brad.barnhill@mindspring.com
HomeSite v2.5Last Updated: Thursday, March 04, 1999 10:02:17 PM
1
1 IN THE UNITED STATES DISTRICT COURT
2 FOR THE EASTERN DISTRICT OF WISCONSIN
3 --------------------------------------------------------
4 UNITED STATES OF AMERICA,
5 Plaintiff,
6 -vs- Case No. 97-C-207
7 ROBERT R. RAYMOND, individually
and d/b/a Morningstar Consultants,
8 and ROBERT G. BERNHOFT, individually
and d/b/a Morningstar Consultants,
9
Defendants.
10
--------------------------------------------------------
11
12 Examination of STEVEN C. KRAM, taken at
13 the instance of the Defendants, under and pursuant to
14 the Federal Rules of Civil Procedure, pursuant to
15 Stipulation by Respective Counsel, before KATHLEEN E.
16 CARTER, a Certified Realtime Reporter, Registered Merit
17 Reporter and Notary Public in and for the State of
18 Wisconsin, at Brown & Jones Reporting, Inc., 312 East
19 Wisconsin Avenue, Suite 608, Milwaukee, Wisconsin, on
20 the 12th day of February, 1999, commencing at 2:32 p.m.
21 and concluding at 5:15 p.m.
22
23
24
25
2
1 A P P E A R A N C E S
2 UNITED STATES DEPARTMENT OF JUSTICE, TAX DIVISION, by
MS. TERESA DONDLINGER TRISSELL,
3 555 4th Street NW,
P.O. Box 7238,
4 Ben Franklin Station,
Washington, DC 20044,
5 appeared on behalf of the Plaintiff.
6 MR. ROBERT R. RAYMOND,
Defendant, appeared pro se.
7
MR. ROBERT G. BERNHOFT,
8 Defendant, appeared pro se.
9 A L S O P R E S E N T
10 MR. GERARD HOSS and
MR. WAYNE C. BENTSON.
11
* * * * *
12
I N D E X
13
Examination By: Page
14
Mr. Bernhoft .................................. 4
15
Exhibits: Marked ID
16
No. 1 - Chapter 3, Department Of The Treasury,
17 Subchapter 1, "Organization" .......... 4 16
No. 2 - Wayne Bentson's Expert Witness Report . 4 19
18 No. 3 - Rebuttal Expert Witness Report Re
Robert Bernhoft And Robert Raymond .... 4 12
19 No. 4 - IR Manual 30(55)4.2 Page With
Subheading "IMF Operations" ........... 4 30
20 No. 5 - Letter From The Department Of The
Treasury, Internal Revenue Service,
21 From Program Analyst, Freedom Of
Information, Barry Windheim ........... 4 35
22 No. 6 - Document 6209, Section 8, Page 9 ...... 4 36
No. 7 - IRM Section 3(10)(72)7.2 .............. 4 59
23 No. 8 - Official Internal Revenue Service
Nonmaster File Transcript Dated 6-16-98
24 Re Robert R. And Patricia J. Raymond .. 4 60
No. 9 - Document 6209, Section 8, Page 130 .... 4 63
25 No. 10- (Not Identified) ...................... 4 --
3
1 I N D E X C O N T ' D
2 Exhibits: Marked ID
3 No. 11- (Not Identified) ...................... 4 --
No. 12- Portion Of Document 6209, Section 2,
4 Titled "Tax Returns And Forms" ........ 56 58
No. 13- Excerpt From Document 6209, Section
5 13-26 to 27 ........................... 70 70
6 Requests: Page
7 By Mr. Bernhoft - Any Documents, Faxes,
E-mails, Memoranda, Letters, Notes That
8 Mr. Kram Took, Anything Received By Mr.
Kram From Anyone, Or Sent By Mr. Kram To
9 Anyone Regarding His Expert Witness
Report ................................. 80
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
4
1 TRANSCRIPT OF PROCEEDINGS
2 (Exhibit Nos. 1 through 11 were
3 marked.)
4 MR. BERNHOFT: We have one appearance to
5 make as being present.
6 MR. HOSS: I already did it, I believe.
7 My name is Gerard Hoss.
8 STEVEN C. KRAM, called as a witness
9 herein, having been first duly sworn on oath, was
10 examined and testified as follows:
11 EXAMINATION
12 BY MR. BERNHOFT:
13 Q Have you ever had your deposition taken before, Mr.
14 Kram?
15 A No.
16 Q Okay. You heard what Attorney Trissell advised Mr.
17 Bentson. We just ask that you make audible
18 responses, no nods or anything like that, because
19 the court reporter can't record those. And I'll
20 try and do a good job of not stepping on your
21 answers, and if you try and have an interaction
22 where there's separations between the question and
23 the answer, that would be great.
24 MR. BERNHOFT: May I see Mr. Kram's
25 credentials?
5
1 MS. TRISSELL: I don't have his
2 credentials.
3 BY MR. BERNHOFT:
4 Q Do you have your credentials with you, Mr. Kram?
5 A I have a badge.
6 Q That would be great. I will give it back. I
7 just -- Great. Thank you. I'll just show this to
8 Mr. Bentson. If he has any notes to make --
9 MR. RAYMOND: You were younger then, huh?
10 THE WITNESS: A little bit.
11 MR. RAYMOND: They don't update your
12 photo.
13 MR. BENTSON: I'm saying 30 -- 39; isn't
14 it? Okay. 39 hyphen --
15 THE WITNESS: Zero-zero.
16 MR. BENTSON: -- 003, or B?
17 THE WITNESS: 3.
18 MR. BENTSON: 003.
19 THE WITNESS: 89.
20 MR. BENTSON: 89.
21 MS. TRISSELL: If you would like the
22 witness to read it, that would be fine.
23 MR. BENTSON: Let me go here. Blue.
24 What's the date on that?
25 MS. TRISSELL: Is there a date?
6
1 THE WITNESS: February 5th, '79.
2 MR. BENTSON: And read the ID number for
3 us. I got 39 --
4 THE WITNESS: 00389.
5 MR. BENTSON: 389. Thanks very much. Is
6 there anything written on the back of it that you
7 can tell us about?
8 MS. TRISSELL: Can we limit the
9 questions, please, to the parties.
10 MR. BENTSON: Ask him what's on the back.
11 BY MR. BERNHOFT:
12 Q Sure. Can you just tell me if there's anything on
13 the back?
14 A "Department of Treasury, Internal Revenue Service,"
15 Internal Revenue Service seal, a warning that's
16 issued for identification.
17 Q Okay. Let me just take a look at that.
18 A Sure.
19 Q The seal on the back of the ID has the scale and
20 the key, it says, "Internal Revenue Service."
21 Thank you. Appreciate that.
22 MR. BENTSON: Thank you.
23 BY MR. BERNHOFT:
24 Q What is your business address, Mr. Kram?
25 A 310 West Wisconsin Avenue, Milwaukee, Wisconsin,
7
1 53203.
2 Q And your business phone number, please?
3 A 414-297-3046.
4 Q And do you have a business fax number, sir?
5 A 414-297-3362.
6 Q And do you have an E-mail address, a business
7 E-mail address?
8 A No.
9 Q And could you tell me what your educational
10 background is, please.
11 A I have an associate degree in accounting from the
12 Milwaukee Area Technical College.
13 Q And did you graduate high school?
14 A Yes.
15 Q What high school was that?
16 A South Division in Milwaukee.
17 Q Who prepared you for your deposition today?
18 A Attorney Trissell.
19 Q When were you first approached about being an
20 expert witness in this case?
21 A I believe it was November, '98. If not November,
22 late October. But October, November, '98.
23 Q And who approached you about being an expert
24 witness in this case?
25 A Ed Langer, an attorney with our district counsel.
8
1 Q And what did Mr. Langer tell you when he approached
2 you to be an expert witness in this case?
3 MS. TRISSELL: Objection, attorney-client
4 privilege. Instruct the witness not to answer.
5 MR. BERNHOFT: Can we go off the record
6 real quick.
7 (Discussion off the record.)
8 MR. BERNHOFT: Let's go back on.
9 BY MR. BERNHOFT:
10 Q In relationship to your -- the first contact with
11 Mr. Langer regarding your being an expert witness
12 in this case, when did you decide to be that expert
13 witness?
14 A He gave me the report that was prepared by Mr.
15 Houck to look at and see if it was something that I
16 felt I could respond to, and I read it and said
17 that, yes, I was able to prepare a response. That
18 basically was it.
19 Q And it was at that point that you understood that
20 you were going to be the expert witness in this
21 case?
22 A Correct.
23 Q Was that during the -- Was that the same day that
24 he first approached you with the report itself?
25 A I believe it was the same day. If it wasn't, it
9
1 was the next day. He may have dropped it off and
2 asked me the next day or something.
3 Q Okay.
4 A But it was the same day or the following day.
5 Q Did you have any further conversations with
6 Assistant District Counsel Langer after you were
7 appointed expert witness in this case?
8 A The only contact was after I had prepared -- or,
9 started to prepare it, he advised me some of the
10 elements that had to be in an expert witness report
11 as far as qualifications and things like that, but
12 that basically was it.
13 Q Um-hum.
14 A Otherwise all my contact has been with the
15 Department of Justice.
16 Q Did Mr. Langer talk to you at all about the case?
17 A No.
18 Q Did Mr. Langer give you any other materials with
19 relationship to your expert witness testimony with
20 the exception of the Ben Houck report?
21 A No.
22 Q How did you know who to contact at Department of
23 Justice to begin your work on the expert witness
24 report?
25 A Mr. Langer gave me the name.
10
1 Q And who did you contact at Department of Justice?
2 A Teresa Trissell.
3 Q And what did you discuss with Ms. Trissell with
4 respect to the expert witness report?
5 A Again, it was basically format and just the
6 elements that needed to be included. Not so much
7 content as far as response, but just the format and
8 things like that.
9 Q Did she discuss this case with you at all?
10 A In what way?
11 Q Any way?
12 A Really nothing outside of just preparing the
13 report.
14 Q Have you read the Plaintiff United States of
15 America's complaint in this case?
16 A No.
17 Q Did Ms. Trissell talk to you about either Defendant
18 Raymond or myself in your conversations with her
19 regarding your expert witness report?
20 A Nothing personal. Just the information that was
21 required to be put in the report.
22 Q When you said that she mentioned nothing personal
23 with respect to Defendant Raymond or I, were there
24 other things she talked about Defendant Raymond or
25 I that weren't personal?
11
1 A No, no, I just mean that I think she even faxed me
2 a part of the legal requirements of what had to be
3 in there, the educational background, the
4 qualifications, if I received compensation, things
5 like that. So it was just the -- the
6 technicalities of filling out the report.
7 Q Did you receive any other correspondence,
8 memoranda, faxes or E-mails from anybody at
9 Department of Justice or IRS after you were
10 designated the expert witness in this case?
11 A No.
12 Q Could you tell me what your work history prior to
13 your joining the IRS is, please.
14 A A few -- Basically while I was in college after
15 high school it was just short-term jobs. I worked
16 with Milwaukee County for a few months, I think. I
17 worked for Coca-Cola. I distributed telephone
18 books, just basically your typical school part-time
19 jobs that -- or, short-term jobs that really
20 didn't -- nothing that really carried over to the
21 IRS.
22 Q And when did you begin your work with IRS?
23 A 1976.
24 Q And how old were you then?
25 A 22.
12
1 Q So your date of birth is?
2 A 4-7-54.
3 Q Okay. I'm holding in my hand a copy of the Kram
4 Deposition Exhibit 3, and it purports to be a copy
5 of the rebuttal expert witness report regarding
6 Robert Bernhoft and the rebuttal expert witness
7 report regarding Robert Raymond, and I'm handing
8 Exhibit 3 to the deponent.
9 So you began employment with the IRS in
10 1976, and you have worked there uninterruptedly
11 since then?
12 A Correct.
13 Q In your report you indicate that you've held
14 several positions with IRS. Which position did you
15 first hold where you had an opportunity or an
16 obligation to interpret IMF transcripts?
17 A Actually, the first position as Taxpayer Service
18 Representative dealt with answering questions from
19 taxpayers which were either of a tax law nature or
20 an account nature, so it was like within the first
21 year.
22 Q And what did you ordinarily do when you received an
23 IMF? What kind of an analysis were you making at
24 that time?
25 A It could be determining when a refund check was
13
1 being issued, why a penalty was assessed, how much
2 tax or penalty was assessed.
3 Q And what information did you rely on to make those
4 determinations?
5 A The -- It was my review of the IMF transcripts.
6 Q And did you rely on any Internal Revenue manuals,
7 publications, legal regulations or statutes or
8 sections of statutes to make those determinations?
9 A Primarily the Document 6209.
10 Q What other items or documents did you rely on?
11 A The -- There would be updates from -- small
12 multipage updates from the Service Center
13 clarifying issues. As I said, update things.
14 Also, the Internal Revenue manuals.
15 Q When you say "Service Center," what are you
16 referring to?
17 A The Kansas City Service Center, which processes the
18 returns for our area.
19 Q Was your post of duty always in Milwaukee?
20 A Yes, with the exception of maybe very short-term
21 couple-day assignments at different suburban
22 locations, but always officially Milwaukee.
23 Q Um-hum. And what is your current position?
24 A PRP, which is Problem Resolution Program Analyst.
25 Q What is your service grade?
14
1 A GS9.
2 Q Have you ever been charged or convicted of any
3 misdemeanors or felonies?
4 A No.
5 Q Have you had occasion to read Title 26 of the
6 United States Code?
7 A I'm not -- I'm not sure what that is.
8 Q It would be -- We could refer to it as the Internal
9 Revenue Code?
10 A Yes, I have read portions.
11 Q What portions of that have you had occasion to
12 read?
13 A Primarily the sections that deal with penalties and
14 interest.
15 Q Have you had occasion to read any of Title 26 of
16 the Code of Federal Regulations?
17 A Yes.
18 Q And what portions of the CFR would you have had
19 occasion to read?
20 A Primarily those dealing with penalties and
21 interest.
22 Q In the course of your duties as program analyst
23 have you had occasion or necessity to read any
24 other portions of any other titles of the US Code?
25 A I was questioning what that meant.
15
1 Q What I mean there is that there is the United
2 States Code, and in that code there are 50 titles,
3 and the laws are codified within those 50 titles
4 according to subject matter and sometimes agency.
5 The Internal Revenue Code is codified in 26 USC,
6 United States Code. And so my question was asking
7 if you had occasion to read any of the other
8 sections of the US code and other titles other than
9 those in the Internal Revenue Code.
10 A I very briefly at times may have read portions of
11 the Social Security Administration.
12 Q And do you know what title that is found in?
13 A No.
14 Q Have you had occasion to read any of the portions
15 of Title 27 of the Code of Federal Regulations?
16 A What does that deal with?
17 Q The Code of Federal Regulations corresponds to the
18 United States Code, and it's a body of codified
19 regulations organized by 50 titles again, and
20 agencies will promulgate regulations to implement
21 portions of the US code, and they'll do that by
22 publishing their regulations in the Code of Federal
23 Regulations. Does that help explain the question?
24 A Yeah.
25 Q And have you had occasion to read Title 27 of the
16
1 Code of Federal Regulations?
2 A Not that I'm aware of.
3 Q Is the Internal Revenue Service an organization of
4 the Department of the Treasury?
5 A Yes.
6 Q Mr. Bentson previously testified that he relied on
7 31 USC Chapter 3 to form an opinion that the
8 Internal Revenue Service was not an organization of
9 the Department of the Treasury. Holding in my hand
10 a copy of what's been marked as Kram Exhibit 1. It
11 purports to be a copy of Chapter 3, Department of
12 the Treasury, Subchapter 1, "Organization," and
13 handing that to the deponent.
14 Can you tell me if based on this document
15 in your expert opinion is the IRS an organization
16 of the Department of the Treasury?
17 THE WITNESS: Could you repeat that?
18 (Above-pending question read.)
19 THE WITNESS: If you're looking for an
20 expert opinion, as far as organization, I'm not
21 sure if I can tell you that. My expertise lies
22 more in accounts and transcripts. The IRS is a
23 part of the Department of Treasury, and the
24 Department of Treasury is listed here, but I don't
25 think I can make an expert opinion beyond that.
17
1 BY MR. BERNHOFT:
2 Q You had previously testified that the IRS was an
3 organization of the Department of Treasury. On
4 what do you base that conclusion?
5 A That the IRS is under the umbrella of the
6 Department of Treasury.
7 Q On what do you base that conclusion?
8 A From my knowledge of just the internal structure of
9 the organization that we report to the Secretary of
10 the Treasury.
11 Q How does your knowledge of the internal structure
12 of the organization provide evidence that you
13 report to the Department of the Treasury?
14 A I'm not sure if I've analyzed it, but that is
15 basically, I guess, what our organization chart
16 shows, and I'm relying on that. But I don't
17 really -- I haven't done any further research.
18 Q What organization chart are you referring to, Mr.
19 Kram?
20 A I think just a general government chart of which --
21 which department is under which -- which
22 organizations are under which sections of the
23 government or report to which treasury -- which
24 secretaries of the government.
25 Q And you've had occasion to see such a document in
18
1 your employ at Internal Revenue Service?
2 A I'm not sure if it was personal or business, but
3 that's my understanding. But as I say, I'm --
4 that's not my area of expertise, but that's my
5 understanding.
6 Q Are you familiar with ADP and IDRS Information
7 Document 6209?
8 A Yes.
9 Q Do you have access to the entire unredacted
10 document?
11 A Yes. Wait. I am sorry. Could you -- How did you
12 phrase that again, the complete what?
13 Q Do you have access to the entire unredacted
14 Document 6209?
15 A Could you -- I'm not familiar with "unredacted."
16 Q Redaction would be that certain portions would be
17 removed or not made available to you. So the
18 thrust of my question is do you have access to the
19 entire 6209 document?
20 A Yes, I do.
21 Q Did you reference that document in preparing your
22 expert witness report?
23 A Yes, I did.
24 Q I am going to be referring to what I'm holding here
25 as Kram Exhibit 2, and it is a copy of Wayne
19
1 Bentson's expert witness report. I'm just going to
2 leave that here on the table so that we'll have
3 access to that when we ask questions regarding that
4 report.
5 I see, Mr. Kram, you have in front of you
6 what's been marked as Kram Exhibit 3. Are those
7 accurate copies of your reports?
8 A Yes.
9 Q Did you write that report?
10 A Yes.
11 Q Did you receive assistance from anybody in writing
12 that report?
13 A No. Outside of format as we discussed, no.
14 Q Did anyone edit that report for you after you had
15 composed the substance?
16 A No.
17 Q Did you have a model from which to work when
18 writing that expert witness report?
19 A No.
20 Q Who provided you with the caption and the titling
21 information on that report?
22 A I believe that was Attorney Trissell. If it wasn't
23 her, it was Ed Langer for the Houck report. But it
24 was -- It was in one of the first early discussions
25 of just the format of preparing it.
20
1 Q So when you testified that the only document that
2 you received from Ed Langer was Ben Houk's expert
3 witness report, you had forgotten about receiving
4 this titling information from Assistant District
5 Counsel Langer; is that correct?
6 A Well, I'm not sure if it was from him or Attorney
7 Trissell. And it was -- It was just -- It wasn't
8 really part of anything, it was just written down.
9 Q You indicate in your rebuttal expert witness report
10 that you research and interpret IRS transcripts on
11 almost a daily basis, and have done so for the last
12 15 years. What kind of transcripts do you
13 interpret?
14 A IMF transcripts, BMF transcripts.
15 Q Those would be the only two forms of transcripts
16 that you interpret?
17 A Occasionally Nonmaster File transcripts.
18 Q What would be the occasion upon which you would
19 examine a Nonmaster File transcript?
20 A If an assessment was made on a Nonmaster File.
21 Q How would you access a Nonmaster File transcript?
22 A They can be requested from the Service Center or
23 via a computer system to the Service Center.
24 Q Who imputes codes or information into the Nonmaster
25 File system, and where are those codes imputed?
21
1 A Could you define "imputed"?
2 Q Entered.
3 A The actual entering is probably done at the Service
4 Center. It could be requested by anyone within the
5 organization.
6 Q Why would you have occasion to request a Nonmaster
7 File transcript?
8 A As with any other transcript, just to see what --
9 what the account activity has been.
10 Q Is it fair to say that Individual Master File
11 transcripts relate to individuals?
12 A Yes.
13 Q And is it fair to say that Business Master File
14 transcripts relate to businesses or entities?
15 A Generally.
16 Q Could you explain to me what a Nonmaster File
17 transcript is and why one would be generated by the
18 Service?
19 A Well, if there's an account of a Nonmaster File,
20 that would be the only means of getting the
21 transcript information. If it was not able to be
22 processed on the individual or BMF master file, it
23 may need to be processed on the Nonmaster File.
24 Q What do you mean when you say that if it would not
25 be able to be processed on the IMF or BMF system?
22
1 A There are some types of returns in some situations
2 that the master -- the IMF or BMF systems cannot
3 handle and must be processed on the Nonmaster File.
4 Q How do you come to find out when such an account or
5 situation will not process on an IMF or BMF system?
6 Do you attempt to process it and nothing shows up?
7 A No. It's certain -- certain situations, certain
8 types of returns, certain situations on accounts.
9 It's -- It's not that it wouldn't work there, so
10 it's processed there, it's that it -- there's a
11 reason that it has to be processed there.
12 Q And what type of situations and accounts would
13 occur where you would have to process on a
14 Nonmaster File system?
15 A Situations where the -- I'll give an example. An
16 individual -- individual account, a joint account
17 where both parties would be liable for the tax, but
18 for one reason if one -- one of those two parties
19 are not being held liable for the tax, then the
20 spouse that is being held liable for the tax, the
21 billing and account would have to be transferred to
22 the Nonmaster File.
23 Q Why would that be?
24 A Bankruptcy proceedings, innocent spouse provisions.
25 Q But why would the spouse with the liability have to
23
1 be transferred to a Nonmaster File transcript?
2 A Because if it's a joint account on the Individual
3 Master File, there's no way to only hold one spouse
4 liable.
5 Q So why not retain the account on the spouse with
6 the liability on the IMF and transfer the nonliable
7 spouse to the NMF or some other system of records?
8 A I'm not sure if that would be possible or not, but
9 the way -- you're still basically holding only one
10 person liable, and the way that was established was
11 to move the spouse that is being held liable to the
12 Nonmaster.
13 Q Where was that established?
14 A I -- I really don't know. I would assume it's
15 National Office policy. I have no idea.
16 Q How would you have had occasion to know that that
17 was the policy, though?
18 A Just because that's where they are processed. And
19 the manuals reflect that that's where they need to
20 be processed.
21 Q That was what I was driving at. What manuals would
22 have indicated that to you?
23 A Nonmaster File manuals.
24 Q What manuals would pertain to Nonmaster File
25 transcripts?
24
1 A Well, there's general manuals on accounts -- I
2 mean, on transcripts that talk about different
3 types of transcripts. There's also manuals that
4 talk about the Nonmaster File processing.
5 Q What manuals talk about Nonmaster File processing?
6 A The number? I couldn't cite it offhand.
7 Q But you've had occasion to reference that manual?
8 A Um-hum. And I think, as was mentioned before, a
9 lot of the manuals are listed in the 6209 -- the
10 Document 6209.
11 Q Do you have access to all the manuals that are
12 cross-referenced and listed in Document 6209?
13 A Not all of them, just the ones that relate to -- to
14 account processing and things like that. The ones
15 listed in 6209 basically deal with like all aspects
16 of the IRS, all divisions, all jobs. So I only
17 have access to the ones I need for my work.
18 Q What kind of tax classes are listed on the
19 Nonmaster File transcript?
20 A Tax Class 6.
21 Q Are there any Tax Class 2 listings on the Nonmaster
22 File transcript?
23 A You mean as far as the document locater number
24 or --
25 Q Yes.
25
1 A -- as far as -- The only -- The only document
2 locater numbers that can be on the Nonmaster File
3 are Tax Class 6.
4 Q Are there any Tax Class 6 codes anywhere in the DLN
5 number located on an Individual Master File
6 transcript?
7 THE WITNESS: I'm sorry. Could you
8 repeat that.
9 MR. BERNHOFT: Could you read the
10 question back, please.
11 (Above-pending question read.)
12 THE WITNESS: Well, the tax class is a
13 specific position of the DLN, and there cannot be
14 any Tax Class 6 -- There cannot be a 6 in that
15 position on any IMF DLNs.
16 BY MR. BERNHOFT:
17 Q The operator couldn't enter a "6" in that numeric
18 spot?
19 A The operators don't input tax class.
20 Q Who does input tax class?
21 A If you're -- For Master File, you're specifying
22 the -- the Master File tax class, the period,
23 things like that, and the system just generates a
24 tax class because there's no options.
25 Q So when you're on an IMF, it's an automatic
26
1 generation then of Tax Class 2?
2 A Correct.
3 Q Does Tax Class 2 indicate a nontaxable person or
4 entity?
5 A No.
6 Q In which system of records are Nonmaster File
7 transcripts maintained?
8 A Explain "system of records." I mean, the
9 transcript is just basically a printout of what is
10 someplace, and it's -- where it is is on a
11 Nonmaster File computer system, so I'm not sure
12 what --
13 Q What I'm asking for is on what system is the
14 Nonmaster File transcripts contained, in what
15 system?
16 A The accounts or the transcripts? The transcripts
17 are just a printout.
18 Q Let me clarify. Individual Master File transcripts
19 are located in IRS Treasury System Of Records
20 24.030. Are you aware of that?
21 A No.
22 Q Then you're not aware of what system of records the
23 Nonmaster File records are kept in?
24 A That's correct.
25 Q You indicate in your report that you have extensive
27
1 knowledge regarding the codes that appear on IRS
2 transcripts. Do you know what all the codes mean
3 on IRS transcripts?
4 A Not every one, no.
5 Q Would you have access to the resources to find out
6 what they all meant?
7 A I'm guessing, but I would say no. Only in the
8 respect that to do my job I don't think I need to
9 know everything that's on a transcript, and,
10 therefore, I don't have access to everything.
11 Q Do you not have access to everything because you
12 choose not to, or it's because you do not have
13 access as a general rule?
14 A It's because I do not have access. If -- If --
15 Whenever we need something to do our job, we are
16 provided with the resources, the manuals to
17 accomplish that.
18 Q Who provides those manuals?
19 A You mean distribution or --
20 Q How would you obtain a manual if you wanted one?
21 A They're requested through the supervisor and then
22 just shipped out of distribution sites.
23 Q Who is your direct supervisor?
24 A Cary Brown, C-A-R-Y, B-R-O-W-N.
25 Q What is her title?
28
1 A We've just changed some of the titles by us. I
2 can't give you the exact title.
3 Q I'm familiar with certain divisions of the IRS,
4 like Examination, Collections, CID. What area do
5 you work in?
6 A Problem Resolution.
7 Q And who does Problem Resolution report to?
8 A It was recently changed to where it's taken out of
9 the district and reports to National Office through
10 whatever channels.
11 Q And the National Office would be in the District of
12 Columbia?
13 A Yes.
14 Q Do you know what department out there of IRS
15 Problem Resolution reports to?
16 A Well, to the tax -- to the National Tax Bureau
17 Advocate.
18 Q That's that ombudsman or --
19 A Yes.
20 Q You indicate in your report that you have taught
21 and assisted in the writing of national training
22 books for the interpretation of IRS transcripts.
23 Where have you taught information regarding the
24 training books?
25 A Just at different offices within -- within our
29
1 region.
2 Q Who would you teach?
3 A Basically lesser experienced people in the Problem
4 Resolution program.
5 Q Do you have occasion to teach people that are not
6 in the Problem Resolution program?
7 A Yes.
8 Q What departments might they come from?
9 A Examination or Collection.
10 Q What national training books have you assisted in
11 writing?
12 A I think it was "Advanced Account Resolution." It
13 was -- I think I did that like ten years ago, so
14 I'm not exactly certain of the titles. Some of the
15 more recent ones are more of a workshop type nature
16 as opposed to an official course book.
17 Q You indicate in your report on Page 2, and I'm
18 looking under the subheading "Findings" -- You
19 indicate there in the second sentence that
20 Paragraphs 1 through 12 of Mr. Bentson's report
21 contain references to various provisions of the US
22 Code and the CFR and their meaning, and you state
23 further, "Accordingly, I do not express a view or
24 opinion as to the validity of the matters set forth
25 in Paragraphs 1 through 12." Why did you not
30
1 express an expert opinion with respect to
2 Paragraphs 1 through 12 of Mr. Bentson's report?
3 A It was a lot of references that I'm not familiar
4 with.
5 Q So when I look at Mr. Bentson's report on Page 3
6 under "Analysis," and I see Paragraph 3, and it
7 cites 26 CFR 601.601, you're unfamiliar with that
8 reference?
9 A Correct.
10 Q Are you familiar with System Of Records Treasury,
11 slash, IRS 24.030?
12 A Not until you explained to me what that was right
13 now.
14 Q Are you familiar with the National Prohibition Act?
15 A The name sounds very vaguely familiar, but, no, I
16 couldn't give you any details.
17 Q I, of course, meant other than the discussions we
18 had here at Mr. Bentson's deposition.
19 A Yes.
20 Q Okay. Thank you. I'm holding in my hand a copy of
21 Kram Exhibit 4. And it purports to be a copy of IR
22 Manual 30(55)4.2, it's got a subheading "IMF
23 Operations," and this is the document that was
24 referred to in Mr. Bentson's deposition that was
25 inadvertently excluded from his expert witness
31
1 report, and this has been entered as Exhibit 4, and
2 handing that to the deponent.
3 MS. TRISSELL: Do you have a copy of that
4 document I can take?
5 MR. RAYMOND: Remind me to give it to you
6 before you leave today.
7 BY MR. BERNHOFT:
8 Q You stated in your second paragraph under
9 "Findings" that Mr. Bentson was incorrect in his
10 assertion that Transaction Code TC 150 indicates a
11 Virgin Islands transcript. On what do you base
12 that conclusion?
13 A The fact that TC 150 can indicate a number of
14 different types of returns, and it's either
15 assessing original tax or establishing a tax
16 module. It isn't anything specific to the Virgin
17 Islands.
18 Q On what do you base that conclusion?
19 A Document 6209 and my experience of looking at
20 transcripts and tax returns.
21 Q What section of Document 6209 do you rely on for
22 that conclusion?
23 A The reference is Section 8, Page 9.
24 Q And I note that you make reference to that in
25 Paragraph 2 under "Findings," and I just note for
32
1 the record that that should be Section 8, Page 9,
2 okay. For clarification.
3 If you would, if you could please view
4 that document that's been entered as Exhibit 4, are
5 you familiar with Internal Revenue Manual 3?
6 A Section 3, yes.
7 Q I just want to clarify that we're talking about the
8 same manual. We're talking about Internal Revenue
9 Manual 3? Are you familiar with Internal Revenue
10 Manual 3?
11 A Well, it's like Section 3. There isn't a manual
12 specifically labeled 3.
13 Q And in this exhibit that's identified as 30(55)4.2,
14 we can see an arrow there, and it's pointing to,
15 "(29) Virgin IS (TC 150)." What does that mean?
16 A I'm not sure because the -- there's no heading to
17 the column.
18 Q What is your understanding of the relationship
19 between Document 6209 and Internal Revenue Manual
20 3?
21 A Document 6209 is like a summary of an abbreviated
22 version of the information contained in Section 3.
23 Q So if you wanted specific information, you would go
24 to Section 3?
25 A Correct.
33
1 Q Do you have access to Internal Revenue Manual
2 Section 3?
3 A Yes.
4 Q How often do you have occasion to view it?
5 A Probably a few times a month.
6 Q What do you think this list of information here is
7 on this Exhibit 4, where it lists in parens from 10
8 to 45?
9 A I really couldn't tell you.
10 Q Well, as a foundation, what I see here, I see a
11 bunch of what could be called transactions that
12 might need to be imputed into a certain transcript,
13 and then in parentheses the transaction code that
14 would affect imputing the transaction into the
15 transcript. Is that accurate?
16 A 25 and 26 are the same transaction code but
17 different items, though.
18 Q What do you conclude from that?
19 A That it's not a definition of transaction codes.
20 Q When you said that you looked at Document 6209,
21 Section 8, Page 9, to form your conclusion that Mr.
22 Bentson was wrong when he said that the Transaction
23 Code TC 150 indicates a Virgin Islands transcript,
24 what were you referring to in that section? And if
25 I might, I can tender you a copy of Kram Exhibit 6,
34
1 which purports to be a copy of Document 6209,
2 Section 8, Page 9.
3 A The remarks that state, "A tax liability assessed
4 from the original return establishes a tax module";
5 the file source codes in Column 3 that indicate its
6 various types of Master Files; the title that just
7 says, "Return Filed & Tax Liability Assessed," and
8 also my experience in reviewing documents that have
9 Transaction Code -- reviewing the tax returns that
10 relate to transcripts and seeing that a Transaction
11 Code 150 was not based on anything relating to the
12 Virgin Islands.
13 Q How would you make such a determination?
14 A As part of my job, we, in very many cases, obtain
15 the original returns from the Service Center.
16 Q And how would an original return from the Service
17 Center indicate that TC 150 did not relate back to
18 the source of a Virgin Islands source?
19 A There was nothing on the tax return to indicate
20 that there was a Virgin Islands connection, no
21 addresses, no --
22 Q Was there something on the tax return that would
23 lead you to believe that it was not a Virgin
24 Islands source?
25 A Yes, the addresses of all -- of the wage sources,
35
1 address of taxpayer.
2 Q What information in Document 6209, Section 8-9,
3 that's copied there in Exhibit 6 -- What
4 information there -- You have read certain of the
5 information that's in columns there. How does that
6 establish that this doesn't relate back to a Virgin
7 Islands tax source?
8 A I think the comment in the report is that a
9 Transaction Code 150 is automatically the Virgin
10 Islands, and there's nothing that says that it has
11 to be Virgin Islands.
12 Q I'm holding in my hand a copy of Kram Exhibit 5.
13 It's a copy of a letter from the Department of the
14 Treasury, Internal Revenue Service, in Washington,
15 DC. And it's from a Program Analyst, Freedom Of
16 Information, at that location named Barry Windheim.
17 And handing a copy of Exhibit 5 to the deponent.
18 Mr. Kram, do you know Program Analyst Barry
19 Windheim?
20 A No.
21 Q If you would, if you would please -- the text of
22 the letter isn't that long, and I would appreciate
23 it if you could read that text of the letter,
24 please.
25 A The whole thing or just the underlined?
36
1 Q Why don't you do the whole thing because we don't
2 want it to be taken out of context.
3 A "This is in response to your Freedom of Information
4 Act, FOIA, request dated April 9th, 1997,
5 concerning Transaction Code 150.
6 In response to No. 5 of your request, we
7 are not required under FOIA to conduct extensive
8 research. Concerning the sketch of Transaction
9 Code 150," paren, "No. 6 of your request, our
10 Disclosure Officer in the Assistant Commissioner
11 (International) has advised us that the transaction
12 codes contained in our manuals are used to identify
13 a transaction being processed and to maintain a
14 history of actions posted to a taxpayer's account
15 on the Master File. Transaction Code 150 indicates
16 a tax liability assessed when a tax return is filed
17 and a return is posted to the master file. The
18 Virgin Islands, 150," in parentheses, "relates to
19 the tax liability assessed on a US Self-Employment
20 Tax Return-Virgin Islands, Guam, American Samoa.
21 It indicates the amount of self-employment tax
22 assessed on this type of return."
23 Q What Program Analyst Windheim has said there I
24 think is a little bit more detailed restatement of
25 what Mr. Bentson's assertion has been. Is Program
37
1 Analyst Windheim from IRS National incorrect in his
2 assertions there?
3 A I just want to read this again. The first
4 sentence -- Excuse me. The one sentence that
5 states, "The Transaction Code 150 indicates a tax
6 liability assessed when a tax return is filed and a
7 return is posted to the Master File," that sentence
8 basically is what I'm saying. The next sentence,
9 the Virgin Islands 150, I'm not sure if he's
10 specifically talking about returns filed from that
11 area as opposed to a general comment. The prior
12 sentence seems to be the general comment on TC 150,
13 whereas, it seems that he's talking about a
14 specific group of returns in the second sentence.
15 MR. BERNHOFT: Could you please repeat my
16 last question to Mr. Kram.
17 (Above-pending question read.)
18 THE WITNESS: My turn.
19 BY MR. BERNHOFT:
20 Q To you.
21 A It looks -- He's not incorrect. It looks like he's
22 talking about two separate things, Transaction Code
23 150 in general and then a second comment about
24 returns specifically filed from Virgin Islands, as
25 the second part.
38
1 Q When you were looking at what had been marked as
2 Defendants' -- I should say Kram Exhibit 4, which I
3 have a copy of here, purported to be a photocopy of
4 30(55)4.2, which comes from Internal Revenue Manual
5 Section 3, and there was an item entered here,
6 "(29)" and then "Virgin IS (TC 150)" -- Have you
7 ever seen the Transaction Code TC 150 identified in
8 any other documents or manuals at the Internal
9 Revenue Service that you have access to that would
10 indicate that it is something other than a Virgin
11 Islands source?
12 A I'm not sure if I've seen it in listing format like
13 this, but, yes, Transaction Code 150 is listed. As
14 I previously said, it's just a generic means of
15 assessing tax or establishing a module on -- on
16 various Master File systems.
17 Q On what basis do you assert that the TC 150 is just
18 a general transaction code for assessing any tax?
19 A The Document 6209.
20 Q And where does -- where in 6209 do you find a
21 foundation for that proposition?
22 A Where we previously discussed.
23 Q Are you referring to --
24 A Section 8.
25 Q Section 8, Page 9?
39
1 A Yes.
2 Q You indicate on Page 3 of your report that, "The
3 acronym 'AGI' refers to adjusted gross income and
4 is indicated on all Individual Master File accounts
5 after the TC 150 is posted to the account." And I
6 believe, if my recollection serves me, Mr. Bentson
7 did not disagree with that statement. He did,
8 however, take issue with the second sentence there,
9 wherein you state, "It does not indicate any type
10 or source of income, only an amount." I note that
11 you make no citation to any manual, law,
12 regulation, et cetera.
13 On what basis do you make the assertion
14 that the AGI does not indicate any type or source
15 of income, only an amount?
16 A The transcript is basically a reflection of the
17 account and the tax return, and one of the items on
18 the tax return is adjusted gross income. And it's
19 basically reflecting the amount that would be from
20 the tax return on that line or as adjusted, and
21 it's basically my -- my experience of, again,
22 reviewing tax returns and transcripts and just my
23 interpretation of the definition of it
24 corresponding to the information on the tax return.
25 Q How did the observations you just made establish
40
1 that AGI only refers to an amount and does not
2 indicate any type or source of income?
3 A I never -- The amount indicated was always the
4 amount listed. It didn't -- It didn't matter where
5 the money came from or what the source of the
6 income was as far as having the effect. If it was
7 X amount of dollars, that was the amount that was
8 on the transcript. It was never any variance
9 between types of income or sources of income.
10 Q But how does the fact that there were amounts
11 listed after the AGI acronym establish that AGI did
12 not indicate the type or source of the amount of
13 that income?
14 A It's basically a dollar amount. And not reflect --
15 it cannot reflect source or type. There's no
16 coding. It's just a dollar amount.
17 Q And Mr. Bentson's assertion is that the acronym AGI
18 in particular is rooted in a particular type or
19 source of income. I'm not trying to be difficult
20 on this point, but I still don't believe I've
21 gotten a -- an answer that meets the thrust of my
22 question. I'm asking, you know, on what foundation
23 do you base the conclusion that the AGI acronym
24 does not relate to a certain type or source of
25 income?
41
1 A Basically by experience. That's a dollar amount
2 and no other type of indicator.
3 Q You referred to based on your understanding of the
4 definition of AGI. What is the definition of AGI?
5 A Basically, just from the tax form that you're --
6 It's a subtraction of the two sections of the tax
7 form.
8 Q Where would one find the definition of AGI?
9 A For my use, I just am pulling numbers off the tax
10 return as far as what's entered. There are
11 definitions in, I believe, the instruction book,
12 things like that, but that I'm not as familiar with
13 to give you citations. I believe it's also in the
14 Internal Revenue Code, but as I say, for my
15 account-related issues, I'm just basically taking
16 the -- the mathematical subtractions on the tax
17 returns itself.
18 Q So is it fair to say that when you refer to your
19 understanding of the definition of AGI, you were
20 referring to a conventional intuitive understanding
21 and not to a specific definition that you had seen
22 in these Internal Revenue manuals where it might be
23 contained; is that a fair statement?
24 A I'm saying my definition is just that it's a dollar
25 amount based on math.
42
1 Q You state in Paragraph 2 of Page 3 of your report
2 that Mr. Bentson's assertion that the acronym SET
3 is a Northern Mariana Islands Social Security tax
4 is incorrect. And yet you provide no citation or
5 foundation for that assertion. Could you tell me
6 upon what foundation you make the assertion that
7 that is incorrect?
8 A Again his reference is indicating that that's the
9 only -- that SET, that that is the only -- that
10 indicates that the -- the Northern Mariana Islands
11 Social Security tax. Again, the self-employment
12 tax is a computation from the tax return based on
13 self-employment income that the individual is -- is
14 putting on the form, and generally it's for income
15 derived within the United States. It's not solely
16 Northern Mariana Islands Social Security tax.
17 Q Upon what foundation do you base that assertion?
18 A That it's primarily within the United States or --
19 Q Um-hum.
20 A My experience of reviewing accounts and tax
21 returns.
22 Q Could you be more specific?
23 A In all of my work or seeing -- in reading I have
24 never seen a statement that SET is only Northern
25 Mariana Islands Social Security tax.
43
1 Q Are you familiar with Delegation Order 164?
2 A No.
3 Q Are you familiar with 26 CFR 1.6017-1?
4 A Not by number.
5 Q Are you familiar with 42 USC Section 405?
6 A No.
7 Q You make an assertion in Paragraph 2 of Page 3 of
8 your report that, "The amount of self-employment
9 income is then forwarded to the Secretary of Health
10 and Human Services to be included in the Social
11 Security earnings record of the individual," and
12 provide no citation or basis for that belief. What
13 is the basis for that assertion?
14 A I can't give you a numerical citation, but the
15 Internal Revenue manual states that the
16 self-employment income that's reported on the tax
17 returns is sent to the Secretary computerwise so
18 that the earnings records can be updated.
19 Q When you say "computerwise," what are you referring
20 to?
21 A I'm not sure how it's done, computer tape,
22 whatever, but there are -- there is no direct
23 reporting to Social Security of self-employment
24 income except for information that is sent from the
25 Internal Revenue to them. So --
44
1 Q Based on your testimony there, is it fair to say
2 that you have no firsthand knowledge that this
3 self-employment income is forwarded from Internal
4 Revenue Service to the Secretary of Health and
5 Human Services?
6 A I don't know the mechanics of it, but I have talked
7 to taxpayers who have received notices from Social
8 Security based on IRS actions on their accounts.
9 So I have read in our manuals that that happens,
10 and I've talked to taxpayers who apparently have
11 received notices as a result of that. So I would
12 assume it's happening as the manual states.
13 Q What manual states that?
14 A It's Section 3, but I do not know the specific
15 reference.
16 Q There's a part of Section 3 that states that
17 self-employment income is forwarded to the
18 Secretary of Health and Human Services to be
19 included in the Social Security earnings record of
20 the individual?
21 A I'm paraphrasing, but yes. It's not those exact
22 words but --
23 Q But it's somewhere in Section 3 it substantially
24 says that?
25 A Correct.
45
1 Q You state in Paragraph 3 of Page 3 of your
2 report -- this is regarding the Bernhoft report --
3 You take issue with Bentson's assertion that
4 another person is using the Social Security number
5 of Robert Bernhoft. Now, I note that you indicate
6 that Mr. Bentson provides no basis for that
7 statement, but then I also see that -- I don't see
8 a citation or basis that you provide to counter his
9 statement. I do note that you say, "A review of
10 the account does support this." I believe you
11 meant to say "does not support this"?
12 A Correct. It should state --
13 Q "Does not support this." So you're taking issue
14 with Bentson's statement that another person is
15 using the Social Security number of Robert
16 Bernhoft? You disagree with that?
17 A Yes.
18 Q Okay. On what basis do you form that opinion of
19 disagreement?
20 A I could find no indication of it. As I state --
21 This morning he stated that there was a notation on
22 the transcript that indicated that.
23 Q Yes. I believe you're referring to the Val-1
24 designation?
25 A Right. Right.
46
1 Q Are you familiar with what Val-1 means?
2 A I'm not familiar with the "1" coding. I would have
3 to look in the manual for that. The Val refers to
4 the validity of the name and Social Security number
5 matching.
6 Q You've confused me now. If that's your
7 understanding of what the acronym Val means, and
8 Mr. Bentson is asserting that the numeric code "1"
9 after "Val" indicates that another person is using
10 the Social Security number of Robert Bernhoft, and
11 you further testify that your examination of
12 transcripts doesn't support that, I don't see how
13 you could -- Where on this transcript do you find
14 refutation for that?
15 A I don't see how reading -- the Social Security
16 number validity indicator indicating that somebody
17 else is using his number.
18 Q What does the code "1" mean there?
19 A I believe it means it matches, but I'm not sure.
20 Q Where would you find what code "1" means there
21 after "Val"?
22 A Section 3 of the manual.
23 Q And Mr. Bentson asserts that when looking in
24 Internal Revenue Manual 3, that the code "1" in Val
25 indicates that another person is using the Social
47
1 Security number of Robert Bernhoft, and he's
2 tendered an affidavit here to that effect. You've
3 countered that assertion, and you say you find no
4 basis for that statement. Have you looked at
5 Internal Revenue Section 3 or Document 6209 to
6 refute Mr. Bentson's assertion?
7 A No, because I didn't realize that that's what he
8 was basing his assertion on.
9 Q But if, as you say, you understood that Val
10 meant -- referred to the validity of the Social
11 Security number vis-a-vis matching the name of the
12 party using the Social Security number, wouldn't it
13 have made sense to find the referring documents to
14 verify whether or not that that was true with
15 respect to this transcript?
16 A I am not certain, but I believe "1" indicates that
17 it matches, and if that's the case, then there
18 would be no reason to research it because it would
19 support my position that there's no indication of
20 another individual using it.
21 Q When you say you believe "1" indicates that it
22 matches, upon what foundation do you form that
23 belief?
24 A My memory of what the manual is. That's why I'm
25 saying I'm not certain. I would have to check
48
1 that.
2 MR. BERNHOFT: Can we please take two
3 minutes.
4 MS. TRISSELL: Yes.
5 (Discussion off the record.)
6 BY MR. BERNHOFT:
7 Q Mr. Kram, in the conclusion of your report at the
8 bottom of Page 3 you indicate that you "find no
9 irregularities on the 1994 tax account of Robert
10 Bernhoft." I have a couple questions about that.
11 First, we're referring to the Individual
12 Master File transcript of Bernhoft for 1994,
13 correct?
14 A Yes.
15 Q Okay. And when you say there are no
16 irregularities, irregular with respect to what?
17 A The types of things that were indicated as far as
18 the Northern Mariana Social Security --
19 self-employment tax, the Guam adjusted gross
20 income. This account looks like a thousand others
21 that I have seen. There is no irregularities,
22 nothing -- nothing looks out of place, everything
23 would fit.
24 Q Is it possible that all of those thousands of
25 returns you've looked are Virgin Islands 1040s?
49
1 A No, because a lot of them I've received the actual
2 documents from Kansas City.
3 Q When you say "actual documents," what are you
4 referring to?
5 A The original paper 1040 return that a taxpayer
6 files.
7 Q And how does that establish that they're not Virgin
8 Islands source returns?
9 A There's no addresses, no -- no indication -- Well,
10 I guess what are you referring to as a Virgin
11 Islands return?
12 Q The TC 150 -- When a return has a TC 150
13 transaction code on it.
14 A But you're saying there is some tie-in to the
15 Virgin Islands.
16 Q Mr. Bentson asserts that the presence of a TC 150
17 transaction code indicates a Virgin Islands return,
18 and correct me if I am mischaracterizing your
19 expert witness report, I believe he bases that in
20 part on Kram Exhibit 4, which is again an excerpt
21 of Internal Revenue Manual 3, and where it has this
22 "(29)" and then "Virgin IS TC 150," and further
23 based on Kram Exhibit 5, where Program Analyst
24 Windheim talks about the Virgin Islands TC 150, et
25 cetera. That's what I'm referring to.
50
1 A Okay. And in my looking at the original paper
2 return, I see no mention or indication that there
3 was any connection with the Virgin Islands.
4 Q You make an assertion -- I don't mean to interrupt
5 you. Were you --
6 A I was just going to ask if I could see the Document
7 6209 for a moment, the complete --
8 Q Certainly.
9 MR. BENTSON: Yes, you can.
10 MR. BERNHOFT: Absolutely. Look at this
11 expert witness camaraderie.
12 MR. RAYMOND: Don't throw it at him,
13 though. It's heavy.
14 THE WITNESS: There is a form in here
15 marked 1040SS, "US Self-Employment Tax
16 Return-Virgin Islands, Guam, American Samoa." Is
17 that what you're asserting the TC 150 --
18 MR. BENTSON: No, I'm using -- When I
19 say specifically Virgin Islands, I'm referring to
20 Manual 3, this exhibit we're talking about that
21 says TC, the Virgin Islands TC 150.
22 THE WITNESS: Okay.
23 MR. BENTSON: As part of it. And the
24 other part is 26 CFR 1.6017-1.
25 BY MR. BERNHOFT:
51
1 Q Are you familiar with 26 CFR 6017-1?
2 A Not by number, no.
3 Q All right. In your conclusion at the end of Page 3
4 to your expert witness report you assert that Mr.
5 Bentson's report contains numerous references to
6 information that is not pertinent to the account.
7 What do you mean by that?
8 A I think I was just referring to some of his -- his
9 different interpretations as far as AGI, SET.
10 Q If I might, then your assertion that his report
11 contains references to information that is not
12 pertinent to the account, you're just repeating
13 your assertion that his conclusions are erroneous?
14 A Yes.
15 Q Okay. In preparing your expert witness report in
16 rebuttal to Mr. Bentson's report, specifically with
17 respect to the Bernhoft 1994 IMF transcript, you
18 did -- did you view and analyze the Bernhoft 1994
19 transcript?
20 A Yes. Yes.
21 Q I believe it's Exhibit --
22 A Yeah, I have got it.
23 Q Yeah, to the Bentson report B1, Page 2?
24 A Yeah. Wait. Okay.
25 Q Okay. Based on your review of that IMF transcript,
52
1 is Bernhoft liable for the individual income tax?
2 A Yes.
3 Q And upon what basis do you make that assertion?
4 A The account reflects a tax assessment, and there's
5 nothing to indicate that it has been reversed.
6 Q Where on Bernhoft's transcript is there an
7 indication of a tax assessment?
8 A The Transaction Code 300, tax assessment by exam.
9 Q And what is the value of that tax assessment?
10 A $3,202.
11 Q So you're suggesting that that assessment indicator
12 establishes that Bernhoft is liable for the
13 individual income tax?
14 A Correct.
15 Q Is there a 23C filed in relationship to that tax
16 assessment by your viewing of that transcript?
17 A All assessments have a 23C, so, yes, there is a --
18 an assessment 23C date and document -- and DLN, and
19 there would be a supporting 23C document.
20 Q Where is the document locater number with respect
21 to that assessment you pointed to?
22 A Should I read it?
23 Q Please.
24 A 0925126314002-6.
25 Q What tax class is that?
53
1 A 2.
2 Q If you would, please, if you could look at the next
3 page of the report, where Mr. Bentson previously
4 circled "SFR 150" and then the value "0.00," Mr.
5 Bentson asserted that there was no tax assessed
6 pursuant to the issuance of that Substitute For
7 Return. Do you agree with that?
8 A The TC 150 SFR is the first step in a procedure to
9 assess tax. The TC 150 of an SFR return never
10 carries a tax assessment. It's just a preliminary
11 action in the process to assess tax.
12 Q Is a TC 150 required to be on a transcript before a
13 tax can be assessed?
14 A It either assesses the tax if a return is being
15 voluntarily filed or, as in this case, yes, the TC
16 150 has to be there prior to an assessment.
17 Q Why is that?
18 A The -- The computer system would not accept a
19 secondary tax assessment without an initial TC 150
20 on the account.
21 Q Why is that?
22 A I know that's how the program is set up. As far as
23 why, that I couldn't answer.
24 Q Is a TC -- Does a TC 150 code on a transcript mean
25 that the taxpayer has self-assessed himself or
54
1 herself?
2 A Not always. In this case the SF -- the TC 150
3 indicates that it's an SFR, which is the IRS
4 initiating the action to assess the tax.
5 Q Does the IRS have authority to issue a substitute
6 return for the 1.1-1 individual income tax?
7 A I'm sorry, the 1-1?
8 Q The individual income tax is described at 26 USC
9 1.1-1 and 26 CFR 1.1-1. I make that reference just
10 so that the record is clear that the -- there's a
11 lot of people that refer to an individual income
12 tax, but I want to make sure we're rooting it in
13 the code.
14 So again my question would be, is the IRS
15 authorized to issue a Substitute For Return for the
16 1.1-1 individual income tax?
17 A I cannot cite a code section, but, yes, it's my
18 understanding that they do have the authority.
19 MR. BERNHOFT: Okay. Just take 30
20 seconds, please.
21 (Discussion off the record.)
22 MR. BERNHOFT: Could we go off the record
23 to mark something.
24 (Discussion off the record.)
25 MR. BERNHOFT: Back on the record.
55
1 BY MR. BERNHOFT:
2 Q Did the Returns Analysis Branch place a Code 4 on
3 the Substitute For Return prepared for Bernhoft?
4 A What type of Code 4?
5 Q The numeric -- A numeric 4.
6 A As far as what code? I mean --
7 Q Yeah, let me -- I'll repeat the question, and if
8 it's not a -- if it's not a good question, if you
9 can't answer it, you can just say, "I can't answer
10 that." I think it's a good question.
11 Did the Returns Analysis Branch place a
12 Code 4 on the Substitute For Return prepared for
13 Bernhoft based on your viewing of that IMF
14 transcript?
15 A I don't see a Code 4. I know they do special
16 coding to let the computer know it's an SFR return,
17 and this one is indicated as an SFR return, so I
18 would assume there was some coding. I do not see a
19 4, though.
20 Q Did you ever have occasion to enter a command code
21 into one of the terminals and draw up an IMF screen
22 live on a computer terminal?
23 A When -- We would not pull up an account to do an
24 adjustment. We're not going into -- There's not a
25 screen that looks like this that we're going into.
56
1 Q Um-hum.
2 A There may be a screen where we do things on, but
3 it's just a screen that's basically almost like a
4 fill-in-the-blank of what you want to do type
5 thing.
6 Q Um-hum. Are you aware if there is any fields or
7 zones on an IMF transcript that might appear live
8 on the operator's terminal but do not print on any
9 hard copy sent to a FOIA requester, for example?
10 A I'm not sure what information you receive on a FOIA
11 request.
12 Q Is there an MFR code on Bernhoft's IMF transcript?
13 A I am sorry?
14 Q MFR?
15 A Oh. Yes, 05.
16 Q What does MFR stand for?
17 A Mail filing requirement.
18 Q And what does 05 stand for?
19 A I would have to look in the 6209.
20 (Discussion off the record.)
21 (Exhibit No. 12 was marked.)
22 BY MR. BERNHOFT:
23 Q Is there an FR code on Bernhoft's IMF transcript?
24 A No.
25 Q Do you know what FR stands for?
57
1 A Filing requirements.
2 Q Is that different than MFR?
3 A MFR indicates what type of tax package they're
4 mailed, what forms are contained in it.
5 Q And what does FR mean?
6 A Filing requirement.
7 Q So MFR tells the service which form to mail to the
8 taxpayer, but FR determines the actual filing
9 requirement; is that correct?
10 A It's really the individual themself that determines
11 what -- whether or not they have to file and what
12 type of form, and generally filing requirements are
13 more with business taxpayers, where there's
14 numerous types of forms that could be filed. The
15 MFR is pretty much based on just the prior year
16 return that was filed, so it would be repeated, but
17 it may not be the accurate return due for the
18 current period.
19 Q Have you ever seen an FR code on an IMF transcript?
20 A I don't think so.
21 Q Have you ever seen an FR code on a BMF?
22 A Yes.
23 Q I'm holding in my hand a document that's been
24 entered as Kram Exhibit 12. Purports to be an
25 extract from Document 6209, Section 2. It's titled
58
1 "Tax Returns and Forms, Subsection .01, List of
2 Returns and Forms." Handing that to Mr. Kram.
3 Mr. Kram, you previously testified that a
4 Form 23-C is always filed in conjunction with a tax
5 assessment, that it underpins the tax assessment.
6 Could you show me where Form 23C is listed in this
7 area of Document 6209?
8 A If I said "filed," the terminology may have been
9 wrong. It's something that's maintained. It's
10 a -- It's a form that's kept on file as a means to
11 back up assessments that were made. Whereas, these
12 are generally things that are processed within the
13 system as opposed to backup documents for the
14 system, or for the returns.
15 Q I appreciate that proviso, but if you -- could you
16 tell me whether or not the Form 23C is listed
17 there?
18 A There is no 23C form listed.
19 Q Where do you see the distinction that you have just
20 drawn between returns that are required to be filed
21 and processed and forms that are filed internally
22 to back up tax assessment in that document?
23 A There is no distinction made. It just says, "List
24 of Returns and Forms." It would just be my
25 experience that I know that this is, say, not
59
1 personnel forms or anything like that, it's just
2 tax-related forms and schedules from individuals
3 that are --
4 Q You're suggesting that a Form 23C is not tax
5 related?
6 A Not as far as processing something. It's the --
7 It's the backup for an action, not the action
8 itself.
9 Q So all of these forms listed here are actions or
10 filings themselves, not the backup or underpinning
11 documents to said actions?
12 A I don't think I'm familiar enough with every one of
13 these forms to make that statement. I can say that
14 to the 23C form. That I'm familiar with to a
15 limited extent but not everything else here.
16 Q Have you ever seen the Form 23C form listed in any
17 section of Document 6209 that identifies it as a
18 bona fide Internal Revenue Service form?
19 A I don't think so.
20 Q Holding in my hand a copy of what's been marked
21 Kram Exhibit 7. Purports to be a copy of IRM
22 Section 3(10)(72)7.2. And handing that to the
23 deponent.
24 Mr. Kram you previously testified that
25 there was no such thing as a nontaxable 1040, and
60
1 yet I note on this document it appears that there
2 is a nontaxable 1040. Could you explain that for
3 me?
4 A I forget your previous reference to a nontaxable
5 1040, but I thought it was something in the coding
6 or something as opposed to a form itself.
7 Obviously, if I file a tax return with zeros on it,
8 it's going to be nontaxable.
9 Q So you think that this document, where it lists a
10 nontaxable 1040, refers to those forms that
11 taxpayers might file where they list zeros on the
12 form?
13 A I am not familiar with what they're talking about
14 here. I don't know what they mean. It's a
15 Nonmaster File numbering chart. As far as what
16 they would be putting on a nontaxable return, I'm
17 not sure.
18 Q I have in my hand a copy of what's been marked Kram
19 Exhibit 8. It purports to be a copy of a
20 transcript. At the top it says, "Official Internal
21 Revenue Service Nonmaster File Transcript." The
22 transcript date is 6-16, 1998. It appears to refer
23 to Robert R. And Patricia J. Raymond. And handing
24 that to the deponent.
25 Could you tell me how a Nonmaster File
61
1 transcript like this would be generated on Robert
2 and Patricia Raymond?
3 A It is possible on the Nonmaster File system to
4 generate a transcript. I guess I don't understand
5 the question. I mean, there is, obviously, an
6 account, and if there's an account, an employee can
7 request a transcript.
8 Q What is on this transcript? What's the nature of
9 the data on there in a general sense?
10 A It looks like a penalty was assessed.
11 Q And what was that penalty assessed for?
12 A It doesn't give the -- Oh, I am sorry. It looks
13 like it was a -- I would have to look in the 6209,
14 but it appears to be a frivolous return penalty.
15 Q Why wouldn't that just be entered on the individual
16 Master File transcript of which we know Bob and
17 Patricia Raymond have?
18 A In prior years a lot of the civil penalties had to
19 be assessed on Nonmaster File. In the past -- It
20 was changed where they could be assessed either
21 way. I think it was -- I think when this was done,
22 it could be assessed on the Master File. I'm not
23 sure why it -- it was not assessed.
24 Q What kind of a tax is Tax Class 6?
25 A Nonmaster File.
62
1 Q Is it excise tax?
2 A It can be anything. It's just Nonmaster File. It
3 could be any type of tax.
4 Q What does Tax Class 2 mean?
5 A I'd have to -- I'd have to look. I know it
6 includes -- it includes the Individual Master File,
7 it includes some -- some BMF returns. But the Tax
8 Class 6 is just an indication that it's on the
9 Nonmaster File, but no clear indication of what it
10 is.
11 Q I note that the title on the document, the header
12 states, "Official Internal Revenue Service
13 Nonmaster File Transcript." Yet when I look at the
14 exhibits attached to Mr. Houk's report that are
15 copies of the Raymonds' IMF transcripts, I see "IMF
16 NCC Transcript Specific." Why do you think that
17 is?
18 A It's two separate computer systems. And as far as
19 why the difference in the wording, I don't know.
20 Q Do you find it unusual that these IMF NCC
21 transcript specifics are not denominated with any
22 indicator that they're from the Internal Revenue
23 Service?
24 A I'm not sure why there's a difference between the
25 two. They're both internal transcripts, so you
63
1 would think they would be the same. They're
2 obviously not. I don't have any reasoning for that
3 but --
4 Q Do you know by what authority the Internal Revenue
5 Service purportedly maintains the IMF system of
6 records?
7 A No, I do not.
8 Q I have in my hand a copy of Kram Exhibit 9, and it
9 purports to be a copy of Document 6209, Section 8,
10 Page 130, and I'm referring to the very bottom of
11 this form, and I'm going to just read a couple
12 lines off here and hand the document to Mr. Kram
13 for comment.
14 Recalling that in your previous testimony
15 regarding Exhibit 8 that this Nonmaster File
16 transcript with respect to Robert and Patricia
17 Raymond appeared to have assessed a penalty for
18 frivolous return, I note that at the bottom of
19 Exhibit 9 it says, "Forms 5600.1, 5600.6, AT&F
20 additional assessments, frivolous returns, Internal
21 Revenue Code 6702, NMF excise." And handing that
22 to the deponent. Do you think there's any
23 relationship between the indicator at the bottom of
24 Exhibit 9 that frivolous returns penalty can be
25 assessed per IRC 6702 for Alcohol Tobacco and
64
1 Firearms excise taxes and the fact that Robert and
2 Patricia Raymond's Nonmaster File transcript
3 contains a frivolous return penalty?
4 A I guess I don't see the tie-in between the ATF -- I
5 see that's a separate category, but I don't see
6 that the two are tied together. But it does appear
7 that this is a 602 penalty that was assessed on
8 Exhibit 8.
9 Q And I would note that it's a 6702 penalty. Now we
10 have it straight. For everybody's edification.
11 Are you aware of anywhere in Document
12 6209 where there are transaction codes to assess
13 6702 frivolous penalties?
14 A On Exhibit 8 it was assessed with a Transaction
15 Code 240. And the -- And the Transaction Code 240
16 is in there -- in the 6209 with -- with some of the
17 reference numbers. Do you want to go off for two
18 seconds?
19 (Discussion off the record.)
20 THE WITNESS: The answer is yes.
21 BY MR. BERNHOFT:
22 Q Okay. Okay. So Mr. Kram is referring to Document
23 6209, Section 11-59, and he's pointing to --
24 A Transaction Code 240 is a general penalty
25 assessment, and it can have a number of different
65
1 meanings, and this is a breakdown of the meanings.
2 So that would be the reference for the Section 6702
3 frivolous return penalty.
4 Q $500 per return. What does this Reference No.
5 665-673 mean that's on this document?
6 A Are there other reference numbers within the same
7 category?
8 Q No, it says, "665," dash "673."
9 A Because this -- the notice would indicate Reference
10 No. 672.
11 Q Um-hum. So that appears to fall within that range
12 then?
13 A Um-hum.
14 Q Have you ever heard of a dummy return?
15 A Sometimes the SFR 150 is referred to as a dummy
16 return, only in that it's not a -- it's not a real
17 return, it's just a mechanical way to start the
18 process of assessing the tax through the SFR
19 program.
20 Q Why does a dummy return need to be generated to
21 proceed with assessing a tax?
22 A As I explained, the -- I'm not sure of the
23 mechanics, but the system will not allow a
24 subsequent tax assessment without a TC 150 on the
25 module, so that must be started for -- that must be
66
1 placed on the account first.
2 Q Does a dummy return refer to filing a Substitute
3 For Return to establish a TR 150 on an account to
4 make it appear as if a taxpayer had filed that
5 return, and that's why they call it a dummy return?
6 A Could you say that again?
7 MR. BERNHOFT: Could you read that
8 question back, please.
9 (Above-pending question read.)
10 THE WITNESS: It's nothing to make it
11 appear as though a taxpayer filed a return, it's
12 just the mechanics needed to start the process.
13 BY MR. BERNHOFT:
14 Q We took the deposition -- We took the deposition of
15 IRS Revenue Agent Jeffrey Palmer previously in this
16 case. That's a registered pseudonym. In other
17 words, it's a fake name. Do you know IRS Revenue
18 Agent Palmer?
19 A Yes.
20 Q He substantially stated in previous deposition
21 testimony that if a taxpayer did not file a return,
22 the IRS would trick the computer into thinking that
23 the taxpayer had filed a return so they could get a
24 TC 150 code on the transcript so they could assess
25 a tax. Do you know what he's talking about there?
67
1 A I would assume he's talking about the SFR process
2 of the dummy 150 that we were just discussing.
3 Q What does TC 148 stand for?
4 A I believe it can have a number of different
5 meanings.
6 Q What does TC 148-2 stand for?
7 A It indicates a tax protestor account.
8 Q What does TC 148 ISP mean?
9 A Basically the same thing. It's just on a
10 different -- a different way of coding it on
11 different forms, and I'm not sure which forms it's
12 coded that way on, but I have seen a reference
13 similar to that in the 6209 document.
14 Q Have you heard of bootleg procedures?
15 A Pardon?
16 Q Have you heard of bootleg procedures?
17 A No.
18 Q Steven Kram isn't a registered pseudonym, is it?
19 A No.
20 Q Okay. Makes me feel better. What does a TC 148-5
21 mean?
22 A I don't know.
23 Q Who imputes the codes TC 148 onto IMF transcripts?
24 A Onto transcripts or onto accounts?
25 Q Accounts.
68
1 A If it's an original return that's being processed
2 in the system, there's keypunch people, or it could
3 be from an electronically filed return. If it's
4 actions after the original return processing, then
5 it's a -- a terminal operator, a keypunch operator,
6 basically. Some employees have the capability. It
7 could be --
8 Q Who has authority to request that a TC 148 be
9 entered into an account?
10 A I don't know.
11 Q Any speculation on who might have that authority?
12 A No.
13 Q Who is the current Chief of the Illegal Tax
14 Protestor Unit for IRS in Milwaukee?
15 A The term tax protestor was eliminated with the last
16 tax law, and I'm not -- there's been a lot of
17 reorganization, and I'm not sure if there is
18 anything established, or who it is, or --
19 Q Have you talked to -- and I'm referring to a
20 registered pseudonym, but you know him as such --
21 Even if you know his real name, we should point out
22 you shouldn't give his real name, because that's
23 been determined to be a no-no until we file a
24 motion, so we'll call him Fictitious Revenue Agent
25 Palmer. Have you talked to Fictitious Revenue
69
1 Agent Palmer about this case?
2 A No.
3 Q Has Fictitious Agent Palmer ever mentioned anything
4 about this case to you?
5 A No.
6 Q How long have you known Fictitious Agent Palmer?
7 A I've never really worked closely with him, but I
8 have seen him in the building. And the closest
9 I've ever gotten to working with him, I think, was
10 with this case, which was very limited, just in him
11 coming down originally, and I think because I was
12 going to be out of the office, he delivered some of
13 the paperwork one day that I had completed but --
14 Q Fictitious Revenue Agent Palmer never spoke to you
15 regarding Robert Raymond or Robert Bernhoft?
16 A Just in the -- very limited when him and Attorney
17 Langer came down to ask if I would do this, and
18 like I say, he delivered a set of paperwork on it,
19 but, no, there were no discussions of what he was
20 doing or --
21 Q So Fictitious Agent Palmer accompanied Assistant
22 District Counsel Langer when they approached you
23 regarding this expert witness report?
24 A Right. They brought -- They gave me the report to
25 determine if I could respond to it or not.
70
1 Q Right. I don't mean to be difficult, but why
2 didn't you mention previously, when I asked you who
3 had first made contact with you, that Fictitious
4 Agent Palmer had accompanied Langer?
5 A Ed Langer called me on the phone, and then Jeff and
6 Ed brought it down.
7 MR. BERNHOFT: Could you mark that,
8 please.
9 (Exhibit No. 13 was marked.)
10 BY MR. BERNHOFT:
11 Q Okay. On the record. I'm going to very briefly
12 pursue the -- Mr. Bentson's assertion that there
13 was a problem with my Social Security number by
14 viewing my transcript, and your assertion that a
15 review of the account caused you to draw the
16 opposite conclusion, that he was incorrect. I'm
17 holding a document that's been marked Kram Exhibit
18 13, and this is an excerpt from Document 6209,
19 Section 13-26 to 27. And I am going to note two
20 things on here, and then I am going to hand the
21 document to the deponent.
22 I note that on ENMOD IMF output screen
23 display it has "Val," and "Val" has been numbered,
24 its field has been numbered with a 27, and then
25 when we flip the page over, and we go to Field 27,
71
1 and then we go to the code "1," it says, "Invalid
2 SSN."
3 And handing Exhibit 13 to the deponent,
4 can you tell me if that substantiates Bentson's
5 claim that there is a problem with Bernhoft's
6 Social Security number as used on the IMF
7 transcript?
8 A "1" says, "Invalid SSN Freeze has been released by
9 TC 290 or 300 or Scrambled SSN Indicator."
10 Q Could you repeat the question to the deponent.
11 (Above-pending question read.)
12 (Discussion off the record.)
13 THE WITNESS: I believe he asserts that
14 another person was using his Social Security number
15 and that it had not been corrected. And that seems
16 to be indicating that if there was a problem, it
17 was resolved, the invalid freeze was released.
18 BY MR. BERNHOFT:
19 Q That's your answer?
20 A Yes.
21 Q Okay. Do you know who Mimi Mendosa (phonetic) is?
22 A I recognize the name. I know her. I know the
23 division she works in. I don't know anything about
24 specifically her duties or things like that.
25 Q What division does she work in?
72
1 A Examination.
2 Q Are you aware that she's the AIMS Coordinator?
3 A Yes.
4 Q Would she know more about the coding on the IMF
5 transcripts than you do?
6 A I don't know. I don't know what her duties all
7 entail.
8 Q Are there other personnel at IRS in Milwaukee who
9 would know more about IMF transcripts than you do?
10 A I really don't know.
11 Q Is there anybody at IRS National who would know
12 more about the coding on IMF transcripts than you
13 do?
14 A I don't know.
15 Q If you had a problem or question with interpreting
16 an IMF, who would you go see or call?
17 A The -- I would call the Kansas City Service Center.
18 Q Who would you call there?
19 A There's like -- There's like a customer support
20 section.
21 Q And why would you call there?
22 A If I had a question, and couldn't find something in
23 the manual. Sometimes updates are done, and the
24 information is not provided to the field promptly.
25 Q So are there people at the Kansas City Service
73
1 Center who know more about the IMF transcripts than
2 you do?
3 A I'm not sure if I can say they know more or less,
4 but they are informed of updates faster than we
5 are, so there are times when specific items they're
6 made aware of sooner than we are.
7 Q Who is the ultimate authority on IMF transcripts at
8 IRS?
9 A I don't know.
10 MR. RAYMOND: Who trained you for your
11 job?
12 THE WITNESS: I had a couple courses
13 maybe 15 plus years ago, and a lot of it is just
14 experience and coworkers and --
15 MR. RAYMOND: Working together?
16 THE WITNESS: Just numerous sources.
17 BY MR. BERNHOFT:
18 Q Who taught those courses?
19 A Generally more experienced employees. I would have
20 no idea on names but --
21 Q You testified that you don't know particular people
22 who might know more than you do about the IMF
23 transcripts. Does anybody at IRS-Milwaukee in a
24 general sense know more than you do regarding IMF
25 transcripts?
74
1 A There's a lot of different sections, and people are
2 familiar with different sections possibly, but to
3 say as far as who overall is more knowledgeable
4 than other people, I don't feel I can judge that.
5 Q Are you the ultimate authority at IRS on IMF
6 transcripts in Milwaukee?
7 A I'm listed as a contact person for the area for
8 questions. So a lot of people come to me. Again,
9 I can't say that I can answer every question better
10 than anybody else.
11 Q I would still request an answer to my question,
12 which was, are you the ultimate authority at
13 IRS-Milwaukee regarding IMF transcripts?
14 A I don't know.
15 Q Are you an expert in the field of IMF transcript
16 interpretation?
17 A What's an expert?
18 Q I don't know. You're the expert witness. You tell
19 me.
20 MS. TRISSELL: I'll object to form.
21 MR. BERNHOFT: For my last question?
22 MS. TRISSELL: I object to form of the
23 pending question.
24 BY MR. BERNHOFT:
25 Q Then I would ask for an answer to my previous
75
1 question. Are you an expert on IMF transcript
2 interpretation?
3 MS. TRISSELL: And I object to the form.
4 MR. BERNHOFT: Of that question?
5 MS. TRISSELL: Yes.
6 BY MR. BERNHOFT:
7 Q I would ask you to answer the question subject to
8 the objection.
9 A I'm very knowledgeable on account transcripts,
10 complex transcripts. If -- Other people may call
11 me an expert. I don't know if I rate myself as an
12 expert.
13 Q Have you testified as an expert witness before in
14 any trial?
15 A No.
16 Q In your job are you administering regulations or
17 Treasury Orders prescribed or approved by the
18 Secretary of the Treasury?
19 A I'm not sure if I can say that -- that everything I
20 do can be -- that I can trace back to a specific
21 order, whatever, but all of our direction does come
22 down from -- from the layers above us.
23 Q And one of those layers above is the Secretary of
24 the Treasury?
25 A Yes.
76
1 Q Upon what do you base that assertion?
2 A It's my understanding that that's the head of our
3 agency.
4 Q Upon what do you base that assertion?
5 A My understanding of government.
6 Q One of the reasons Mr. Bentson was brought in as
7 defendants' expert witness is because the United
8 States has averred in its complaint, as an
9 essential element of its complaint, that Mr.
10 Raymond and I made false statements regarding the
11 scope and nature of the federal income taxation,
12 and some of Mr. Bentson's report goes to
13 determining whether those statements were false or
14 not. With that foundation, I am going to ask you a
15 series of questions.
16 What law imposes the 1.1-1 individual
17 income tax on Robert G. Bernhoft?
18 A You're looking for a specific law?
19 Q Yes.
20 A I don't know.
21 Q What law makes Bernhoft liable for the 1.1-1
22 individual income tax?
23 A Again if it's a specific law. I don't know.
24 Q What form does the law require Bernhoft to file to
25 pay the 1.1-1 individual income tax?
77
1 A The individual -- The individual income tax is paid
2 by the 1040 series form.
3 Q Where does the law prescribe that form?
4 A I don't know.
5 Q What is a tax protestor?
6 A I'm not sure what the agency definition used to be.
7 It was just a -- a judgment. I don't know.
8 MR. BERNHOFT: Off the record.
9 (Discussion off the record.)
10 MR. BERNHOFT: Okay. Back on the record,
11 please.
12 BY MR. BERNHOFT:
13 Q Are the Department of the Treasury and the IRS one
14 and the same entity?
15 A Say that again.
16 Q Are the Department of the Treasury and the IRS one
17 and the same entity?
18 A It's my understanding that the IRS is a part of the
19 Department of Treasury, so, no.
20 Q What is a true tax class?
21 A I'm not totally certain, but my understanding is
22 that on Nonmaster File, because all the tax classes
23 have to be 6, that that true tax class relates to
24 what it would have been on -- had it been on -- on
25 Master File. That's my understanding.
78
1 Q On IMF, you mean?
2 A Yes, IMF or BMF.
3 Q Are IRS employees who place information on IMF
4 accounts always directed to use Tax Class 6?
5 A No. Employees do not designate a tax class.
6 Q What does?
7 A The computer generates a tax class based on the
8 type of -- If you're working on the Individual
9 Master File, they would be -- the system would
10 automatically generate a 2.
11 Q When we talked previously about Bernhoft and
12 Raymond's IMF transcripts for 1994 as set forth in
13 the exhibits to Bentson's expert witness report,
14 you had indicated those were Tax Class 2. Would
15 that mean true Tax Class 2 or just Tax Class 2?
16 A The IMF only has a tax class, so it was Tax Class
17 2.
18 MR. BERNHOFT: Thank you. Could we go
19 off the record real quick.
20 (Discussion off the record.)
21 MR. BERNHOFT: Okay. Let's go back on,
22 please.
23 BY MR. BERNHOFT:
24 Q When you analyzed Mr. Bentson's expert witness
25 report, did you do an independent analysis of
79
1 Bernhoft and Raymond's 1994 IMF transcripts?
2 A An independent one of each account?
3 Q (Nods head.)
4 A Yes.
5 Q And do you have any notes that you took when you
6 were doing that independent analysis?
7 A No.
8 Q Did you take any notes whatsoever when you were
9 working with the IMF transcripts in Mr. Bentson's
10 report?
11 A No.
12 Q You took no notes, made no handwritten items, and
13 kept no files relating to your work on this expert
14 witness report?
15 A I did like a scratch copy of my report, but that
16 was -- that was destroyed once I did my final copy.
17 It was just a -- scratch notes to be put on the
18 word processor.
19 Q How was it destroyed?
20 A By shredding.
21 Q Did you receive any advice from anybody on the
22 substance of the expert witness report?
23 A No.
24 Q Did you ever have communication, verbal, written,
25 E-mail, or otherwise, with anybody at DOJ other
80
1 than Attorney Trissell regarding the expert witness
2 report?
3 A Just Bob Metcalf when she was out of the office.
4 Q Can you explain? I don't understand what you meant
5 there. "Bob Metcalf when she was at the office."
6 A Out of the office.
7 MS. TRISSELL: Out.
8 THE WITNESS: Out.
9 BY MR. BERNHOFT:
10 Q I see. And what were your conversations with Mr.
11 Metcalf?
12 A Actually I never -- I never -- I take -- I never
13 talked to him on the telephone, but he faxed me --
14 I think he faxed me the -- when this was going to
15 be. I can't -- I can't remember. But it was
16 basically just a -- I don't remember exactly what
17 it was.
18 MR. BERNHOFT: Just if I can note for the
19 record, if you could, Mr. Kram, if you could look
20 for any, you know, documents, faxes, E-mail copies,
21 whether on digital, you know, computer databases or
22 hard copy, any memorandum, any letters, any notes
23 that you took, anything received by you from
24 anyone, or sent by you to anyone regarding this
25 expert witness report. I'm making a formal request
81
1 to have all those materials presented whenever it's
2 convenient for the United States.
3 THE WITNESS: Outside of the report?
4 MR. BERNHOFT: Right, right, outside of
5 the report.
6 THE WITNESS: Okay.
7 MS. TRISSELL: You can get those to me.
8 If you find them.
9 BY MR. BERNHOFT:
10 Q What is your position on Mr. Bentson's expert
11 qualifications?
12 A I think some of the conclusions he's drawn and some
13 of his information is incorrect from my
14 understanding, so I -- He felt that his information
15 was better, and I feel my information is better,
16 and --
17 Q What is your position on his qualifications,
18 though?
19 A I feel I'm maybe more qualified just because I'm
20 with the Internal Revenue Service and have more
21 access to information, and have worked with it for
22 a number of years.
23 Q Are there any other men or women that you're aware
24 of that would be considered experts in the field of
25 IMF transcript interpretation?
82
1 A Outside of IRS, within IRS?
2 Q Inside, outside?
3 A I know of no one on the outside. Inside, that kind
4 of gets back to what we were talking about before
5 that I really -- people may have different
6 specialties within the transcripts, or whatever,
7 but I wouldn't want to venture an opinion.
8 Q Did you ever do any military service, Mr. Kram?
9 A No.
10 MR. BERNHOFT: Any cross?
11 MS. TRISSELL: No cross.
12 MR. BERNHOFT: No recross.
13 MS. TRISSELL: We'll read and sign.
14 MR. BENTSON: On the record. I was
15 going to tell you the name of an attorney that was
16 involved in the Kilpatric case in Denver and the
17 airline pilot in Denver. His name is Cohan,
18 C-O-H-A-N. He was the attorney on the Kilpatric
19 case -- He was the attorney for the Kilpatric case
20 in which I testified and the airline pilot whose
21 name I don't recall. Both cases were in Denver,
22 but different courts, but Bill Cohan was the
23 attorney. I said if I remember the name, I'd tell
24 you.
25 MR. BERNHOFT: Might be helpful in
83
1 getting the transcript. I think we're done.
2 (Proceedings concluded at 5:15 p.m.)
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
84
1 STATE OF WISCONSIN )
) SS:
2 COUNTY OF MILWAUKEE )
3
4
5 I, KATHLEEN E. CARTER, a Certified
6 Realtime Reporter, Registered Merit Reporter and Notary
7 Public in and for the State of Wisconsin, do hereby
8 certify that the above deposition of STEVEN C. KRAM was
9 recorded by me on the 12th day of February, 1999, and
10 reduced to writing under my personal direction.
11 I further certify that I am not a
12 relative or employee or attorney or counsel of any of
13 the parties, or a relative or employee of such attorney
14 or counsel, or financially interested directly or
15 indirectly in this action.
16 In witness whereof I have hereunder set
17 my hand and affixed my seal of office at Milwaukee,
18 Wisconsin, this 22nd day of February, 1999.
19
20
21
_________________________________
22 Notary Public
In and for the State of Wisconsin
23
24
My Commission Expires: March 18, 2001.
25
85
1 STATE OF WISCONSIN )
) SS:
2 COUNTY OF MILWAUKEE )
3
4 I, STEVEN C. KRAM, do hereby certify that
5 I have read the foregoing transcript of proceedings,
6 taken the 12th day of February, 1999, at Brown & Jones
7 Reporting, Inc., 312 East Wisconsin Avenue, Suite 608,
8 Milwaukee, Wisconsin, and the same is true and correct
9 except for the list of corrections noted on the annexed
10 page.
11 Dated at______________________________
12 this_________day of________________, 1999.
13
14
15
16 _____________________________
STEVEN C. KRAM
17
Subscribed and sworn to before me
18
this________day of_____________, 1999.
19
20
21 __________________________________
Notary Public
22
My commission expires:
23
24
25
86
1 CORRECTIONS
2 PAGE NO. LINE NO. DESCRIPTION
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
|
brad.barnhill@mindspring.comHomeSite v2.5 Last Updated: Thursday, March 04, 1999 10:02:17 PM |