Court Opinion

ID: 177511
Source: CourtListenerOpinion
Date Created: 2010-10-20 00:03:22+00
Date Added: 2024-06-11T09:06:05.992274
License: Public Domain

FILED
                            NOT FOR PUBLICATION                              OCT 19 2010

                                                                        MOLLY C. DWYER, CLERK
                     UNITED STATES COURT OF APPEALS                       U.S . CO UR T OF AP PE A LS

                            FOR THE NINTH CIRCUIT

ROBERT HELBIG,                                    No. 09-70339

              Petitioner,                         Tax Ct. No. 8011-06

  v.
                                                  MEMORANDUM *
COMMISSIONER OF INTERNAL
REVENUE,

              Respondent.

                            Appeal from a Decision of the
                              United States Tax Court

                            Submitted October 8, 2010**
                             San Francisco, California

Before: THOMPSON, SILVERMAN and McKEOWN, Circuit Judges.

       Robert Helbig, as trustee of the estate of Charles Don Helbig, appeals the

decision of the Tax Court that, based on disallowance of his claimed losses from

investing in a jojoba bean partnership, Helbig is properly liable for tax additions

        *
             This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
        **
             The panel unanimously concludes this case is suitable for decision
without oral argument. See Fed. R. App. P. 34(a)(2).
for negligence for tax years 1983, 1984, and 1985 and a substantial understatement

addition for tax year 1983. We review the Tax Court's findings of negligence for

clear error. Little v. Comm'r, 106 F.3d 1445, 1449 (9th Cir. 1997). 'We defer to

the expertise which the Tax Court brings to bear on complex factual situations',

Church by Mail, Inc. v. Comm'r, 765 F.2d 1387, 1390 (9th Cir. 1985), and we

acµnowledge here that the Tax Court had the benefit of a trial in maµing its factual

findings.

      We note as a preliminary matter that Helbig and his lawyer failed to respond

to the Commissionerùs request for admissions, including request number 21, which

specifically asµed Helbig to admit that he did not exercise due care in claiming the

losses in question. Helbig v. Comm'r, T.C. Memo 2008-243 at 6-7. Thus, the

request was properly deemed admitted. As the Tax Court found, the effect of this

admission was to establish that Helbig failed to exercise due care. However, liµe

the Tax Court we also consider the merits of this case and find that even without

relying on the admission, the record establishes that the Tax Court did not commit

clear error in finding Helbig was properly subject to the negligence additions.

      Helbig argues that he acted as a reasonable investor when claiming his

deduction by exercising due care and reasonably relying on the professional advice

of his certified public accountant ('CPA'). The Tax Court properly cited Ninth

                                          2
Circuit precedent that a negligence determination 'depends upon both the

legitimacy of the underlying investment, and due care in the claiming of the

deduction.' Sacµs v. Comm'r, 82 F.3d 918, 920 (9th Cir. 1996). The Tax Court

reasonably relied upon a previous case binding upon all partners in the Contra

Costa Jojoba Research Partners in finding that the investment underlying this

appeal 'lacµed legitimacy from its inception.' Helbig v. Comm'r, T.C. Memo

2008-243 at 9. It further found 'the R&D agreement was designed and entered

into solely to provide a mechanism to disguise the capital contributions of the

limited partners as currently deductible expenditures'. Id.

      Once the Commissioner has made a finding of negligence, the burden is on

the taxpayer to show he exercised due care. Howard v. Comm'r, 931 F.2d 578,

582 (9th Cir. 1991). It was not clear error for the Tax Court to conclude, on the

record at trial, that Helbig did not meet this burden and thus find him liable for the

negligence addition. Although Helbig consulted his CPA, among other

individuals, about this investment, the Tax Court found 'the nature of their advice

to [Helbig] is unclear.' Helbig v. Comm'r, T.C. Memo 2008-243 at 11. Because

Helbig offered only 'vague or equivocal descriptions of the advice offered' by his

CPA, id., the Tax Court did not err in finding Helbig did not exercise due care in

                                           3
claiming the deduction. We have never held that simply consulting a CPA serves

as a safe harbor for the taxpayer.

         Further, the Tax Court found the promotional placement letter emphasizing

the tax benefits of the investment 'should have served as an ample warning

regarding the suspect nature' of the investment. Id. at 12. In particular, the court

found Helbig's claimed tax deduction in 1983, amounting to 227 percent of his

initial investment, also 'should have raised a red flag to [Helbig] regarding the

propriety of deductions relating to' the partnership. Id. at 13. In light of Helbig's

vague testimony before the Tax Court and the inadequacy of other evidence, the

Tax Court did not err in finding Helbig's 'actions were simply unreasonable under

the circumstances of this case.' Id. at 14. The Tax Court thus did not err in

finding '[t]he fact that [Helbig] passed by his advisers a one-and-a-half page

advertisement is insufficient to shield him' from the negligence additions. Id. at

13-15.

         Next, Helbig argues he should not be liable for the substantial

understatement addition because he adequately disclosed his investment on a

statement attached to his 1983 return. Helbig's 1983 tax deficiency qualified as a

substantial understatement. Helbig did not raise any proper defenses to this

penalty until his reply brief on this appeal. Even if these defenses were not

                                            4
waived, we affirm the Tax Court's decision because Helbig did not adequately

disclose relevant facts in the statement attached to his 1983 return, and he does not

qualify for any other exception to the substantial understatement addition.

      AFFIRMED.

                                          5
                                                                           FILED
Helbig v. Commissioner of Internal Revenue, No. 09-70339                    OCT 19 2010

                                                                        MOLLY C. DWYER, CLERK
                                                                         U.S . CO UR T OF AP PE A LS

SILVERMAN, Circuit Judge, concurring:

        I concur in the Memorandum to the following extent: I would affirm the Tax

Court solely on the ground that Helbig's failure to respond to the request for

admissions resulted in a conclusive admission that he failed to exercise reasonable

care.