In a case before the U.S. Tax Court, unless a basis of settlement has been reached, the Court generally orders each party to prepare and file a Pretrial Memorandum at least 14 days before the first day of the trial session. The Pretrial Memorandum includes pertinent information including the amount(s) in dispute, the status of the case (i.e., probable settlement, probable trial, definite trial), an estimate of trial time, and more.
The temptation always exists to treat the Pretrial Memorandum as a procedural nuisance – something to be completed and filed out quickly, without much thought or strategy, and only as a matter of procedure. After all, there are a significant amount of other issues directly related to the disposition of the case that occur leading up to that 14 day deadline. However, the importance of this requirement can not be overemphasised. The Pretrial Memorandum is the opportunity for the practitioner to make their first impression upon the Tax Court Judge, and several strategies should be kept in mind to serve this important goal.
First, approach the “Witness(es) You Expect to Call” portion for what it truly asks. On the fourth page of most Standing Pretrial Orders, or second page of the Pretrial Memorandum template, the Tax Court asks for practitioners to list witness and provide a brief summary of their expected testimony. A summary of their testimony should be contrasted with just merely listing why they are being called as a witness in the first place. Instead of stating a witness will “Discuss the nature of the petitioner’s trade and business,” practitioners have the opportunity to influence the theme of a case with more. Instead, practitioners should strive to actually summarize that testimony which is expected. For example, “[John Smith]’s testimony is expected to be that he first met the petitioner 5 years ago, and since that time he has worked for, and been intimately involved in petitioner’s firm. He is also expected to testify that during the tax year before the Court he and the petitioner entered into a written agreement to purchase the latter’s firm for a sum of $900,000 based on thorough negotiations and reviewing comparable sales metrics.”
Second, practitioners have the opportunity to influence the theme of their case by properly framing the issues presented to the Court. Not only is presenting the issues important generally, it is the first substantive element of the Pretrial Memorandum. Practitioners should state the issue fairly, but framed it in a way that suggests a desired outcome. For example, instead of framing the issue as “Did petitioners have unreported income,” a practitioner has the ability to influence the theme of their case, and perhaps the ultimate outcome, by proffering the issue as “Did respondent properly determine, through permissible methods, that petitioners had unreported income?”
Lastly, no one likes to be blindsided with difficult questions of law on the spot, especially on the eve of trial. Properly using the “Evidentiary Problems” portion of the Pretrial Memorandum eliminates this problem for the Tax Court Judge. Listing the specific exhibits and/ or witness, and the basis for the objection here, in addition to the Stipulation of Facts, can make the Judge’s job easier and create a better first impression.
Ultimately the Pretrial Memorandum is the first chance a Tax Court Judge has to acquaint him or herself with your case. By treating it as an important part of that case, practitioners can seize on an opportunity to create a favorable first impression and, hopefully, a first step towards persuading the Judge in their favor.
Kevan P. McLaughlin, a tax attorney whose practice in San Diego at McLaughlin Legal focuses on defending taxpayers, provides comments about the importance of the Pretrial Memorandum in the U.S. Tax Court.