- 12 -- 12 - In Sher v. Commissioner, 861 F.2d 131, 134-135 (5th Cir. 1988), affg. 89 T.C. 79 (1987), the Court of Appeals for the Fifth Circuit held that respondent's position was substantially justified where respondent relied upon apparently credible third party payment information that had not been refuted by the taxpayers.7 Even in the wake of its decisions in Portillo I and Portillo II, the Court of Appeals for the Fifth Circuit continues to cite Sher v. Commissioner, supra, for this proposition. See, e.g., Nalle v. Commissioner, supra at 192.8 Furthermore, other Court of Appeals for the Fifth Circuit cases suggest that respondent's duty to investigate information provided by a third party payor is not absolute. See, e.g., Parker v. Commissioner, 117 F.3d 785, 787 (5th Cir. 1997) (in context of a motion to dismiss for failure to state a claim, the court noted that respondent has no duty to investigate a third-party payment report that is not disputed by the taxpayer). 7 We recognize that Sher v. Commissioner, 861 F.2d 131 (5th Cir. 1988), affg. 89 T.C. 79 (1987), arose in the context of a motion for litigation costs; hence the focal point of the analysis was respondent's position in the answer. Moreover, we note that in dicta, the Court of Appeals for the Fifth Circuit stated that respondent's reliance upon the information from the third party payor "would not have been sufficient if the petition and the documents in the file demonstrated the need for further investigation." Id. at 135. 8 The opinion in Sher v. Commissioner, supra, was superseded by statute on other grounds. See Hanson v. Commissioner, 975 F.2d 1150, 1152 n.2 (5th Cir. 1992), revg. an unpublished order of this Court.Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Next
Last modified: May 25, 2011