## Facts

- Mary Kay Ash, founder and principal shareholder of Mary Kay Cosmetics, Inc., exchanged shares in 1985 for securities of other entities within the same corporate group.
- The IRS issued a notice of deficiency for 1985, asserting Ash underreported income.
- In 1989, the IRS opened a broader investigation into Ash’s 1985 return and returns of related Mary Kay entities.
- In September and October 1989, the IRS issued I.R.C. § 7602 administrative summonses to related corporate entities and to the group’s third-party accounting firm seeking records concerning Ash and related entities.
- In December 1989, Ash petitioned the U.S. Tax Court for redetermination of the 1985 deficiency.
- In 1990, while the Tax Court deficiency case was pending, the IRS issued another § 7602 summons to the Mary Kay group’s bankers for additional financial records.
- Ash moved in the Tax Court for a protective order to (i) stop the IRS from using third-party summonses after the petition was filed and (ii) bar the IRS from accessing, reviewing, or using summons-derived materials in the Tax Court case.

## Issues

1. Whether the IRS may continue to use I.R.C. § 7602 administrative summonses, including third-party summonses, to obtain information relating to a tax year already in a pending Tax Court deficiency case.
2. Whether the Tax Court should issue a protective order barring the IRS from accessing, reviewing, or using summons-derived materials on the theory that post-petition summonses improperly circumvent Tax Court discovery rules.

## Decision

- The Tax Court denied Ash’s motion for a protective order.
- The court held there is no categorical rule that filing a Tax Court petition extinguishes the IRS’s § 7602 summons authority for the year in dispute.
- The court emphasized that post-petition summons use is subject to functional limits and judicial scrutiny when it is used primarily to obtain evidence for the pending case in a way that would bypass court-supervised discovery.
- On the record presented, a blanket prohibition on access to or use of summons-derived information was not warranted.

## Legal Principles

- The IRS’s I.R.C. § 7602 summons power may continue after a deficiency petition is filed, but its exercise may be constrained when the summons is used chiefly to develop evidence for the pending Tax Court litigation rather than for legitimate investigative purposes.
- Tax Court discovery in a deficiency case is governed by the Tax Court Rules, and the IRS may not use administrative summonses as a substitute for, or end-run around, court-supervised discovery.
- The Tax Court has supervisory authority to regulate the use of summons-derived information in the pending case and may impose remedies (including restrictions or exclusion) if the summons process is abused.
- The court limited earlier, more permissive approaches associated with prior Tax Court precedent by clarifying that post-petition summons use and the litigation use of summons-derived material require careful, purpose-based scrutiny.

## Conclusion

The Tax Court refused to bar the IRS from using post-petition administrative summonses outright, holding that § 7602 remains available after a petition is filed, while confirming that the court can restrict litigation use of summons-derived information when summonses function as a means to bypass Tax Court discovery oversight.


Ash v. Commissioner, 96 T.C. 459 (1991)