right against self-incrimination.

In United States v. Greenfield, the taxpayer, Steven Greenfield, was linked to tax evasion as a result of leaked documents from LGT Global Trust, a Liechtenstein financial institution. As part of a subsequent investigation into Greenfield’s affairs, the IRS issued a summons for numerous records relating to Greenfield’s offshore activities. When Greenfield refused to comply, the IRS filed a motion in court to enforce the summons, which was partially granted in district court but Greenfield appealed this decision to the 2nd Circuit.

Greenfield argued that forced production of the documents would violate his Fifth Amendment right against self-incrimination. Generally, a taxpayer may claim Fifth Amendment protection if delivering documents would also deliver information to the government that would tend to incriminate the taxpayer. However, under a Supreme Court doctrine known as the foregone conclusion doctrine, a taxpayer can be ordered to produce documents if the government can show that it already knew all of the incriminating information contained in the documents (that it was a foregone conclusion).

In the instant case, the court held that the government did not meet its burden under the foregone conclusion doctrine. In a footnote, the court also noted that the documents do not fall under the ‘required records exception,’ which allows the government to require production of documents that are otherwise legally required to be kept. Some of the documents requested in the summons may have originally been covered as required records, except that the mandated time period for retention had lapsed.

Although the 2nd Circuit ultimately ruled for the taxpayer in this case, it is worth noting that the IRS continues to aggressively pursue cases involving offshore accounts. While a taxpayer may be able to assert Fifth Amendment protection against production of documents in response to an IRS summons, this is certainly not available in all cases. Thus, taxpayers should timely and correctly disclose their offshore income and assets in accordance with current law.


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