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Oversharing on Social Media Reaches the Tax Court

Posted on Sep. 3, 2020

Today guest blogger James Creech brings us a cautionary tale of social media undermining a taxpayer’s credibility. After reading this post, practitioners may want to read this article by Marie V. Lim of the ABA Section of Litigation, on how to use social media at trial.

As James notes, social media also brings up ethical concerns for lawyers. In addition to the issues discussed below, attorneys must be careful as they investigate their opponents. The issue is not so much “who” can be investigated but “how”. Under Rule 8.4 it is professional misconduct for a lawyer to engage in conduct involving dishonesty, deceit, or misrepresentation. If an opponent’s social media account is not public, how can one go about accessing the incriminating posts that are certain to exist? Before engaging in any schemes, practitioners would be well advised to research the applicable ethics opinions. The Philadelphia Bar Association, for example, has advised that attempting to “friend” a witness to gain access to information on Facebook or Myspace is pretextual and violates Rule 8.4(c), even if there is no fake name or falsehood used. However, the State Bar of Oregon came out the other way. Christine

Most of us know social media is a double-edged sword. It allows us to share events and thoughts in real time regardless of the substance. Sometimes those thoughts are genius and inspire others, other times those thoughts are inane, banal, or outright stupid. Occasionally these posts cost (or make) people real money. One of these situations where social media posts perhaps cost a taxpayer real money is the recently decided Tax Court case of Brzyski v. Commissioner, T.C. Summary Opinion 2020-25 released on August 27.

The facts of Brzyski are complicated and highly factual. Mr. Brzyski claimed the children of his significant other as qualifying children for the dependency exemption. The IRS disallowed the dependency exemption because Mr. Brzyski was not formally married to the children’s mother and without a marriage the children cannot be qualifying stepchildren. Mr. Brzyski claims that while not formally married in his home state of California, one night while he and his significant other were in Missouri they crossed the border into Kansas for dinner and declared themselves married. Thus, according to Mr. Brzyski, they were legally common-law married in Kansas and the children met the relationship test. To provide support for this Mr. Brzyski testified to this effect and produced affidavits from family members to the same effect.

While the facts might be unusual, even more unusual is how the taxpayer’s version of events was discredited. At trial social media posts were entered into evidence (presumably by Chief Counsel) that showed Mr. Brzyski referring to his significant other as his fiancée after the date of their alleged common law marriage. This plus a host of other inconsistencies (which were probably enough to carry the day for the respondent without mention of the social media post) were enough to satisfy Judge Copeland that the testimony regarding a Kansas common law marriage was unreliable and not enough for the taxpayer to carry their burden of proof. As a result the dependency deduction was denied.

From a quick search it appears that Brzyski may be the first Tax Court decision in which social media posts are cited to as direct evidence of a taxpayer’s lack of credibility. It also appears to be the first decision where the social media posts introduced into evidence could have only come from Chief Counsel’s office.

To get a sense of just how novel this is, it is worth looking at the totality of social media in Tax Court decisions. Tax Court decisions do not cite to social media frequently. Excluding Brzyski, a keyword search using the Tax Court’s website for even a single mention of “social media” returns six cases. A search using the term “Facebook” as a proxy for social media returns eight cases and of those eight cases two of the “Facebook” cases refer to Facebook’s Taxpayer Bill of Rights litigation. This leaves a grand total of twelve cases that cite to social media.

Of the twelve cases that remain for social media, nine of the cases involve the petitioner introducing social media as evidence of a for profit enterprise or as part of a business plan, one case discusses the business expense of a computer that was also used for work and personal social media usage, one opinion from Judge Holmes mentions the company Facebook to set the stage for discussing a petitioner’s career in technology, and one case memorializes a laundry list of the taxpayer’s grievances including the notion that social media websites were conspiring against his vaporizer business.

One common thread that Brzyski shares with the other nine relevant cases is that each of the social media cases is about mindset. Posts on social media are generally inadmissible hearsay if offered by the declarant for the truth of the matter asserted. A part time horse breeder cannot claim a Facebook post stating “We are now a legitimate stable conducting a for profit enterprise” is substantive evidence in his favor for purposes of section 183.

However, as an indicator of mindset social media posts can be useful. The low threshold for publication and our cultural habit of oversharing and introspection mean that they are probably a fairly accurate indicator of the declarant’s mental state. (See FRE 803(3)). One could also imagine social media posts that might plausibly qualify for the  excited utterance exception to the hearsay rules under the Federal Rules of Evidence Rule 803(2). Present sense impression is a third exception that might apply. (FRE 803(1)). As a result, social media posts have been useful in the past for practitioners to reconstruct the mindset of a client. For instance, one could learn a lot from the social media posts of a struggling small business owner who has lost money four straight years.

Now that the Tax Court is on the record giving more weight to a spontaneous social media post that hurts the taxpayer than to the taxpayer’s actual testimony at trial, practitioners should beware that these posts cut both ways. As a result of Brzyski, due diligence as to a client’s social media should be conducted if the case relies heavily on the petitioner’s credibly on the witness stand. However, this potentially opens up the Pandora’s box of what to do if practitioner learns prior to trial that the petitioner’s version of events does not match the story social media tells. This can lead to conflicts between Model Rule 3.3’s Duty of Candor Towards the Tribunal vs Model Rule 1.6’s Duty of Confidentiality. As with many social media issues today, solving one problem invariably leads to another.

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