- 36 -
the normal demeanor of the parties in civil
examinations.
97 T.C. at 29 (emphasis added).
Here, the evidence demonstrating the use of a
civil tax examination as a means to gather information
for criminal investigative purposes is abundant.
That complaint is distinguishable from the immediately
preceding complaint in that petitioner is complaining of
respondent’s methods for gathering evidence for use in a criminal
investigation rather than for use in a civil examination.
B. Background
What we said above, in the first paragraph of section
VII.B., is equally applicable here. Also, 2 Audit, Internal
Revenue Manual (CCH) section 4565.21, at 14,382, provides that,
if an employee of respondent’s conducting a civil examination of
a taxpayer comes across a firm indication of fraud on the part of
the taxpayer, she must suspend her examination so that an
evaluation can be made as to whether the case is appropriate for
criminal investigation.8 Several courts have relied on the “firm
indications of fraud” rule of 2, Audit, Internal Revenue Manual
(CCH) sec. 4565.21(2) as an appropriate benchmark for determining
8 The Court of Appeals for the Sixth Circuit has stated:
“compliance with � 4565.21 is mandated by the Constitution.”
United States v. McKee, 192 F.3d 535, 542 (6th Cir. 1999);
accord Grunewald v. Commissioner, 897 F.2d 531, 534 (8th Cir.
1993). But see Groder v. United States, 816 F.2d 139, 142 (8th
Cir. 1987) (classifying Internal Revenue Manual sec. 4565.21 as
essentially a procedural rule conferring “no substantive rights
or privileges upon taxpayers”).
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