Aroeste

I. Introduction

18 This is a relatively low-stakes case concerning roughly $3,000 in penalties paid to 19 the IRS, but the discovery dispute presently before the Court, in which the parties dispute 20 whether nine pages of documents have been appropriately redacted, has managed to raise 21 not one but two questions of first impression in the Ninth Circuit. The first question 22 presented is this: does 26 U.S.C. section 6103, a relatively obscure provision of the Internal 23 Revenue Code, require the United States to withhold documents in discovery because those 24 documents contain information gleaned from the tax returns of third parties? Although the 25 Court suspects the answer is “no,” the Court need not resolve this complicated issue 26 because the second question presented by the parties’ discovery dispute ultimately proves 27 dispositive. That second question is as follows: are legal memoranda prepared by attorneys 28 in the IRS Office of Chief Counsel during taxpayer audits protected from disclosure by the attorney-client privilege, or are they discoverable because they constitute so-called “agency law”? Because the Court concludes the memoranda are privileged…