Court Opinion

ID: 4661364
Source: CourtListenerOpinion
Date Created: 2021-02-18 21:01:37.352234+00
Date Added: 2024-06-11T08:02:12.948164
License: Public Domain

NOT FOR PUBLICATION                           FILED
                    UNITED STATES COURT OF APPEALS                        FEB 18 2021
                                                                      MOLLY C. DWYER, CLERK
                                                                       U.S. COURT OF APPEALS
                           FOR THE NINTH CIRCUIT

RENEE VENTO,                                    No.    19-71601
                                                       20-70068
                Petitioner-Appellant,
                                                Tax Ct. No. 992-06
 v.

COMMISSIONER OF INTERNAL                        MEMORANDUM*
REVENUE,

                Respondent-Appellee.

GAIL C. VENTO,                                  No.    19-71602
                                                       20-70254
                Petitioner-Appellant,
                                                Tax Ct. No. 993-06
 v.

COMMISSIONER OF INTERNAL
REVENUE,

                Respondent-Appellee.

NICOLE VENTO MOLLISON,                          No.    19-71603
                                                       20-70067
                Petitioner-Appellant,
                                                Tax Ct. No. 1168-06
 v.

      *
             This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
COMMISSIONER OF INTERNAL
REVENUE,

                 Respondent-Appellee.

                            Appeal from a Decision of the
                              United States Tax Court

                             Submitted February 3, 2021**
                               San Francisco, California

Before: SILER,*** RAWLINSON, and BUMATAY, Circuit Judges.

      This suit followed years of litigation between the Commissioner of Internal

Revenue Service and three sisters (“Taxpayers”), after they incorrectly claimed U.S.

Virgin Islands (“USVI”) residency and filed tax returns with the USVI instead of the

IRS in 2001. The dispute eventually narrowed to one issue: whether Taxpayers were

entitled to foreign tax credits under Internal Revenue Code § 901. See 26 U.S.C.

§ 901. The Taxpayers separately appealed the Tax Court’s ruling for summary

judgment in favor of the Commissioner and the Tax Court’s denial of leave to move

for indicative rulings. See 26 U.S.C. § 7482. We review the Tax Court’s legal

conclusions de novo, its factual findings for clear error, and its denial of leave to file

      **
             The panel unanimously concludes this case is suitable for decision
without oral argument. See Fed. R. App. P. 34(a)(2).
      ***
            The Honorable Eugene E. Siler, United States Circuit Judge for the
U.S. Court of Appeals for the Sixth Circuit, sitting by designation.

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a motion to vacate for abuse of discretion. Dieringer v. C.I.R., 917 F.3d 1135, 1141

(9th Cir. 2019); Abatti v. C.I.R., 859 F.2d 115, 117 (9th Cir. 1988). We consolidated

Taxpayers’ two appeals and affirm.

      1.     The Tax Court correctly rejected Taxpayers’ claim that their payments

to the USVI should be credited as “foreign taxes” under § 901. See 26 U.S.C.

§ 901(b)(1). Section 901 provides U.S. citizens a credit for taxes paid to “any

foreign country or to any possession of the United States.” Id. But Taxpayers’

payments to the USVI are not eligible for foreign tax credits because they do not

satisfy § 904’s limitation on foreign tax credits. See id. § 904(a).1   Section 904

limits the amount of any foreign tax credit based on the amount of a given taxpayer’s

foreign income. Id.; see also Treas. Reg. § 1.904-1(a). Taxpayers admit that they

had no USVI income in 2001, and there is no evidence they had any foreign income

that year. Accordingly, Taxpayers failed to establish they had sufficient foreign-

source income to be eligible for a foreign tax credit under the limitation found in

§ 904.2

      1
         Because we affirm the district court holding that Taxpayers did not satisfy
§ 904’s limitation on foreign tax credits, we do not reach the Tax Court’s two
additional, independent reasons for rejecting Taxpayers’ § 901 claim.
       2
         Additionally, Taxpayers waived this argument by not raising it in their
Opening Brief. See Friends of Yosemite Valley v. Kempthorne, 520 F.3d 1024, 1033
(9th Cir. 2008).

                                         3
      2.     The Tax Court did not abuse its discretion in adopting the

Commissioner’s proposed computations under Tax Court Rule 155. See Erhard v.

C.I.R., 46 F.3d 1470, 1479 (9th Cir. 1995). Taxpayers raised new issues at the

computation stage, despite Rule 155’s prohibition on doing so. See Tax Ct. R.

155(c). Taxpayers initially agreed that the only remaining issue was whether they

were entitled to foreign tax credits; however, at the computation stage, Taxpayers

for the first time claimed eligibility for additional tax deductions, including tax

credits for state and local tax deductions under 26 U.S.C. § 164 and for payments

made to the IRS and covered over to the USVI under 26 U.S.C. § 31(a).3

Accordingly, Taxpayers’ new arguments were contradictory to their previous

litigation position and the Tax Court properly viewed this as violating Rule 155.

      Further, Taxpayers’ argument that it was the Commissioner who raised new

issues at the computation stage is without merit. While Taxpayers assert the

Commissioner injected a new issue during the Rule 155 computation by rejecting

their entitlement to 26 U.S.C. §§ 164 and 31(a) tax credits, the Commissioner was

simply responding to the new issues raised by Taxpayers for the first time. This is

exactly what Rule 155’s prohibition on new arguments is meant to forestall. See

Erhard, 46 F.3d at 1480.

      3
         Taxpayers moved to amend their petitions to add these new claims and
admitted they had not alleged they were entitled to these deductions in their original
petitions.

                                          4
      3.     The Tax Court did not abuse its discretion in denying Taxpayers’

motions for an indicative ruling to reopen the record under Tax Court Rule 162 and

Fed. R. App. P. 12.1. “[T]he federal civil rules do not apply, of their own force, to

proceedings in the Tax Court[.]” Organic Cannabis Found., LLC v. C.I.R., 962 F.3d

1082, 1088 (9th Cir. 2020). The Tax Court’s rules, however, provide that “[w]here

in any instance there is no applicable rule of procedure, the Court . . . may prescribe

the procedure, giving particular weight to the Federal Rules of Civil Procedure to

the extent that they are suitably adaptable to govern the matter at hand.” Id. (quoting

Tax Ct. R. § 1(b)).

      As Taxpayers themselves acknowledge, the Tax Court has not issued an

indicative ruling in the past, nor has it purported to adopt Rule 12.1. Accordingly,

the Tax Court acted within its discretion in denying Taxpayers’ motion for leave to

move for an indicative ruling.

      AFFIRMED.

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