## Facts

- William and Frieda Duffey petitioned the U.S. Tax Court challenging asserted income tax deficiencies and civil fraud additions.
- The Commissioner alleged substantial unreported income and use of trusts to hold assets purportedly acquired with that income.
- The Duffeys’ attorney, G. Alohawiwoole Altman, had (1) prepared their prior tax returns and (2) served as attorney for the trusts holding the assets.
- The Commissioner moved to disqualify Altman as trial counsel, stating an intent to call him to testify about what the Duffeys disclosed or withheld from him as return preparer and trust counsel and whether they misrepresented asset sources and trust purposes.
- The Duffeys opposed disqualification, arguing hardship because Altman knew their finances and trust structure, represented them without fee, and they lacked funds for replacement counsel; they also had separate co-counsel.

## Issues

1. Whether the taxpayers’ counsel was likely to be a necessary witness at trial on relevant, material matters not obtainable from another source with comparable effectiveness, requiring disqualification under the lawyer-witness rule.
2. Whether any “substantial hardship” exception permitted counsel to continue as trial advocate despite being a necessary witness.

## Decision

- The Tax Court granted the Commissioner’s motion and barred Altman from serving as trial counsel.
- The court found Altman was likely a necessary witness because his testimony concerned disputed, material facts central to the fraud allegations, including alleged concealment or misrepresentation to him in his professional capacities.
- The court rejected the hardship argument, concluding the asserted difficulties did not outweigh the policy against combining advocacy and necessary witness testimony, particularly given the presence of co-counsel.
- The ruling addressed disqualification from the trial advocacy role and did not decide broader questions about counsel’s pretrial assistance.

## Legal Principles

- An attorney generally may not act as trial advocate when the attorney is likely to be a necessary witness, subject to limited exceptions.
- A “necessary witness” determination turns on whether the attorney’s testimony is relevant and material and cannot be obtained from other sources with comparable effectiveness.
- The prohibition applies with special force when the anticipated testimony is contested and bears directly on core issues (such as intent and concealment supporting a civil fraud theory).
- A hardship-based exception requires more than client preference, financial difficulty, or the attorney’s familiarity with the facts; the court may still require disqualification to protect the integrity of the fact-finding process.

## Conclusion

The Tax Court disqualified the taxpayers’ attorney from serving as trial counsel because his unique involvement in preparing returns and structuring asset-holding trusts made him a likely necessary witness on disputed facts material to the Commissioner’s fraud case, and the claimed client hardship did not justify an exception.


Duffey v. Commissioner, 91 T.C. 81 (1988)