2002 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

2-13-2002

Visco v. Commissioner IRS

Precedential or Non-Precedential:

Docket 0-2049

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Recommended Citation

"Visco v. Commissioner IRS" (2002). 2002 Decisions. Paper 116.

http://digitalcommons.law.villanova.edu/thirdcircuit_2002/116
Filed February 13, 2002 

UNITED STATES COURT OF APPEALS 

FOR THE THIRD CIRCUIT 

No. 00-2049 

DIANA T. VISCO, 

 Petitioner 

v. 

COMMISSIONER OF INTERNAL REVENUE 

On Appeal From the United States Tax Court 

(No. 97-23336) 

Tax Court Judge: Honorable Robert P. Ruwe 

Submitted Under Third Circuit LAR 34.1(a) 

November 20, 2001 

Before: NYGAARD, MCKEE and GARTH, Circuit Judges . 

(Filed: February 13, 2002) 
OPINION OF THE COURT 

PER CURIAM: 

Diana Visco appeals the United States Tax Court's 

decision sustaining the Internal Revenue Service's ("IRS") 

determination of a deficiency in Visco's 1992 Federal 

income tax.1 We will affirm the Tax Court's order for the 

reasons that follow. 

I. 

Visco was employed as a reading specialist for the 

Cheltenham Township School District (the "district") until 

1989.2 Visco was asked not to return to work in June of 

1989, and in August 1989 was suspended. The district's 

school board (the "board") voted to dismiss Visco in 

November 1989. Visco appealed this decision. The Secretary 

of Education for the Commonwealth of Pennsylvania 

("Secretary") reversed the board's decision and ordered the 

district to reinstate Visco to the same or a comparable 

position and to award her back pay with interest for the 

years she was wrongfully dismissed. The board appealed, 

but the Secretary's order was affirmed by the 

Commonwealth Court of Pennsylvania on June 3, 1991.

Visco returned to employment at the district for the 1991- 

1992 school year, and was compensated for her work that 

year. She did not return to work after June 1992. 

In compliance with the Secretary's order, the district 

attempted to pay Visco her back pay for the 1989-90 and 

1990-91 school years. The district first issued two checks 

on February 25, 1992 representing salary for the two years, 

plus interest, less payroll deductions. Visco never cashed 

_________________________________________________________________ 

1. The Tax Court reversed the Commissioner's assessment of an addition 

to tax pursuant to 26 U.S.C. S 6651(a)(1). The IRS does not challenge 

this ruling. 

2. Unless otherwise indicated, the factual history is taken from the 

"Findings of Fact" in the Tax Court's opinion. See Visco v. CIR, No. 

23336-97, slip op. (U.S.Tax.Ct. March 7, 2000). 

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these checks, and they were later voided by the district. On 

December 21, 1992, the district again issued Visco two 

checks, again for the back pay for the two school years, 

plus interest, less payroll deductions. These checks, along 

with a third for reimbursement for health benefits Visco 

had not received, were delivered by courier to Visco on 

December 28, 1992. She took the checks from the courier, 

telephoned the district's attorney to inform him she was 

refusing the checks, and then returned the checks to the 

courier. 

The district mailed Visco a Form W-2 for 1992, showing 

taxable income and withholdings for 1992. It reflected the 

salary she earned for 1992, plus the back pay she was 

issued. On April 15, 1993, Visco filed a Form 4868,

"Application for Automatic Extension of Time to File U.S. 

Individual Income Tax Return." Visco then filed a Form 

4852, "Substitute for Form W-2, Wage and Tax Statement 

of Form 1099R, Distributions from Pensions, Annuities, 

Retirement or Profit-Sharing Plans, IRA's, Insurance 

Contracts, etc." She filed this Form with the Criminal 

Investigation Unit of the IRS in June 1993. In her 

substitute Form W-2, Visco explained why she believed the 

district's W-2 was inaccurate: 

 (1) Money reported as earnings may actually be 

 monies illegally withheld from taxpayer's 

 retirement fund during the years of credited

 service (1963-1992); 

 (2) If, money reported as earnings, constitute 

 employer contractual liability for wrongful 

 discharge of taxpayer, the amount entered is

 inaccurate. . . . .; 

 (3) Monies issued to taxpayer identified as payroll 

 checks . . . dated December 21, 1992 are not

 constructively received because they are 

 inaccurately identified as retirement salary. 

 Taxpayer has not filed for any application for 

 retirement allowance. Moreover, these checks serve 

 to validate a grossly inaccurate retirement fund. 

 Consequently, the taxpayer does not know how to 

 complete tax filing for the 1992 tax year and 

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 kindly requests a thorough investigation into this 

 matter. 

Visco v. CIR, at 6 (quoting Substitute form W-2) (footnotes 

omitted). Along with her substitute Form W-2, Visco

submitted a letter requesting a criminal investigation into 

the matter, in which she stated that she wished to file her 

1992 tax return in a way which would allow her to preserve 

her legal rights. Visco then filed a Form 2688,"Application 

for Additional Extension of Time to File U.S. Individual 

Income Tax Return," explaining that she was waiting for 

information regarding her criminal investigation. 

After Visco's refusal of the two checks, the 

Commonwealth Court ordered the district to pay the total 

back pay, plus interest and less payroll deductions, to the 

Commonwealth Court. The Commonwealth Court later 

opened a bank account with Dauphin Deposit Bank and

Trust Co. for Visco's benefit, and notified Visco by letter 

that her back pay had been deposited in an interest bearing 

account. On August 28, 1997, the IRS mailed a statutory 

notice of deficiency to Visco for the taxable year 1992. 

Visco has neither attempted to access the fund in the 

Dauphin bank account, nor filed an income tax return for 

1992. 

II. 

The Tax Court determined that Visco's gross income for 

the taxable year 1992 included the paychecks she received 

and cashed for her work in the district in 1992 

($38,223.86). With respect to the back pay and interest 

thereon, Visco argued, in the alternative that (1) she never 

received these amounts; (2) the money was a damage award 

and not back pay; and (3) the income is an unauthorized 

withdrawal from her pension plan. The Tax Court 

concluded that Visco constructively received the back pay 

and interest on the back pay. Accordingly, the Tax Court 

determined that the back pay and interest on back pay 

must be included in Visco's 1992 gross income. 

III. 

On appeal, Visco raises three claims: (1) "[t]he chamber 

conference held on January 19, 1999, immediately prior to 

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the petitioner's bench trial culminated pre-trial practice 

governed by the court that unfairly restrained petitioner's 

discovery of respondent's case"; (2) "[t]he chamber

conference held on January 19, 1999 immediately prior to 

the petitioner's bench trial culminated pre-trial practice 

governed by the court that unfairly restrained petitioner's 

development of her defense through substantive facts to be 

made a part of the required stipulation of fact;" and (3) 

"[t]he court committed plain error by entering findings and 

opinion of tax deficiency predicated on legally insufficient 

evidence and exclusion of substantive fact through trial 

governance that manifested an arbitrary application of 

motion in limine practice." 

Visco's first and second claims relate to pretrial practice, 

and are raised for the first time in this appeal. As these 

claims were not raised before the Tax Court, we will not 

consider them. Resyn Corp. v. United States, 851 F.2d 660, 

664 (3d Cir. 1988) (citing Singleton v. Wulff , 428 U.S. 106, 

120, 96 S.Ct. 2868, 2877 (1976). Further, as these claims 

were not preserved below, they have been waived. See 

Holmes v. Pension Plan of Bethlehelm Steel Corp., 213 F.3d 

124, 139 (3d Cir. 2000). Visco was given the opportunity to 

object to the pre-trial procedures, specifically the adoption 

of the factual stipulations. She made no objections, but 

instead endorsed the proceedings. (Notes of Transcript ("Tr.")3 

at 3). 

Visco's final claim appears to allege that the Tax Court's 

opinion was based on insufficient evidence. This claim is 

belied by the record before us. There was ample evidence in 

the record to support the Tax Court's decision. The Tax 

Court's opinion thoroughly outlines why Visco's challenges 

fail under each of the alternative theories she presented. 

First, the Tax Court correctly found that Visco had

constructively received the monies from the district. Visco 

argues that because she neither accepted nor cashed the 

checks from the district, and she failed to access the 

Dauphin Bank account, she never "received" the funds. "So 

long as the `income . . . is subject to a man's unfettered 

_________________________________________________________________ 

3. Transcript of proceedings in United States Tax Court on Tuesday, 

January 19, 1999. 

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command and . . . he is free to enjoy [it] at his option[, it] 

may be taxed to him as income, whether he sees fit to enjoy 

it or not.' " Leavens v. CIR, 467 F.2d 809, 813 (3d Cir. 

1972) (quoting Corliss v. Bowers, 281 U.S. 376, 378, 50 

S.Ct. 336, 337 (1930)). There were no restrictions on the 

money when the district mailed Visco the checks or when 

they were delivered to her by courier. See Walter v. United 

States, 148 F.3d 1027, 1029 (8th Cir. 1998). Further, to 

access the Dauphin Bank account, Visco need only write a 

letter to the Commonwealth Court informing the court of 

her interest in accessing the money, and the court will 

notify the bank that Visco may receive the money. (Tr. at 

126). Visco had unfettered access to and control of the 

money; she just chose not to touch it. 

Visco also asserts that the money from the district is not 

back pay, but rather represents a settlement in a tort-like 

situation. We agree with the Tax Court that there is nothing 

in the record to support this claim. However, even if this 

were an accurate description of the circumstances, 

settlement funds would still be included in Visco's taxable 

income for 1992. See Greer v. United States, 207 F.3d 322, 

326 (3d Cir. 2000) (noting that settlement agreements 

constitute gross income unless expressly excepted) 

(citations omitted). 

Finally, Visco alleges that the money from the district is 

not for back pay, but rather involved her retirement salary. 

There is nothing in the record to indicate that Visco's 

retirement fund is involved with these payments from the 

district, nor has she adequately explained her belief that 

retirement funds were involved in this transaction. The Tax 

Court correctly found this claim without merit. 

As the Tax Court noted, it appears that Visco had 

genuine concerns about the nature of her taxable income 

for the year 1992, and refrained from filing her income tax 

return until the matter could be resolved. Nevertheless, we 

agree with the Tax Court's conclusion that the payments of 

back pay, plus interest, were taxable income for 1992, and 

as such the deficiency determined by the IRS stands. 4 

_________________________________________________________________ 

4. The total amount of Visco's deficiency for 1992 was determined to be 

$37,224. However, this is the total amount she owed for the year. The 

district withheld $35,134.61 in federal taxes from Visco's paychecks in 

1992. Visco then must only make a payment of the difference, $1,980 

(plus interest). 

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We will affirm the decision of the Tax Court. Visco's 

motion for correction or modification of the record pursuant 

to F.R.A.P. 10(e) is denied. 

A True Copy: 

Teste: 

 Clerk of the United States Court of Appeals 

 for the Third Circuit 

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