Opinion ID: 3050656
Heading Depth: 2
Heading Rank: 3

Heading: The Tax Court’s Exclusion of Sparkman’s 1996

Text: and 1997 Amended Returns During his direct examination, Sparkman attempted to enter his 1997 and 2000 amended returns into evidence, which he had filed with the IRS shortly before trial. The Tax Court rejected them as not probative. The Tax Court’s evidentiary rulings are reviewed for abuse of discretion and will not be reversed absent a showing of prejudice. Sacks v. Comm’r, 82 F.3d 918, 921 (9th Cir. 1996). [7] A tax return, even though signed under penalty of perjury, is not per se evidence of the income, deductions, credits, and other items claimed therein. Mays v. United States, 763 F.2d 1295, 1297 (11th Cir. 1985); Lunsford v. Comm’r, 212 F.2d 878, 883 (5th Cir. 1954); Wilkinson v. Comm’r, 71 T.C. 633, 639 (1979); Halle v. Comm’r, 7 T.C. 245, 247-50 (1946), aff’d, 175 F.2d 500 (2d Cir. 1949). As the Tax Court noted, Sparkman retained the opportunity to substantiate the contents of his returns with testimony and documentary evidence. Because Sparkman’s amended returns did not “hav[e] any tendency to make the existence” of those underlying items “more probable or less probable than it would be without” them, Fed. R. Evid. 401, the Tax Court was correct in declining to admit the returns into evidence. [8] Even if the returns were somehow relevant, however, the Tax Court did not abuse its discretion in refusing to admit them. Federal Rule of Evidence 403 allows even relevant evisarily underlies how to classify that entity. Cf. Lerman v. Comm’r, 939 F.2d 44, 52 (3d Cir. 1991) (“Economic substance is a prerequisite to the application of any Code provisions allowing deductions.”). By definition, to be a “business entity” (and hence a business trust), an entity must be an “entity recognized for federal tax purposes.” Treas. Reg. § 301.7701- 2(a). An entity without economic substance, whether a sham partnership or a sham trust, is a sham either way and hence is not recognized for federal tax law purposes. SPARKMAN v. CIR 16181 dence to be excluded if its admission would result in “needless presentation of cumulative evidence.” In this case, an amended tax return filed only a few days before trial merely demonstrates that Sparkman now contends he had a different level of income than was reflected on his original return—a contention that Sparkman presented in oral testimony immediately after the returns were rejected. Sparkman has not demonstrated what the returns would have added to his own testimony that same day. Because the returns were at best cumulative, and at worst irrelevant, we hold that the Tax Court did not abuse its discretion in declining to accept them into evidence.