Pickering v. United States
United States Court of Appeals for the Eighth Circuit
691 F.2d 853 (1982)
- Written by Kate Luck, JD
Facts
James Pickering (plaintiff), a certified public accountant, was hired to prepare corporate tax returns for A.P.T. Construction, Inc. (APT). APT’s tax returns were audited by the Internal Revenue Service (IRS). The audit revealed that APT had improperly taken business deductions for the payment of APT shareholders’ personal expenses. The IRS assessed a penalty under 26 U.S.C. § 6694(b) against Pickering for willfully understating APT’s tax liability. Pickering sued the federal government (defendant) to challenge the assessment of the penalty. The evidence at trial showed that Pickering had conducted a spot-check audit of APT’s accounting records each year and then relied on APT’s records to prepare its tax returns. Pickering testified that he did not see any indication that APT was paying shareholders’ personal expenses in his audit of APT’s records. APT’s bookkeeper testified that she once asked Pickering what the IRS would say about APT’s payment of shareholders’ personal expenses, and Pickering told her not to worry about it. APT’s records indicated that APT was using corporate funds to pay shareholders’ expenses and that Pickering directed APT to make a record of bonuses given to shareholders to account for the expenses. The district court upheld the assessment of the penalty. Pickering appealed.
Rule of Law
Issue
Holding and Reasoning (Per curiam)
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