Court Opinion

ID: 2672402
Source: CourtListenerOpinion
Date Created: 2014-05-02 15:01:14.634161+00
Date Added: 2024-06-11T13:05:59.149591
License: Public Domain

Case: 13-14398    Date Filed: 05/02/2014   Page: 1 of 17

                                                           [DO NOT PUBLISH]

             IN THE UNITED STATES COURT OF APPEALS

                    FOR THE ELEVENTH CIRCUIT
                      ________________________

                             No. 13-14398
                         Non-Argument Calendar
                       ________________________

                            Agency No. 024221-10

DIEP N. HOANG,

                                                            Petitioner-Appellant,

                                   versus

COMMISSIONER OF IRS,

                                                          Respondent-Appellee.

                       ________________________

                     Petition for Review of a Decision
                            of the U.S. Tax Court
                      ________________________

                               (May 2, 2014)

Before HULL, PRYOR and MARTIN, Circuit Judges.

PER CURIAM:
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        Proceeding pro se, Diep Hoang petitions for review of the United States Tax

Court’s decision upholding the Internal Revenue Services’s (“IRS”) determination

of his income tax liability for the 2006 tax year. After careful review of the briefs

and the record, we affirm the Tax Court’s decision.

                                I. BACKGROUND

A.      The IRS’s August 2010 Notice of Deficiency

        Hoang’s individual tax return for the year 2006 was due on October 15,

2007. But Hoang did not file a 2006 tax return until much later—on September 2,

2009, to be specific. This belated tax return reported an adjusted gross income of

$22,921.19 (including dividends of $19,027.84 and capital gains of $2,891.19) and

a taxable income of $13,221. Hoang left blank the fields for taxes paid and taxes

owed.

        The IRS was dubious about the accuracy of Hoang’s 2006 tax return—

particularly the reported gross and taxable income. Various different brokerage

firms submitted to the IRS Form 1099s which indicated that Hoang received a total

of $14,855,797 in proceeds from sales of securities during 2006.

        Given the large discrepancy between the income reported in Hoang’s tax

return and the sales proceeds reported by Hoang’s brokerage firms, the IRS issued

a notice of deficiency for the year 2006. The IRS notice, dated August 3, 2010,

contained the following determinations: (1) a deficiency of $5,188,587 in income

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taxes for 2006; (2) an “addition to the tax” of $1,297,533.50 for failure to file a

timely return; and (3) a penalty of $1,037,717.40 for understating the taxable

income on the 2006 tax return.

      The IRS arrived at these figures by treating all of Hoang’s sales proceeds

reflected in the Form 1099s—i.e., the entire $14,855,797—as capital gains. The

IRS did so because there was no information about the cost basis for the

securities—in other words, there was no evidence about how much Hoang had paid

for the securities he sold in 2006. Absent such information, the IRS treated the

entire $14,855,797 as capital gains. With that premise, the IRS calculated that

Hoang owed $5,188,587 in income taxes for 2006.

      On top of that income-tax deficiency, the IRS assessed two penalties: First,

the IRS added a 25 percent charge (or $1,297,533.50) because Hoang filed his

2006 tax return in September of 2009, which was long past the applicable due date.

Second, the IRS imposed a 20 percent penalty (or $1,037,717.40) because Hoang’s

2006 tax return significantly understated Hoang’s income.

B.    Hoang’s Petition in the Tax Court

      Hoang responded to the IRS notice by filing a Tax-Court petition disputing

the deficiency. Proceeding pro se, Hoang contended that the IRS’s notice of

deficiency was “totally invalid and illegal” for several reasons: (1) the IRS was

not authorized by the Internal Revenue Code to issue the notice; (2) the tax

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increase was fabricated; (3) the IRS failed to meet its burden to prove the legality

of the notice; (4) the notice “was designed to cover up the fact that [the IRS] was a

self-convicted perjurer”; and (5) the notice “was issued to retaliate” against Hoang

for reporting that the IRS committed perjury in a prior controversy between Hoang

and the IRS.

       Hoang also attempted to state a “counterclaim/charge” because “the issuance

of this [notice] constitute[d] a criminal act disguised as tax collection.” Hoang

demanded that the IRS pay over $75 million in fines and damages for its conduct.

C.     Discovery

       As litigation commenced in the Tax Court, the IRS made multiple attempts

to verify the accuracy of its notice of deficiency. Specifically, the IRS served

several discovery requests on Hoang to obtain information about his cost basis—in

other words, how much Hoang had paid for each of the securities he sold in 2006.

With that, more precise calculations could be made as to what part of the

$14,855,797 in 2006 sales proceeds were, in fact, capital gains.

       The IRS’s first attempt was a request for admission asking Hoang to

concede that he did indeed “receive[] $14,857,461 in capital gains during the 2006

income tax year.” 1 As an attachment to the request, the IRS provided Hoang with

       1
        The IRS calculated a total of $14,857,461 in capital gains by adding the reported
dividends and distributions Hoang received during 2006 ($1,664) to the reported 2006 sales
proceeds ($14,855,797).
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a detailed and lengthy list of securities sales Hoang made in 2006, including the

respective sales dates and proceeds of each sale.

      Hoang never properly answered this request for admission. Instead, he pro

se objected to the IRS’s request as unconstitutional. The Tax Court overruled this

objection and ordered Hoang to file an amended response. In lieu of answering the

request, Hoang asserted that the Tax Court lacked jurisdiction because the IRS’s

notice of deficiency was issued on August 3, 2010—more than three months after

the applicable statute of limitations allegedly expired on April 15, 2010. Hoang

also explained that there were “no more documents to be used at this late time

because all of them were discarded after [April 15, 2010].”

      The IRS then moved to deem the matters stated in the request as admitted.

The Tax Court deferred its ruling on the IRS’s motion until after trial and

specifically warned Hoang that he must present evidence of a cost basis for the

securities he sold in 2006. This was not the first time the Tax Court issued such a

warning: in denying a motion filed by Hoang, the Tax Court stated in writing that

Hoang had “accomplished nothing positive through the multiple motions he has

filed; henceforth, he might care instead to prepare for trial by focusing his energy

on amassing evidence of his basis in capital assets that he may have sold or

exchanged during the year in issue.”

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      Hoang also had further opportunities to provide such cost-basis information

during discovery. For example, the IRS served on Hoang a request for production

seeking “all documents reflecting your cost basis in each of the securities sold by

you during the 2006 income tax year.” Similarly, the IRS served an interrogatory

asking Hoang to provide a list detailing any cost basis he may have for any of the

securities he sold in 2006. But Hoang did not respond to these requests.

      Having received no valid responses to its inquiries, the IRS served on Hoang

a proposed stipulation of facts. As part of this proposed stipulation, the IRS

included the same detailed list of all securities Hoang sold in 2006, along with the

date and proceeds of each sale. After Hoang refused to stipulate to the proposed

facts, the Tax Court ordered Hoang to show cause why the proposed stipulation

should not be accepted as established. Hoang pro se responded by generally

denying the correctness of the stipulation of facts and disputing the Tax Court’s

authority over him. Concluding that this response was “evasive and not fairly

directed to the [IRS’s] proposed stipulation,” the Tax Court ordered that the

proposed stipulation of facts was “accepted as established.” This meant Hoang

stipulated that he received $14,855,797 in total proceeds from the sale of securities

in 2006.

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D.    The Trial

      As the case proceeded to trial, the Tax Court asked Hoang the critical

question of this case—whether Hoang’s 2006 sales proceeds of $14,855,797 were

indeed capital gains. The Tax Court explained to the pro se Hoang that it would be

in Hoang’s best interest to present a cost basis for the securities he sold in 2006.

      In response, Hoang stated that he did provide the required cost-basis

information to the IRS along with the 2006 tax return he filed in 2009. But,

according to Hoang, the IRS threw it all away.

       Hoang then presented Exhibit 4-p, a 13-page document containing

fragments of various other documents. The first two pages of Exhibit 4-p appear to

be duplicates of one page of the IRS’s August 2013 notice of deficiency—with

several added hand-written comments. The third page of Exhibit 4-p is difficult to

decipher: the bottom appears to be part of a Form 4868 Hoang filed on April 14,

2007 to request an extension for his 2006 tax return; the top of the document states

Hoang’s reasons for the requested extension.

      The fourth and fifth page of Exhibit 4-p are fragments of a document Hoang

ostensibly filed with the IRS on Oct 15, 2007, a Form 1040 with most fields left

blank. The sixth and seventh page of Exhibit 4-p are a Form 1040X, an “Amended

U.S. Individual Income Tax Return” which Hoang apparently filed on November

18, 2010. However, all amounts stated on the document are zeroes.

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      The eighth and ninth page of Exhibit 4-p appear to be yet another Form

1040X; this one apparently filed on April 29, 2011. In this document, Hoang

claimed that he had gross proceeds of $12,412,898.92 from the sale of securities

through the brokerage firm Scottrade. Hoang also asserted that his records from

Scottrade showed total securities purchases in the amount of $12,674,848.06. In

parenthesis, Hoang designated this amount as the cost basis for the securities he

sold through Scottrade in 2006. With that premise, Hoang claimed a capital loss of

$261,950.74 for the year 2006.

      This same document also referenced an Exhibit A and an Exhibit B as

attachments, and it appears that Hoang included these two attachments as the tenth

and eleventh page of Exhibit 4-p. The tenth page has a handwritten “Exh A” on

the bottom and appears to be one page of a “Composite Substitute 1099 Statement”

issued by Scottrade for the year 2006. It appears to be “page 2” of a multi-page

document. It also does not show the name of the Scottrade account holder.

However, the document does indicate proceeds of $12,412,898.92 from the sale of

“stocks, bonds, etc.”

      The eleventh page of Exhibit 4-p has a hand-written “Exh B” on the bottom

and appears to be “page 47” of a multi-page document issued by Scottrade. The

document is entitled “Supplemental Information” for the year 2006. It, too, does

not show the name of the Scottrade account holder. The document does, however,

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state “Total Purchases” of $12,674,849.06. But it does not indicate how the

$12,674,849.06 amount was determined, except with respect to three 2006

purchases of Walgreen Company stock and eight 2006 purchases of Xerox

Corporation stock. For each of these eleven transactions, the dates, share

quantities, and dollar amounts are listed. The total amount for these eleven

purchases is $211,198.00.

      The twelfth page of Exhibit 4-p is difficult to identify: it appears to be “page

3” of an answer or response to factual allegations. Finally, the thirteenth and last

page of Exhibit 4-p appears to be a part of the petition Hoang filed in Tax Court on

November 1, 2010.

      Hoang sought to admit Exhibit 4-p into evidence. But the Tax Court

excluded Exhibit 4-p in its entirety, concluding that the documents appeared

incomplete and altered, lacked authentication, and—in any event—had not been

provided before trial.

      The Tax Court also struck all testimony that was based on Exhibit 4-p. As

such, the Tax Court ruled inadmissible Hoang’s testimony that he filed an amended

2006 tax return in April of 2011 showing “a capital loss of $200,000” and Hoang’s

attempt to support this assertion with the two pages of Scottrade documents (“Page

2” or “Exh A” and “Page 47 or “Exh B”) he attached to this amended 2006 tax

return.

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      Before excluding this testimony, the Tax Court reviewed the two pages of

Scottrade documents and inquired whether the IRS could use them to compute a

cost basis for the securities Hoang sold in 2006. Counsel for the IRS indicated that

the IRS would “love to do that” but these two pages were plainly insufficient. The

two pages did not indicate how much Hoang paid for each of the securities he sold

in 2006.

E.    The Tax Court’s Decision

      After the trial, the Tax Court issued a thorough 48-page memorandum with

findings of fact and an opinion. The Tax Court found, among other things, that the

August 2010 notice of deficiency was timely and correctly determined that Hoang

had $14,857,461 in capital gains during the 2006 tax year. The latter

determination was established through the IRS’s request for admission that Hoang

“receive[] $14,857,461 in capital gains during the 2006 income tax year.” Hoang

had several opportunities to show why this admission sought by the IRS was not

true—but he failed to do so. This failure justified deeming the requested

admission established.

      Alternatively, the Tax Court explained that even if this request for admission

had not been deemed established, Hoang would have failed to meet his burden of

showing that the IRS’s determination of his 2006 capital gains was incorrect. The

Tax Court found that Hoang presented “no evidence to allow [the Tax Court] to

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estimate the cost bases of the securities sold in 2006.” The Tax Court therefore

concluded “that Hoang had capital gains of $14,857,461 as that amount is

calculated in the notice of deficiency.”

       The Tax Court then determined that Hoang (1) had a tax deficiency for the

year 2006 in the amount of $5,188,587; (2) was responsible for an addition to tax

in the amount of $1,297,533.50 because he filed his 2006 tax return 22 months past

the due date; and (3) incurred a $1,037,717.40 penalty for understating his tax

liability on his tax return.

       Hoang timely appealed to this Court.

                                     II. DISCUSSION 2

A.     Statute of Limitations

       Hoang contends that the IRS’s notice of deficiency, dated August 3, 2010,

was time barred as to the 2006 tax year. We disagree.

       Once a taxpayer has filed a tax return, the IRS has three years to assess taxes

against that taxpayer. 26 U.S.C. § 6501(a). This three-year period applies

“whether or not such return was filed on or after the date prescribed.” Id. But if

the taxpayer fails to file a return, the tax may be assessed “at any time.”

       2
         Hoang’s pro se appellate brief is, at times, difficult to follow. Given Hoang’s pro se
status, we have liberally construed his arguments. See Tannenbaum v. United States, 148 F.3d
1262, 1263 (11th Cir. 1998).
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Id. § 6501(c)(3). Put differently, the three-year statute of limitations begins to run

if and when the taxpayer files a tax return.

      Here, the evidence showed that Hoang did not file a 2006 tax return until

September 2, 2009. The IRS filed its notice of deficiency on August 3, 2010, less

than three years after September 2, 2009. As such, the IRS timely filed the notice

of deficiency.

      Hoang argues that he filed a tax return in April 2007 and, therefore, the

statute of limitations expired in April 2010. But the evidence does not support

Hoang’s contention. Instead of a tax return, Hoang filed only an application for an

extension in April 2007—which does not trigger the statute of limitations. The

Tax Court therefore correctly ruled that the IRS’s notice of deficiency was timely.

B.    Hoang’s 2006 Tax Liability

      The IRS calculated Hoang’s 2006 tax liability of $5,188,587 based on its

determination that Hoang had $14,857,461 in capital gains. The IRS based this

capital-gains determination on the various Form 1099s submitted by Hoang’s

brokerage firms, indicating that Hoang received at total of $14,855,797 in proceeds

from security sales during 2006. Without any evidence of a cost basis, the IRS

treated the entire $14,855,797 in sales proceeds as capital gains and calculated

Hoang’s 2006 tax liability accordingly.

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       The Tax Court correctly upheld the IRS’s capital-gains determination for

two reasons. First, the IRS served a request for admission asking Hoang to admit

that he indeed had capital gains of $14,857,461 in 2006. Hoang had many

opportunities to show why this requested admission was incorrect. He never did—

even though the Tax Court expressly and repeatedly urged him to do so.

Accordingly, we cannot say that the Tax Court erred in deeming the request for

admission established.

       Second, the IRS’s determination of Hoang’s 2006 capital gains was

correct—even without the request for admission. An IRS determination in a notice

of deficiency has “the support of a presumption of correctness,” and Hoang, as the

petitioner, “ha[d] the burden of proving it to be wrong.” Welch v. Helvering, 290
U.S. 111, 115, 54 S. Ct. 8, 9 (1933); Bone v. C.I.R., 324 F.3d 1289, 1293 (11th

Cir. 2003) (“[T]he Commissioner’s determinations in his notices of deficiency were

entitled to a presumption of correctness, and Taxpayers bore the burden of proving,

by a preponderance of the evidence, that the Commissioner’s determinations were

incorrect.”); see Tax Court Rule 142(a)(1) (“The burden of proof shall be upon the

petitioner, except as otherwise provided by statute or determined by the Court . . .

.”).

       Again, Hoang had multiple opportunities to come forward with evidence

showing that the IRS’s calculation of his 2006 capital gains was wrong. But

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Hoang never presented evidence of a cost basis for the securities he sold in 2006—

notwithstanding the Tax Court’s repeated warning that he must do so. Given

Hoang’s failure to provide evidence of a cost basis, the Tax Court correctly upheld

the IRS’s capital gains determination. See Better Beverages, Inc. v. United States,

619 F.2d 424, 428 n.4 (5th Cir. 1980) (“Where the taxpayer fails to carry this

burden to prove a cost basis in the item in question, the basis utilized by IRS,

which enjoys a presumption of correctness, must be accepted even where, as here,

the IRS has accorded the item a zero basis.”). 3

       Hoang’s only attempt to provide cost-basis information was his trial

testimony based on four of the 13 pages of documents contained in Exhibit 4-p.

As described in detail above, Hoang presented (1) an amended 2006 tax return

apparently filed in April 2011 (Form 1040X); (2) the one-page Scottrade

“Composite Substitute 1099 Statement” for the year 2006 (“Exh A” or “page 2”);

and (3) the one-page “supplemental information” provided by Scottrade (“Exh B”

or “page 47”).

       The Tax Court excluded Exhibit 4-p because it contained documents that

were incomplete, altered, and unauthenticated. The Tax Court also struck Hoang’s

testimony based on these documents. We need not decide whether the Tax Court

       3
         In Bonner v. City of Prichard, 661 F.2d 1206, 1209 (11th Cir.1981) (en banc), this Court
adopted as binding precedent all of the decisions of the former Fifth Circuit handed down prior
to the close of business on September 30, 1981.
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correctly excluded this evidence because, even if admitted, it would not meet

Hoang’s burden of establishing a cost basis for each of the securities he sold in

2006.

        One reference on the April 2011 amended 2006 tax return summarily claims

“total purchases” and a cost basis of $12,674,849.06. There is no itemization of

what securities are in that lump-sum cost basis, much less a calculation of what a

particular security cost and for how much it was sold. Thus, Hoang’s assertion of a

cost-basis in his amended tax return is not enough to overcome the presumption of

correctness afforded to the IRS’s August 2010 notice of deficiency.

        The only support Hoang offered for this cost-basis assertion was the one-

page “Supplemental Information” (“Exh B” or “page 47”). This document states

“Total Purchases” of $12,674,849.06, but it does not explain how this particular

number was calculated. It lists only eleven security purchases totaling $211,198.

This document would not allow the IRS to match each of Hoang’s 2006 sales of

securities with a corresponding purchase. At best, the document could suggest that

Hoang bought a total of $12,674,849.06 in securities through Scottrade in 2006.

But that in no way establishes how much Hoang paid for each of the securities he

sold in 2006. As such, the document falls far short of providing cost-basis

evidence sufficient to rebut the presumption of correctness enjoyed by the IRS’s

notice of deficiency.

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      In light of Hoang’s failure to provide evidence of a cost basis for the

securities he sold in 2006, we must affirm the Tax Court’s determination of

Hoang’s 2006 tax liability.

C.    Hoang’s Remaining Contentions

      Throughout his brief, Hoang discusses two “grievances” he allegedly filed in

2007. The “grievances” are, ostensibly, the two reasons Hoang listed in his April

2007 request for an extension to file his 2006 tax return. Both appear to relate to

prior controversies between Hoang and the IRS. First, Hoang explained that he

was waiting for the IRS to issue a corrected taxable income for a prior tax year.

Second, Hoang stated that he was waiting on instructions from the Tax Court “on

how to switch from accrual method to cash basis with regard to reporting taxable

interest/capital gains (losses).”

      We fail to see the legal significance of either one of Hoang’s “grievances.”

Whatever their merit, neither “grievance” relieved Hoang from his basic duty to

file an accurate and timely tax return for the year 2006. Nor did Hoang’s

“grievances” discharge Hoang of his burden to present evidence of a cost basis to

rebut the presumption of correctness afforded to the IRS’s notice of deficiency.

The Tax Court correctly rejected Hoang’s arguments premised on the two

“grievances.”

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       Similarly, we find no merit in Hoang’s argument that the Tax Court erred in

denying Hoang’s motion to approve his “counterclaims” against the IRS. Hoang’s

motion was “For an Order Suppressing the Notice of Deficiency and Adjudicating

[His] Counterclaims Against [the IRS] and Referring Criminal Malfeasance to

Federal Law Enforcement.” The Tax Court denied this motion as procedurally

defective because it combined several types of requests and addressed the merits of

prior motions. In his brief, Hoang does not make any arguments that his filing was

procedurally correct or did not address the merits of prior motions. Accordingly,

Hoang has abandoned any such argument. See Timson v. Sampson, 518 F.3d 870,

874 (11th Cir. 2008) (noting that “issues not briefed on appeal by a pro se litigant

are deemed abandoned”).4

              AFFIRMED.

       4
        We also find no merit in Hoang’s arguments regarding the Tax Court’s own civil or
criminal liability.
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