Ryan v. United States

RESPONDENT: United States
LOCATION: Criminal District Court, Parish of New Orleans

DECIDED BY: Warren Court (1962-1965)
LOWER COURT: United States Court of Appeals for the Sixth Circuit

CITATION: 379 US 61 (1964)
ARGUED: Oct 14, 1964
DECIDED: Nov 23, 1964

Facts of the case


Media for Ryan v. United States

Audio Transcription for Oral Argument - October 14, 1964 in Ryan v. United States

Earl Warren:

Number 12, Bayard Edward Ryan, Petitioner, versus United States.

Mr. Bagby.

William R. Bagby:

Mr. Chief Justice and Associate Justice of the Court, this case involves an interpretation of an act of Congress which relates to examinations and investigations of taxpayers by the Commissioner and his agents.

The particular part of the act of Congress with which we are concerned states restrictions on examination of taxpayers.

No taxpayer shall be subjected to unnecessary examination or investigation.

And only one inspection of the taxpayer's books or accounts shall be made for each taxable year, unless the Secretary or his delegate after investigation notifies the taxpayer in writing that an additional inspection is necessary.

The precise question concerned here is whether this act of Congress, this section of the statute, requires that an internal revenue agent should establish to the satisfaction of the District Court that a reasonable basis suggest for a suspicion of fraud or probable cause exist to believe the taxpayer was guilty of fraud in order to justify the enforcement of a summons issued by the agent to the taxpayer to produce his books and records and testify for years which are barred by all statutes of limitations and open only in the event of fraud.

The facts in this case are that the taxpayer, Bayard Edward Ryan of Maysville, Kentucky filed timely his federal income tax returns for the years 1942 to 1953 inclusive, and reported a sizable amount of income for those years.

An examination began by a revenue agent of the Commissioner sometime in 1960 of the returns for 1954 to 1958.

At the time I believe of the hearing in the Sixth Circuit in Cincinnati, the case for the years 1954 to 1958 had been settled.

The agent thereupon began investigation of the years 1942 to 1953 and issued a summons requiring the taxpayer to produce the records for those years and to appear and testify.

Earl Warren:

We'll recess now Mr. --

William R. Bagby:

Yes sir.

Earl Warren:

Mr. Bagby, you may continue.

William R. Bagby:

Mr. Chief Justice, Associate Justices, when we stopped I had stated that the taxpayer had received the summons from the revenue agent and he appeared -- but did not produce his books on the advice of counsel on the basis that the assessment of the taxes had been barred by all statutes of limitations except by fraud and he requested on the advice of counsel that some indication be made of the existence of fraud.

Thereupon a complaint was filed in the District Court, in the Eastern District of Kentucky, and the agent alleged that the taxpayer had the books and records for the years 1942 to 1953 in his possession and that the agent had made an estimate of the network assets of the taxpayer and therefore there was a strong suspicion of fraud.

The basis apparently of the complaint was that the examination was relevant and material through his examinations for the years involved, 1942 to 1953.

The taxpayer filed an answer alleging that the books and records for all the years involved were not in existence and that neither were the filed income tax returns in view of the fact that the Congress itself ever so often orders the destruction of individual income tax returns.

The trial was held in the District Court and the District Court took the position and made the ruling that there was an automatic and arbitrary right of the agent to have the books and records of the taxpayer for the years 1942 to 1953 irrespective of fraud.

He held that fraud was not a matter of concern because the statute 7602, gave the agent the automatic right to any books and records.

At the trial of the case however, it was showed that -- it was proved that the books and records for the years 1942 to 1946 were not in existence and part of the books for 1947 and 1948 were not in existence.

And that -- it was further revealed that the income tax returns themselves for the years 1942 through 1950 were no longer in existence and that the only returns in existence were those for 1951, 1952, and 1953.

Hugo L. Black:

Had it been checked before?

William R. Bagby:

The year 1945 had been checked and the report filed in 1948, none of the other years apparently had ever been examined.

The holding of the District Court --

Potter Stewart:

(Voice Overlap) the Court do with respect to the books which were shown were not in existence and with respect to the years in which it was shown that the income tax returns were not in existence.

Did the Court give that any consideration at all?

William R. Bagby:

The Court gave that there are no consideration, Mr. Justice Stewart.

It was the order as rendered by the Court, and the ruling during the trial was that irrespective of the fact the returns were not in existence and irrespective of the books the order should be that it would cover all books and records.

The Court apparently did not give any consideration at all to Section 7605 (a) or (b), (b) being the requirement that the examination be necessary or putting it the other way that an examination, an unnecessary examination should not be made.