N O T FO R PUB L ICAT IO N UNITED STATES C OUR T OF APPEALS FOR THE NINTH C IR C U IT KATHLEEN S. SIM PSON; GEOR GE T. SIM PSON, Pe t i tione rs-Appe lla nts,
v. C OM M ISSIONER

OF INTER

NAL REVENUE, R e sponde nt-Appe lle e . No. 14-72372 Ta x C t. No. 26619-11
M EM O R ANDUM *

Appe a l from

a De c ision of the Unite d Stat e s Tax C ourt David La ro, Tax C ourt Judge , Pre siding Subm itte d August 8, 2016 ** San Fran c isc o , C a lifornia B e fore : WALLAC E and GR A B ER , C i rc uit Judge s, a

nd LYNN, *** C hie f Distric t Judge
. 

# FIL ED AUG 10 2016 M OLLY C. DW Y ER, CLERK U
. S
. CO URT O F APPEALS

* This disposition is not a ppropria t e for public ation a

nd is not pre c e de nt e xc e pt a s provide d

by Ninth C irc uit R

ule 36-3. ** The pa

ne l una nim ously c onc lude s tha

t this c a se is suita

b le for de c ision without ora l a

rgum e nt. Fe d. R . App. P. 34(a )(2). *** The Honora

ble B a rba ra M . G. Ly nn, Unite d State s C hie f Distric t Judge for the Northe rn Distric t of Te x a s, sitting by de signa tion.Kathle e n Sim pson se ttle d a

n e m ploy m e nt suit a

nd re c e ive d a

la rge pa y out. Only a sm a ll portion of the

se ttle m e nt wa s inc l ude d a s inc om e whe n she and he r husba n d jointly file d the ir taxe s the following y e ar. The Inte rna l R e ve nue Se rvic e issue d a notic e of de fic ie nc y , and the c a se proc e e de d to tria l be fore the Tax C ourt. The Ta x C ourt he ld tha

t a ll but 10% of the

se ttle m e nt proc e e ds ha d to be inc lude d
a s inc om e . The Sim

psons m ove d for attorne y fe e s. The Tax C ourt de nie d fe e s. The Sim p sons tim e ly

a ppe a l. W e re vie w a de c ision of theTax C ourt the sam e wa y we re vie w a

ny de c ision
re nde re d by

a distric t c ourt in a

c ivil be nc h tria l . C om

m ’ r v. Dunkin, 500 F.3d 1065, 1068 (9th C ir. 2007). Thus, we re vie w the c ourt’ s fa c tua l findings for c le ar e rror, its disc re tiona

ry rulings for a

buse of disc re tion, a

nd its c onc lusions of la

w de novo. Id. W e re vie w the Ta x C ourt’ s de nia l of attorne y fe e s for a buse of disc re tion. Huffm an

v. C om m ’ r, 978 F.2d 1139, 1143 (9th C ir. 1992). 1. The se ttle m e nt pa

ym e nts to Sim

pson we re not m a de " unde r" C a lifornia ’ s W orke rs’ C om

p e nsation Ac t, I.R .C . § 104(a )(1), an d, the re fore , c ould not be
e xc lude d from inc om e . B e c a use Sim pson fa ile d to se e k a

pprova l from

the W orke rs’ C om

p e nsation Appe a ls B oa

rd, the se ttle m e nt did not follow the proc e d ure s re quire d

for the a gre e m e nt to be va lid unde r the C a lifornia worke rs’
c om pe nsation sc he m e . C a l. La b. C ode § 5001; Ra isc h e ll & C ottre l l, Inc . v.

2W orkm e n’ s C om p. Appe a ls B d., 58 C a l. R ptr. 159, 163 (C t. App. 1967). Additiona lly , the se tt le m e nt inc lude d only ge ne ra l te rm s and did not spe c ific a lly
m e ntion theW orke rs’ C om pe nsation Ac t a s a

re a son for the se ttle m e n t. 2. The Ta x C o urt did not a buse its disc re tion unde r Inte rna l R e ve nue C ode § 7430(a ) in c onc l uding tha t the Sim psons we re not a

pre va iling pa

rty e n title d to
attorne y fe e s. The Sim

psons did not pre

va i l on the ir m a in c la im

— that the
se ttle m e nt a

m ounts should be

e xc lude d be c a

u se the y we re re c e ive d for worke rs’
c om pe nsation c la im s. The gove rnm e nt wa s substa ntia l ly justifie d in ta

k ing a position tha

t it la te r c onc e de d, be c a

use the Sim

psons c ha nge d the ir position during the l itiga t ion. 3. The Ta x C o urt did not a buse its disc re tion in c onc luding tha t a propose d
se ttle m e nt wa s not a

" q ua l ifie d" offe r be c a

use it provide d tha

t the Sim psons c ould withdra w it a t a ny tim e . A qua lifie d offe r m u st, by its te rm s, " re m a in[] ope n during thepe riod be ginning on the date it is m a de and e n ding on thee arlie st of the date the offe r is re

je c t e d, the date the tria l be gins, or the90th da y a fte r the date the offe r is m a de ." I.R
. C . § 7430(g)(1)(D); Tre a s. R e g. § 301.7430-7(c )(5). The burde n lie s with theSim

psons to show tha

t a proposa l is a

qua l ifie d offe r. Tax C t. R . 232(e ). The proposa l is unc le ar a s to whe the r the offe r truly re m a ine d ope n for the re quisitepe riod. Ac c ordingly , the Tax C ourt did not a buse its disc re tion in 3c onc luding tha t the Sim psons fa ile d to c arry

the ir burde n to de m onstra te tha t the propose d a gre e m e nt wa s a

qua l ifie d offe r. AFFIRM E D.

4