The TaxProfBlog reports here:

The Supreme Court this morning issued its 7-2 opinion in favor of the taxpayers in Ballard v. Commissioner (and the companion Estate of Kanter v. Commissioner), holding that the Special Trial Judge’s report must be included in the record on appeal. Justice Ginsburg wrote the majority opinion; Justice Kennedy concurred; Chief Justice Rehnquist and Justice Thomas dissented.

The issue as framed by the Court:

We granted certiorari, 541 U. S. 1009 (2004), to resolve the question whether the Tax Court may exclude from the record on appeal Rule 183(b) reports submitted by special trial judges. We now reverse the decisions of the Seventh and Eleventh Circuits upholding the exclusion.

Excerpts from the opinion:

The Tax Court’s practice of not disclosing the special trial judge’s original report, and of obscuring the Tax Court judge’s mode of reviewing that report, impedes fully informed appellate review of the Tax Court’s decision. In directing the Tax Court judge to give “due regard” to the special trial judge’s credibility determinations and to “presum[e] . . . correct” the special trial judge’s factfindings, Rule 183(c) recognizes a well-founded, commonly accepted understanding: The officer who hears witnesses and sifts through evidence in the first instance will have a comprehensive view of the case that cannot be conveyed full strength by a paper record. . .

The idiosyncratic procedure the Commissioner describes and defends, although not the system of adjudication that Rule 183 currently creates, is one the Tax Court might some day adopt. Were the Tax Court to amend its Rules to express the changed character of the Tax Court judge’s review of special trial judge reports, that change would, of course, be subject to appellate review for consistency with the relevant federal statutes and due process.

From the New York Times article on the case:

The decision was a posthumous victory for a prominent tax lawyer . . . who along with two other men was found liable for a $30 million tax deficiency in a case that dated to the 1970’s. Although the decision did not overturn the tax court’s 1999 judgment . . the court will now have to disclose the basis for its adverse finding and will have to change its procedures for future cases.

(Previous post on the case is here.)

UPDATE: From Law.com: “Supreme Court: Tax Court Must Make Proceedings Public.