Opinion ID: 467499
Heading Depth: 2
Heading Rank: 3

Heading: Income Averaging and Automobile Expenses

Text: 19 The Christensens did not average their income in the 1977 or 1978 returns. During the audit proceeding, however, the Christensens raised the issue of their eligibility to utilize income averaging. The IRS agent asked for information on the base years and implied the Christensens might be eligible. The Christensens did not discuss the use of income averaging in their petition for redetermination of deficiencies to the Tax Court. Seventeen months after that petition was filed, the Christensens filed a Motion to Place the Following Statements in the Record in which they sought income averaging and also claimed a $400 deduction for additional automobile expenses. 20 Tax Court Rule 34(b)(1)(4) provides that the petition in a deficiency action shall contain 21 [c]lear and concise assignments of each and every error which the petitioner alleges to have been committed by the Commissioner in the determination of the deficiency or liability.... Any issue not raised in the assignment of errors shall be deemed to be conceded. 22 Tax Ct.R. 34, 26 U.S.C.App.R. 34 (1982). The Tax Court concluded that the income averaging and automobile expenses issues were not raised in the Christensens' petition and thus refused to consider them. 23 While Rule 34(b)(1)(4) does require a statement of issues, Tax Court Rule 41(a) permits a party to amend its pleadings, either as a matter of course before a responsive pleading is served, by leave of the court, or by consent of the adverse party. Tax Ct.R. 41(a), 26 U.S.C.App.R. 41(a) (1982). The rule notes that leave shall be given freely when justice so requires. Id. The Christensens filed no formal amendments to their pleadings but they did file the Motion to Place the Following Statements in the Record. Because the Christensens were acting pro se, we conclude that the Tax Court should have considered this Motion as a motion to amend under Rule 41(a). 24 The Supreme Court has directed federal trial courts to read pro se papers liberally. Hughes v. Rowe, 449 U.S. 5, 9, 101 S.Ct. 173, 175, 66 L.Ed.2d 163 (1980) (per curiam); Haines v. Kerner, 404 U.S. 519, 520, 92 S.Ct. 594, 595, 30 L.Ed.2d 652 (1972) (per curiam) (pro se prisoner complaint held to less stringent standards than formal pleadings drafted by lawyers); see also Bates v. Jean, 745 F.2d 1146, 1150 (7th Cir.1984); Traguth v. Zuck, 710 F.2d 90, 95 (2d Cir.1983) (finding district court failed to take into account pro se status and thus failed obligation to make reasonable allowances to protect pro se litigants from inadvertant forfeiture of important rights because of their lack of legal training). The Second Circuit held that a pro se litigant should be afforded an opportunity fairly freely to amend his complaint. Holmes v. Goldin, 615 F.2d 83, 85 (2d Cir.1980) (per curiam) (civil rights action). 25 While this policy of liberal reading of pro se papers developed generally in prisoner and civil rights actions, it applies as well in the Tax Court. In Lysek v. Commissioner, 583 F.2d 1088, 1093 (9th Cir.1978), while holding the Tax Court was correct in finding waiver, we emphasized the tolerance the Tax Court showed in explaining tax procedures to the pro se litigant. We noted that the Tax Court did not insist on an unreasonable degree of formality in the pleadings but instead told taxpayers of their responsibilities in terms clearly understandable by laymen; thus taxpayers were not defeated by arcane legal technicalities. Id. In Scherping v. Commissioner, 747 F.2d 478, 480 (8th Cir.1984), the Eighth Circuit, while finding that the Tax Court was justified in dismissing a pro se petition, nevertheless noted that such Tax Court pleadings should be liberally construed. In Becker v. Commissioner, 751 F.2d 146 (3d Cir.1985), the court reviewed a Tax Court determination adverse to a pro se litigant. The court reasoned that although the taxpayer bears the ultimate burden of proof, pro se pleadings are to be held to less stringent standards and are to be liberally construed. Id. at 149. The court's remand to the Tax Court was based in part on the uncertainty of the language in the pro se pleadings. Id. at 151. See also Feistman v. Commissioner, 587 F.2d 941, 942 (9th Cir.1978) (treating pro se taxpayers' filing liberally). And several district court cases that dealt with tax claims (although not in a Tax Court context) stressed that pro se papers should be held to less stringent standards. See, e.g., O'Neal v. United States, 601 F.Supp. 874, 875 (N.D.Ind.1985); Blair v. United States Treasury Department, 596 F.Supp. 273, 275 (N.D.Ind.1984). These cases have extended the liberality doctrine beyond the prisoner/civil rights context. 26 The policy allowing liberal reading of pro se pleadings is particularly appropriate in tax cases. Taxpayers, unassisted by trained attorneys, are likely to have difficulty understanding the intricacies of tax litigation and procedure. Without legal counsel, they are pitted against the expertise of the Internal Revenue Service in the Tax Court. Tax disputes that involve relatively minor sums may be of great significance to less wealthy taxpayers. Such taxpayers' access to Tax Court review should not be barred by legal technicalities. Indeed, Rule 41 itself speaks in terms of when justice so requires, not in terms of legal technicality. 27 Hence, we remand to the Tax Court to consider the Motion to Place the Following Statements in the Record as a motion to amend for both the income averaging and the automobile expenses claims. The court must decide whether to grant this motion for either or both claims. It should consider whether the Commissioner's Pretrial Memorandum, which notes that the Christensens have requested income averaging be used and states that the Commissioner will allow income averaging to the extent base period income is shown, constitutes written consent of the adverse party for purposes of Rule 41(a). The record indicates that the base period income information was furnished by the Christensens during the post-audit phase, and such information is relatively simple for the Commissioner to validate. If the Tax Court grants the motion, it can require the taxpayers to produce the information necessary to prove their eligibility. The court should also consider whether justice requires leave to amend be given on the additional automobile expenses claim.