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                                                      No. 95-55609
                                                      D.C. No.
                                                      CV 93-5736 SVW

Appeal from the United States District Court
for the Central District of California
Stephen V. Wilson, District Judge, Presiding

Argued and Submitted
August 7, 1996--Pasadena, California

Filed November 7, 1996

Before: Stephen Reinhardt, Cynthia Holcomb Hall, and
Edward Leavy, Circuit Judges.

Opinion by Judge Reinhardt







Joe Alfred Izen, Jr., Bellaire, Texas, for the respondent-

John A. Dudeck, Jr., Tax Division, United States Department
of Justice, Washington, D.C., for the petitioner-appellee.




REINHARDT, Circuit Judge:

Loren C. Troescher appeals an order of the district court
compelling him to appear before the Internal Revenue Service
to answer questions and produce documents.1 The IRS issued
1 The parties disagree as to whether we have jurisdiction to hear this
appeal. Indeed, the complex problem of jurisdiction presents the sole sub-
stantial disagreement between Troescher and the government. Accord-
ingly, we conclude that this case is appropriate for application of the
doctrine of hypothetical jurisdiction. See Wong v. Ilchert, 998 F.2d 661,
662 (9th Cir. 1993) (assuming without deciding the existence of subject
matter jurisdiction where the "difficulty of resolving [the jurisdictional
question] is far greater than the difficulty of resolving [the merits of the
Several opinions in this circuit have set out requirements for the proper
application of the doctrine. See, e.g., In re Grand Jury Subpoena Issued
to Bailin, 51 F.3d 203, 206 (9th Cir. 1995) (holding that the doctrine
requires that "(1) the jurisdictional question must be difficult; (2) the mer-
its of the appeal must be insubstantial; (3) the appeal must be resolved
against the party asserting jurisdiction; and (4) undertaking a resolution on
the merits as opposed to dismissing for lack of jurisdiction must not affect
the outcome"), cert. denied, 116 S. Ct. 472 (1995). The issue here is dif-
ferent from that in our other cases, because here the parties do not disagree
about the merits. Indeed, the reason the case is before us now is that the
government argued a meritless position before the district court which it
now confesses was in error. Thus, the resolution of the merits is in accor-
dance with the position of both parties, and the third of the usual require-
ments is therefore inapplicable. As to the fourth requirement, whether we
dismiss for lack of jurisdiction or reverse on the merits, the outcome of
this case will not change, given the government's confession of error. In
either event the parties will return to the district court and proceed in
accordance with traditional Fifth Amendment doctrine. The other custom-
ary requirements are readily met. We should note, incidentally, that the
requirements we frequently apply when invoking the doctrine are not man-
dated by historical practice. See Philbrook v. Glodgett, 421 U.S. 707, 722
(1975) (resolving the merits in favor of the party asserting jurisdiction);
Secretary of the Navy v. Avrech, 418 U.S. 676, 677-78 (1974) (reversing
the decision of the court of appeals on the merits without deciding the
"difficult jurisdictional issue" presented by the case, concluding that "even
the most diligent and zealous advocate could find his ardor somewhat
dampened in arguing a jurisdictional issue where the decision on the mer-
its is foreordained"). Thus, our requirements may in some instances be


the summons after Troescher apparently failed to file income
tax returns for several years. Troescher argues that the district
court erred in rejecting his assertion of the Fifth Amend-
ment's privilege against self-incrimination. We agree, and
therefore vacate the order and remand to the district court for
reconsideration in light of this opinion.2 


The general standard for a valid assertion of the Fifth
Amendment privilege against self-incrimination is well estab-
lished. In order properly to assert the privilege,"respondents
must show that their testimony would `support a conviction
under a federal criminal statute' or `furnish a link in the chain
of evidence needed to prosecute the claimant for a federal
crime.' " United States v. Rendahl, 746 F.2d 553, 555 (9th
Cir. 1984) (quoting Hoffman v. United States, 341 U.S. 479,
486 (1951). Indeed, it is enough if the responses would
"merely `provide a lead or clue' to evidence having a ten-
dency to incriminate." United States v. Neff, 615 F.2d 1235,
1239 (9th Cir.)(quoting Hashagen v. United States, 283 F.2d
345, 348 (9th Cir. 1960)), cert. denied, 447 U.S. 925 (1980).
The privilege is validly invoked "only where there are `sub-
stantial hazards of self-incrimination' that are`real and appre-
ciable,' not merely `imaginary and unsubstantial.' " Rendahl,
746 F.2d at 555 (quoting Neff, 615 F.2d at 1239). Finally, "the
existence of such a hazard is generally determined from
`examination of the questions, their setting, and the peculiari-
ties of the case.' " Id. (quoting Neff, 615 F.2d at 1240).
2 The government also argues that Troescher was precluded by waiver
and res judicata from raising his Fifth Amendment claim with respect to
the production of documents for the first time in the contempt proceeding.
Because the facts in United States v. Rendahl, 746 F.2d 553 (9th Cir.
1984), are indistinguishable from those in the case before us, we reject the
government's argument, concluding as we did in Rendahl, Troescher's
"first opportunity to litigate properly [his ] Fifth Amendment claims was
at the contempt hearing." Id. at 555.


The district court in this case initially analyzed Troescher's
privilege claims properly, under the standard set forth above.
The court ordered Troescher to file a statement under seal to
determine whether he was justified in refusing to answer each
question posed by the IRS and in refusing to produce each
document requested under the subject summons. The court
then held a hearing and conducted an in camera review of
Troescher's statement and the IRS information requests, con-
cluding in the end that "respondent is faced with substantial
hazards of self-incrimination that are real and appreciable not
merely imaginary and unsubstantial."

Despite that finding, however, the court "reluctantly"
issued its order compelling Troescher to answer the questions
and produce the documents demanded in the IRS summons.
In the face of appellant's otherwise valid claims of privilege,
the court was persuaded by the government's argument that
binding Ninth Circuit precedent created a "Tax-Crime
Exception" to the Fifth Amendment. It found that under
Fuller v. United States, 786 F.2d 1437 (9th Cir. 1986), and
Brooks v. Hilton Casinos, Inc., 959 F.2d 757 (9th Cir.), cert.
denied, 506 U.S. 906 (1992), "the Fifth Amendment just does
not apply when the taxpayer fears prosecution for a tax
crime." Because Troescher demonstrated a real and apprecia-
ble fear of prosecution for tax crimes only, and could make
no showing regarding non-tax crime prosecution, the court
rejected his Fifth Amendment claims. The court felt bound by
decisions it concluded were unjustifiable and "simply wrong,"
and asked that we correct what he rightly viewed to be in

[1] On appeal, the government appears to have discovered
that the district judge's instincts were correct. It now con-
fesses error and argues that "[t]he self-incrimination clause of
the Fifth Amendment applies in all instances where a taxpayer
has reasonable cause to apprehend criminal prosecution,
whether tax related or not." We agree. There is no general
"Tax-Crime Exception" to the Fifth Amendment, and Troes-


cher's Fifth Amendment claims were not defeated here simply
because he feared prosecution for tax crimes.3

It is easy to understand why the district judge was misled
by some of our cases. Our opinions in Fuller and Brooks do
contain language that suggests a distinction between tax
crimes and non-tax crimes under Fifth Amendment analy-
sis. In Fuller we stated, "The fifth amendment's self-
incrimination clause provides no right to taxpayers to refuse
to provide the IRS with financial information unless they
make some showing that there is an appreciable possibility of
prosecution for a non-tax crime." 786 F.2d at 1439. The
actual holding in Fuller, however, and in every case it cites
for support of that holding, is merely that the privilege is not
validly invoked by asserting only vague, blanket, or general-
ized claims of self-incrimination. In Fuller and the cases it
cites, we rejected Fifth Amendment claims where the tax-
payer did not make any showing of an "appreciable possibil-
ity of prosecution," as required by traditional self-
incrimination analysis. Id. Specifically in Fuller, we upheld a
penalty assessed against three taxpayers for filing frivolous
returns within the meaning of 26 U.S.C. S 6702, where each
raised only "spurious" Fifth Amendment objections on their
return forms. Any language suggesting a broad exemption
from the Fifth Amendment in tax cases or that there is a con-
stitutional distinction between tax and non-tax crimes is
merely dictum.

The unfortunate dictum in Fuller was repeated in Brooks,
where on the basis of Fuller we volunteered that "the fifth
amendment's self-incrimination clause does not give taxpay-
ers a right to withhold financial information from the IRS
unless they can show an appreciable possibility of prosecution
3 We need not consider how or in what manner the Fifth Amendment
may be invoked as a defense to a prosecution for failure to file tax returns.
See, e.g., United States v. Sullivan, 274 U.S. 259, 263-64 (1927); Rendahl,
746 F.2d at 556.


for a non-tax crime." 959 F.2d at 767 (emphasis in the origi-
nal). Once again, however, the sweeping language suggesting
a constitutional distinction between tax and non-tax crimes is
simply dictum. In Brooks, discovery sanctions were imposed
against a plaintiff who sued his employer and then attempted
to avoid discovery by relying on the Fifth Amendment. We
upheld the sanctions stating that "Plaintiffs who voluntarily
come into court and seek economic damages must be pre-
pared to prove their economic loss: `The scales of justice
would hardly remain equal . . . if a party can assert a claim
against another and then be able to block all discovery
attempts against him by asserting a Fifth Amendment privi-
lege to any interrogation whatsoever upon his claim.' " 959
F.2d at 768 (quoting Lyons v. Johnson, 415 F.2d 540, 542 (9th
Cir. 1969), cert. denied, 397 U.S. 1027 (1970)). Thus, the
unnecessarily broad language of Brooks regarding a taxpay-
er's right to withhold financial information from the IRS is
clearly dictum and, like in Fuller, involves a question not
before the court.

[2] To read the Fuller and Brooks dicta as creating a gen-
eral "Tax-Crime Exception" to the Fifth Amendment would
render the cases inconsistent with the opinions of this court
that have actually considered the issue before us. The caselaw
in this circuit is clear that the Fifth Amendment may be val-
idly invoked when the taxpayer fears prosecution for tax
crimes. See, e.g., United States v. Bodwell, 66 F.3d 1000,
1001 (9th Cir. 1995) (holding that "[a] reasonable belief that
information concerning income or assets, such as that sought
in the summons here, might be used to establish criminal fail-
ure to file a tax return can support a claim of Fifth Amend-
ment privilege."); Rendahl, 746 F.2d at 555-56 (failure to file
tax return); see also United States v. Turk, 722 F.2d 1439,
1440 (9th Cir. 1983) (failure to file tax return), cert. denied,
469 U.S. 818 (1984); United States v. Tsui, 646 F.2d 365, 367
(9th Cir. 1981) (income tax evasion), cert. denied, 455 U.S.
991 (1982); United States v. Helina, 549 F.2d 713, 716 (9th
Cir. 1977) (income tax evasion and willful filing of a false


return); Federal Deposit Ins. Co. v. Sovereign State Capital,
Inc., 557 F.2d 683, 686 (9th Cir. 1977) (tax fraud). Further,
such a sweeping exception would be inconsistent with the law
in other circuits. See, e.g., United States v. Argomaniz, 925
F.2d 1349, 1353 (11th Cir. 1991); Estate of Fisher v. C.I.R.,
905 F.2d 645, 648-49 (2nd Cir. 1990); United States v. Clark,
847 F.2d 1467, 1474 (10th Cir. 1988).


Accordingly, because we conclude -- in light of the law of
this circuit, and in light of the government's confession of
error on appeal -- that there is no "Tax-Crime Exception" to
the Fifth Amendment, we vacate the order of the district court
and remand for further proceedings so that it may dispose of
the matter before it in accordance with the law that governs
the invocation of the Fifth Amendment.


 the end