Court Opinion

ID: 3064221
Source: CourtListenerOpinion
Date Created: 2015-10-14 21:21:40.02146+00
Date Added: 2024-06-11T09:33:04.174382
License: Public Domain

[DO NOT PUBLISH]

            IN THE UNITED STATES COURT OF APPEALS

                   FOR THE ELEVENTH CIRCUIT
                    ________________________                   FILED
                                                      U.S. COURT OF APPEALS
                           No. 08-12466                 ELEVENTH CIRCUIT
                                                          JANUARY 5, 2009
                       Non-Argument Calendar
                     ________________________            THOMAS K. KAHN
                                                              CLERK

                         Agency No. 10374-05

CURTIS G. LOCKETT,
EDNA L. LOCKETT,

                                                      Petitioners-Appellants,

                                 versus

COMMISSIONER OF IRS,

                                                       Respondent-Appellee.

                     ________________________

                 Petition for Review of a Decision of the
                         United States Tax Court
                      _________________________

                           (January 5, 2009)

Before ANDERSON, DUBINA and MARCUS, Circuit Judges.

PER CURIAM:
       Appellants Curtis and Edna Lockett, pro se,1 appeal the Tax Court’s order

determining tax deficiencies in the amounts of $3,049.00 for 2001, $32,675.00 for

2002, and $2,581.00 for 2003. On appeal, the Locketts procedurally contend that

we should recuse ourselves and that we are without appellate jurisdiction. With

respect to the substantive issues, the Locketts argue that the Tax Court improperly

required them to substantiate their deductions and incorrectly found that they had

not substantiated the deductions claimed for tax years 2001, 2002, and 2003.2

                                                I.

       By statute, “[a]ny justice, judge, or magistrate judge of the United States

shall disqualify himself in any proceeding in which his impartiality might

reasonably be questioned.” 28 U.S.C. § 455(a). When considering whether recusal

is appropriate, we consider “whether an objective, disinterested, lay observer fully

informed of the facts underlying the grounds on which recusal was sought would

entertain a significant doubt about the judge’s impartiality.” Bolin v. Story,

       1
         We liberally construe pro se pleadings and briefs. See Finch v. City of Vernon,
877 F.2d 1497, 1504 (11th Cir. 1989).
       2
          The Locketts also challenge the Tax Court’s refusal to issue an order to enforce an
agreement allegedly reached in a separate federal district court civil action. However, issuance of
such an order would have exceeded the Tax Court’s jurisdiction. See 26 U.S.C. § 7429.
Additionally, the Locketts request review of the Tax Court’s denial of their motion for summary
judgment. However, review of a motion for summary judgment is not appropriate where, as
here, a judgment is entered following a full trial of the merits. Lind v. United Parcel Service,
Inc., 254 F.3d 1281, 1284 (11th Cir. 2001).

                                                2
225 F.3d 1234, 1239 (11th Cir. 2000) (citation omitted). Generally, the claim of

bias under § 455 “must show that the bias is personal as distinguished from

judicial in nature.” Id. (citation omitted). Thus, unless “pervasive bias is shown,

a judge’s rulings in the same or a related case are not a sufficient basis for

recusal.” Id.

      Because the record demonstrates that our only interaction with the Locketts

has been the issuance of opinions resolving their cases in the course of judicial

proceedings without a display of bias, we conclude that recusal is not necessary.

See Bolin, 225 F.3d at 1239.

                                          II.

      We review issues of jurisdiction de novo. Federal Election

Comm’n v. Reform Party of United States, 479 F.3d 1302, 1306-07 (11th Cir.

2007). Section 7429 of Title 26 of the United States Code authorizes the Tax

Court to exercise jurisdiction over, and enter a judgment in, a civil action for

determination of tax liability. 26 U.S.C. § 7429(b)(2)(B). Although its principal

office is in the District of Columbia, the Tax Court may sit anywhere in the United

States. 26 U.S.C. §§ 7445, 7446. Section 7482 of Title 26 of the United States

Code provides for appellate review of a Tax Court decision to be in the circuit of

the petitioner’s legal residence or where stipulated in writing by government and

                                           3
petitioner. 26 U.S.C. § 7482(b)(1)(A) and (2); Becker v. Comm’r of Internal

Revenue, 852 F.2d 524, 524-25 (11th Cir. 1988). If a Tax Court decision is

appealed to the wrong circuit, the circuit may transfer the appeal to the appropriate

circuit. Becker, 852 F.2d at 525-26.

      Having reviewed the record and the briefs of the parties, we conclude that

jurisdiction is proper. The Locketts undisputedly live within the Eleventh Circuit.

The Internal Revenue Service has not stipulated to review in another circuit.

Therefore, the Circuit for the District of Columbia properly transferred this appeal

for our review. See 26 U.S.C. § 7482(b)(1)(A) and (2); Becker, 852 F.2d at

525-26.

                                         III.

      “We review de novo the tax court’s conclusions of law and review findings

of fact for clear error.” Davis v. Comm’r of Internal Revenue, 210 F.3d 1346,

1347 (11th Cir. 2000). The taxpayer bears the burden of submitting evidence that

supports his claim of entitlement to a deduction and the amount of that

entitlement. Gatlin v. Comm’r of Internal Revenue, 754 F.2d 921, 923

(11th Cir. 1985). Further, unsupported allegations by a taxpayer of misconduct by

the government and others is not considered as credible evidence to meet his

burden. Hradesky v. Comm’r of Internal Revenue, 540 F.2d 821, 823 n.2 (5th Cir.

                                          4
1976).3

       Section 6001 of the Internal Revenue Code (“IRC”) requires that a taxpayer

must keep and maintain financial records sufficient to permit verification of

income and expenses. 26 U.S.C. § 6001. When taxpayers’ records are lost or

destroyed through circumstances beyond their control, they are entitled to

substantiate the claimed deductions by use of other credible evidence. Villarreal

v. Comm’r of Internal Revenue, 76 T.C.M. (CCH) 920 (1998). However, the Tax

Court is not bound to accept unverified, undocumented testimony of a taxpayer.

Id. Although the Tax Court may estimate amounts, any estimations must have a

reasonable evidentiary basis. Id. From our review of the record, we discern no

evidentiary or burden of proof errors.

       Discounting Mr. Lockett’s incredible testimony, the record does not support

a conclusion that the government had “unclean hands” in an equitable sense, or

that the Locketts’ property and possessions were illegally foreclosed upon, stolen,

or otherwise coerced from them. Further, Mr. Lockett admitted that the family

property was foreclosed due to failure to make mortgage payments, that he had

seven days to remove belongings, and that he had “seven warehouses” of

       3
         In Bonner v. City of Prichard, Ala., 661 F.2d 1206, 1209 (11th Cir.1981) (en banc), we
adopted as binding precedent decisions of the former Fifth Circuit issued before October 1, 1981.

                                                5
documents related to the case. Thus, the Locketts did not demonstrate that records

were lost or destroyed due to circumstances beyond their control, so as to entitle

them to substantiate their deductions through other credible evidence. Even so,

the Tax Court did not require the Locketts to produce documents that were

allegedly destroyed or stolen. Instead, the Tax Court requested that the Locketts

present other credible evidence to support a reasonable estimate to determine the

deductible amount of the losses. However, the Locketts did not offer any

verification or documentation to support Mr. Lockett’s testimony with respect to

valuation.

                                        IV.

      In reviewing a Tax Court decision, we will only find clear error if we are

left with a definite conviction that a mistake was made. Coggin v. Comm’r of

Internal Revenue, 71 F.3d 855, 860 (11th Cir. 1996). Further, “[t]he

Commissioner’s determination of a deficiency is presumed correct, and the

taxpayer has the burden of proving it is incorrect.” Webb v. Comm’r of Internal

Revenue, 872 F.2d 380, 381 (11th Cir. 1989). Taxpayers must submit evidence

that supports their claims of entitlement to a deduction and the amount of that

entitlement. Gatlin, 754 F.2d at 923.

      IRC section 165 permits for a deduction for any loss that: (1) occurs during

                                         6
the taxable year; and (2) is not compensated for by insurance, or otherwise.

26 U.S.C. § 165(a). Generally, the deductible amount is determined by the fair

market value prior to the loss or the adjusted basis in the property.

26 C.F.R. § 1.165-7(b).

      Individuals may claim losses of property arising from fire or theft.

26 U.S.C. § 165(c). Individual casualty losses must exceed $600.00 ($100 for

taxable years beginning after December 31, 2009); their value is reduced by the

amounts of reimbursement received, and they may be claimed to the extent the

loss exceeds 10% of the taxpayer’s adjusted gross income. Id. § 165(h). Theft

losses are treated as being sustained during the taxable year in which they are

discovered. Id. § 165(e). We have defined theft as “any criminal appropriation of

another’s property to the use of the taker.” Edwards v. Bromberg, 232 F.2d 107,

110 (5th Cir. 1956); accord with 26 C.F.R. § 1.165-8(d). Generally, foreclosures

and repossession do not constitute theft or casualty loss. Johnson v. Comm’r of

Internal Revenue, 81 T.C.M. (CCH) 1538 (2001).

      Additionally, individuals may claim losses incurred in a trade or business.

26 U.S.C. § 165(c). For a taxpayer to be carrying on a trade or business, the

“taxpayer must be involved in the activity with continuity and regularity and . . .

the taxpayer’s primary purpose for engaging in the activity must be for income or

                                          7
profit.” Comm’r of Internal Revenue v. Groetzinger, 480 U.S. 23, 35, 107 S.

Ct. 980, 987, 94 L. Ed. 2d 25 (1987).

      A taxpayer may deduct expenses that are ordinary and necessary in carrying

on a trade or business, but may not deduct personal, living, or family expenses.

26 U.S.C. § 262(a). To be deductible, an item must: “(1) be paid or incurred

during the taxable year; (2) be for carrying on any trade or business; (3) be an

expense; (4) be a necessary expense; and (5) be an ordinary expense.” Comm’r of

Internal Revenue v. Lincoln Sav. & Loan Ass’n, 403 U.S. 345, 352, 91 S. Ct. 1893,

1898, 29 L. Ed. 2d 519 (1971) (internal quotation marks omitted).

      IRC section 217 allows as “a deduction moving expenses paid or incurred

during the taxable year in connection with the commencement of work by the

taxpayer as an employee or as a self-employed individual at a new principal place

of work.” 26 U.S.C. § 217(a). The new principal place of work must be at least

50 miles from the taxpayer’s former residence. Id. § 217(c)(1)(A).

      Based on our review of the record, we discern no error in the Tax Court’s

determination that the tax deficiencies for tax years 2001, 2002, and 2003 were

correct. Although the Locketts submitted pictures of a burned residence, they did

not present any documentary evidence to support the valuation they claimed for

their residence and the personal property therein, to establish their adjusted basis

                                          8
for the residence and other items, to explain any insurance amounts that were paid

or not paid, or to explain their failure to claim the loss until 2001. Further,

Mr. Lockett admitted that he did not know the value and suggested that he had

received some insurance reimbursement for the loss.

      Similarly, the Locketts submitted pictures of the foreclosure of their real

estate and eviction of their personal property that they characterized as a theft and

destruction of their property. However, the theft claim form submitted to prove

theft related to a theft alleged to have occurred in June 2003, which was not the

year in which the theft losses were claimed. Moreover, the record shows that they

were lawfully foreclosed upon for failure to pay their mortgage resulting in their

eviction in 2001. Because foreclosure and eviction are not criminal acts, the

Locketts did not demonstrate that they were victims of theft for purposes of

26 U.S.C. § 165(c).

      With regard to business losses and deductions, Mr. Lockett admitted that

some of the deductions were incorrect. He suggested that he claimed business

losses based on his inability to work while incarcerated for 22 months during the

applicable period. Due to his incarceration and lack of sales activity, Mr. Lockett

did not demonstrate that he was carrying on a trade or business during the

applicable tax years to deduct expenses under 26 U.S.C. § 262(a). Further, he

                                           9
failed to demonstrate, as required, that any amounts he paid or incurred during the

claimed year were necessary or ordinary.

      Lastly, the Locketts did not offer any documentary evidence or testimony to

support the incurrence of $41,952.00 in moving expenses during 2002.

Mr. Lockett’s testimony supports that conclusion that he and his family moved in

September 2001 because they were foreclosed upon, not due to new employment.

      In summary, the Locketts failed to present credible evidence to substantiate

the deductions they claimed for tax years 2001, 2002, and 2003 in order to

overcome the presumption that the IRS had correctly determined the tax

deficiencies. See Gatlin, 754 F.2d at 923; Webb, 872 F.2d at 381. Accordingly,

we affirm the judgment of the Tax Court.

      AFFIRMED.

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