United States Court of Appeals

Fifth Circuit



## FILED

February 16, 2005

Charles R. Fulbruge III

Clerk 

## In the 

# United States Court of Appeals

for the Fifth Circuit

_______________



### m 04-60507

Summary Calendar

_______________



### G ARY 

### L EE 

### C OLVIN



### ,

Petitioner-Appellant,

VERSUS



### C OMMISSIONER OF 

### I NTERNAL 

### R EVENUE



### ,

Respondent Appellee.

_________________________

Appeal from the United States Tax Court



### m 11412-01

_________________________

Before D AVIS , S MITH and

D ENNIS , Circuit Judges.

J ERRY E. S MITH , Circuit Judge: * Petitioner Gary Lee Colvin appeals a decision of the United States Tax Court, which

upheld the Internal Revenue Service’s findings

of deficiencies in the tax reported on certain of

his returns. Finding no error, we affirm.

I.

Colvin lived in a condominium develo pment

during t he t ax years in question. It had 128

units were grouped into two “phases.” Colvin * Pursuant to 5 TH C IR

. R. 47.5, the court has

determined that this opinion s hould not be published and is not precedent except under the limited

circumstances set forth in 5 TH C IR . R. 47.5.4.2

resided in Phase I.

Colvin perceived irregularities in the homeowners association’s adopti on of a new govern ing document that he believed favored

Phase II owners over P hase I owners. He

claimed that when he approached the association’s board of directors to address his grievances, he was refused an opportuni ty to speak

and was harassed a nd threatened, and the

board refused to hand over any financial information related to the maintenance of Phase II.

Consequently, he filed several lawsuits against

the association, for which he incurred legal expenses in 1997 and 1998.

Colvin’s first lawsuit alleged fraud, suppression of facts, negligent misrepresentation,

libel, slander, abuse of process, and civil rights

abuses. He ultimately voluntarily dismissed

that suit and filed another against the association seeking specific performance reg arding

maintenance a nd repairs, declaratory relief as

to the validity of the covenants, conditions and

restrictions, and an injunction to restrai n the

association from making certain water and

sewage charges. The trial court denied his

claim for specific performance but ruled in his

favor with regard to finding certain of the

association’s covenants, c o nditions, and restrictions invalid.

Colvin is employed as a network engineer

and reported wages on his tax returns from his

employment wi t h Daou Systems in 1997 and

Network Computing Device Inc. in 1997 and

1998. He also attached to his tax returns for

those years Sc hedules C, Profit or Loss from

Business, for “Colvin Busines s Services II.”

The Schedules C reported los ses for both

years (with zero gross receipts for 1 998) and

deduct i ons for legal and professional service

expenses, including expenses related to the litigation described above.

Some of the legal expenses Colvin deducted

related to the litigation against the association,

and others related to a suit in which he sought

to recover wages from a former e mployer.

Colvin’s mother, in preparing his returns, tried

to allocate the various legal expenses t o the

suit against the employer and the litigation

ag ainst the association. But, because the

billing records from the attorney did not adequately descri

b e the services performed, she

was unable to allocate the expenses.

On June 21, 2001, the Commi ssioner sent

Colvin a notice o f deficiency stating that he

owed $1,918 for the 1997 tax year and $1,072

for the 1998 tax year. According to the notice, C o lvin was not entitled to deduct any

legal expenses in 1997 or $6,435 of the claimed legal expenses in 1998, because he had failed to establish that he had incurred t hose expenses for ordinary and necessary business

purposes.

In July 2001, Co lvin mailed amended returns for the tax years in question and a check

for $64. The Commissioner considered the

submission to be an offer in compromise and

refused to accept it. Colvin filed a petition in

the Tax Court seeking redetermination of the

defici encies and challenging the Commissioner’s refusal to accept his amended returns.

The court rejected all of Colvin’s claims an d

affirmed the deficiencies.

II.

Colvin argues that the Commiss io ner

abused his discretion in not acce p ting the

amended return. We disagree, because although the Commissioner has administratively

permitted their use, the filing of amended

returns is not a matter of right; there is no3

statutory provision expressly authorizing them

to be filed. 1 The acceptance of amended

returns is a matter of the Co mmissioner’s

discret ion. 2 Moreover, even if the Commissioner had a legal duty to accept the amended

return, it would h ave no impact on the deficiencies upheld by the Tax Court, because they

were issued before Colvin attempted to submit

his amended return, and ame n ded returns do

not vitiate deficiencies that have already been

issued. 3 III.

Colvin challenges the Tax Court’s finding

that the legal expenses he incurred in his litigation against the homeowners association were

not deductible under Internal Revenue Code §

212, which provides:

In the case of an individual, there shall be

allowed as a deduction all the ordinary and

necessary expenses paid or incurred during

the taxable year 

### SS

(1) for the producti on or collection of

income;

(2) for the management, conservation or

m a intenance of property held for the

production of income; or

(3) inconnection with the determination, collection or refund of any tax.

A taxpayer may not, under § 212, deduct legal

fees that are personal expenses. I.R.C.

§ 262(a). 4 Under United States v. Gilmore

, 372 U.S. 39, 49 (1963), we look to the origin

of the claim to determine whether the purpose 1 Bara dacco v. Commissioner , 464 U.S. 386,

393 (1984) (“[T]he Internal Revenue Code does

not explicitly provide either for a taxpayer’s filing,

or for t he Commissioner’s acceptance, of an

amended r eturn; instead, an amended return is a

creature of administrative origin and grace.”);

Evans Cooperage Co. v. United States , 712 F.2d

199, 204 (5th Cir. 1983) (“Neithe r the Internal

Revenue Code nor the Treasury Regulations make

a ny provision for the acceptance of an amen ded

return in place of the o r iginal return previously

filed.”).

2 Hillsboro Nat’l Bank v. Commissione r , 460

U.S. 370, 380 n.10 (1983) (stating that acceptance

of amended returns is “within the discretion of the

Commis sioner”); J

ones v. Commissioner

, 338 F.3d

463, 466 (5th Cir. 2003) (“The IRS has discretion

to accept or reject an amended return.”); Dover

Corp. & Subsidiaries v. Commissioner , 148 F.3d

70, 72-73 (2d Cir. 1998) (“There is simply no

statutory provision

a uthorizing the filing of

amended tax returns, and while the IRS has, as a

matter of internal administration, recognized and

accep ted such returns for limited purposes, their

treatment has not been elevated beyond a matter of

internal discretion.”) (internal citations omitted).

3 See Koch v. Alexander

, 561 F.2d 1115, 1117

(4th Cir. 1977); McCabe v. Commissioner

, 46

T.C.M. (CCH) 390, 391 (1983) (stating that the

filing of “[a]n amended return does not

. . . change

(continued...) 3 (...continued)

an assessment that has been made or vit i ate a notice of deficiency on which the jurisdiction of [the

Tax] Court is based.”); M iskovsky v. United

States

, 414 F.2d 954, 956 (3d Cir. 1969) (“[I]t

would be utterly disruptive of the administration of

the tax laws if a taxpayer could disregard h is return and automatically change an assessment based

thereon by making an amended return in his favor

long afte r the expiration of the time for filing the

original return.”)

4 According to § 262(a), “[e]xcept as otherwise

expressly provided in this chapter, no deduction

shall be allowed for personal, living or family

expenses.”4

of litigation expenses was personal or for profit. 5 We review the Tax Court’s determination

of the qu e stion of profit motive for clear

error. 6

As noted by the Tax Court, Colvin is plainly incorrect in asserting that his legal expenses

in suing the association are deductible under §

212 based on the fact that the consequence of

a successful suit would be the pro duction of

taxable income or would assist in determining

his tax liabilit

y 

### SS such a proposi ti on was

ou t rightly rejected in G ilmore

. 7 The Tax

Court did not commit clear error in determini ng t hat the origin of the lawsuit against the

association was personal in nature, given that

it was Colvin’s primary residence and that his

stated purpose behind the first lawsuit was “to

stop the harassment.” Moreover, there was

substantial e vidence in the record indicating

that the motivation for the suit was his anger

over the failure of the association properly to

manage, conserve, and maintain the condominium property that he used for his personal residence, expenses that the regulations relating to § 212 explicitly reference as being nondeductible.

IV.

Colvin asserts that the Commissi oner improperly denied him deductions for legal costs

that he assumed in lawsuits ag ainst Daou

Systems for unpaid wages. As noted below,

however, Colvin

did not adequately address

the nature or amount of these expenses to the

Tax Court; although the Comm i ssioner’s

written submissions contended that these

deductions were in fact allowed 

### S S albeit converted from Schedule C to Schedule A deductions 

### SS

Colvin’s submissions before the

Tax Court only ad dressed the issue of his

lawsuits against the homeowners association. 8

It may be that Colvin was entit led to deduct

the legal expenses he incurr e d in his lawsuit

against Daou Systems, but we decline to evaluate the veracity of this claim, because the

issue was not adequately raised and presented

in the Tax Court. 9

5 “[T]he origin and character of the claim with

res pect to which an expense was incurred, rather

than its potential consequences upon the fortunes of

the taxpayer, is the controll ing basic test . . . .”

Gilmore

, 372 U.S. at 49. S ee also Srivastava v.

Commissioner

, 220 F.3d 353, 357 (5th Cir. 2000).

6 Ogden v. Commissione r

, 244 F.3d 970, 971

(5th Cir. 2001) (“We review for clear error the tax

court’s profit motive inquiry.”) (internal citations

omitted).

7 See Gilmore

, 372 U.S. at 48 (“The principle

we derive

. . . is that the characterization, as ‘business’ or ‘personal,’ of the litigation costs of resisting a claim depends on whether or not the claim

arises in connection with the taxpayer’s profitseeking activities. It does not depend on the c onsequences that might result

. . . .”) (emphasis added). 8 As stat ed by the Tax Court, “Although petitioner might be entitled to deduct legal expenses incurred in connection with his former employment,

he has identified neither the amount nor the nature

of those expenditures.” Colvin claims that he did

raise the issue in a brief that is not available in the

record on appea l, but the language he quotes

merely states t ha t such legal expenses were incurred and summarily co n cludes that they should

be deductible, witho ut indicating their nature or

amount. By contrast, the Commissioner’s submissions, included in the record, specifically indicate

that $1,217 and $1,787 were allowed as deductions

for legal expenses in the lawsuit against Daou Systems in tax years 1997 and 1998, respectively.

9 See, e.g., Nissho-Iwai Am. Corp v. Kline

, 845

F.2d 1300, 130 7 (5th Cir. 1998); L ittle v. Liquid

(continued...)5

AFFIRMED.

9 (...continued)

Air Corp., 37 F.3d 1069, 1071 n. 1 (5th Cir. 1994)

(en banc).