The chain of events leading up to the Supreme Court case U. S. v Clarke included summonses issued by the IRS to four people associated with Dynamo Holdings, L.P. for evidence and documents related to Dynamo’s tax liability for 2005-2007. Large interest expenses reported in those years were in question. Dynamo had agreed to two year-long extensions of the usual 3-year limitation period for assessing tax liability.

When the four individuals failed to comply with the summonses issued in September and October 2010, the IRS pursued the issue in District Court in April 2011 to enforce the summons under United States Code Section 7602(a), which gives the Secretary the power to examine relevant or material information and to summon liable parties. Under Reisman v. Caplin, 375 U. S. 440, 449 (1964), the summons was challenged by respondents, attempting to question the responsible agents and claiming the IRS had questionable motives in issuing the summonses. The respondents held that the IRS issued the summonses to “punish Dynamo for refusing to a further extension of the applicable statute of limitations.” Additionally, the respondents claimed that the IRS decided to enforce the summonses following Dynamo filing suit in Tax Court in order to avoid the Tax Court’s limitations on discovery, thus gaining an unfair advantage. This request was deemed incorrect matter of law and was denied by the District Court because the respondents did not point to specifics that might raise interference of bad faith by the agents. The District Court held that respondents were speculating and that the Tax Court issue was incorrect matter of law because the proceedings had not begun yet at the time the summonses were issued. The Eleventh Circuit reversed the District Court’s denial, citing an abuse of discretion and holding that the Circuit precedent allowed them to carry out questioning of