Court Opinion

ID: 3036700
Source: CourtListenerOpinion
Date Created: 2015-10-13 22:54:48.075638+00
Date Added: 2024-06-11T11:48:43.044619
License: Public Domain

United States Court of Appeals
                           FOR THE EIGHTH CIRCUIT
                                   ___________

                                   No. 03-3917
                                   ___________

Diane S. Blodgett,                   *
                                     *
          Appellant,                 *
                                     * Appeal from the United States
    v.                               * Tax Court.
                                     *
Commissioner of Internal Revenue,    *
                                     *
          Appellee.                  *
                                ___________

                             Submitted: October 22, 2004
                                Filed: January 12, 2005
                                 ___________

Before BYE, LAY, and GRUENDER, Circuit Judges.
                           ___________

BYE, Circuit Judge.

      Diane Blodgett, a special education teacher, appeals from a tax court
determination in favor of the Internal Revenue Service. We affirm.

                                          I

       We adopt the facts as set forth in the tax court's opinion, T.C.M. 2003-212
(2003), and simply restate some critical facts so as to make understandable the legal
issues presented herein. In the 1970’s, Ms. Blodgett’s ex-husband Michael Blodgett
founded T.G. Morgan, Inc., a business engaged in the buying and selling of rare
coins. The enterprise began as a sole proprietorship, later incorporated, utilizing a
subchapter S election designation for income tax purposes, in 1985. As of 1992, Mr.
and Ms. Blodgett each owned 27.5 percent of the business. Their three children
owned 15 percent each.

       Mr. Blodgett operated the business similar to a ponzi scheme. By all accounts,
it was successful and enabled the Blodgetts to lead a lavish lifestyle. As examples,
the Blodgetts, personally or through their business entity, held rare coins and
historical documents with a collective value of more than $20 million, a
condominium and docking space in Key Largo, Florida, purchased for $583,379, a
Mercedes 560 SL, a 23-foot Cutty Cabin Sunrunner boat and a Simbari oil painting
worth approximately $85,000.

       Eventually, the long arm of the law caught up with Mr. Blodgett as he was
charged with and convicted of several counts of fraud. His wife was not charged with
any criminal wrongdoing. In addition to the criminal troubles, the Federal Trade
Commission (FTC) initiated a civil action against T.G. Morgan and Mr. Blodgett,
alleging deceptive trade practices and seeking permanent injunctive relief and
consumer redress. T.G. Morgan, Mr. Blodgett and the FTC reached a settlement
which was memorialized in a consent order signed March 4, 1992. Diane Blodgett
signed the consent order as a nonparty spouse.

       The consent order provided for the creation of a “settlement estate” and a
“litigation estate,” to include assets transferred from T.G. Morgan and the Blodgetts.
A receiver was appointed to liquidate the assets in both estates and disburse the
money. The litigation estate was used to pay litigation expenses for the defense of
actual or reasonably anticipated governmental enforcement actions against the
Blodgetts. The settlement estate was used to pay claims of defrauded customers of
the business. The litigation estate was established with $300,000, funded solely by
virtue of the liquidation of a so-called Coin Fund. The remaining proceeds from the

                                         -2-
liquidation of the Coin Fund were transferred to the settlement estate. The settlement
estate also included the Florida property and the Simbari painting, among other
assets.

       After the onset of the FTC case but prior to the consent order, creditors of the
business filed an involuntary bankruptcy petition against the business. On August 21,
1992, the district court ordered the receiver in the FTC case to turn over all assets
held in the settlement estate to the bankruptcy trustee (turnover order). The turnover
order specified those assets determined in the bankruptcy proceeding not to be the
property of the T.G. Morgan bankruptcy estate to be returned to their rightful owners.
After the turnover order, the Florida condominium and Simbari painting each became
parts of the bankruptcy estate and were not returned to the settlement estate.

       As part of the liquidation proceedings, the bankruptcy trustee prepared and
filed T.G. Morgan’s tax returns for the years 1990 through 1998. Diane Blodgett did
not participate in the preparation of these returns. On the 1992 return, filed by the
trustee in February 1999, T.G. Morgan reported an ordinary loss in the amount of
$17,202. The trustee prepared and issued to the shareholders a notice indicating each
respective share of the loss amount and the fact such loss was deductible only to the
extent of shareholder basis in the corporation, which the trustee determined was zero.

      The document at issue on appeal is Ms. Blodgett’s 1998 personal federal
income tax return prepared by her ex-husband from prison. It reported wage income
of $45,788.24 and income tax withheld of $5,582.56. The return also included a
$38,046,524 carryover business loss deduction. Such figure reportedly represented
the amount described on the proof of claim filed by the FTC in the bankruptcy case
against T.G. Morgan. The return claimed a refund of all of her withholdings for
1998. Ms. Blodgett attached a letter to her tax return explaining the large loss

                                         -3-
carryovers stemmed from the loss of property arising out of the consent agreement
she signed as a nonparty spouse.1

       On February 15, 2000, the I.R.S. sent Ms. Blodgett a notice of deficiency
disallowing the claimed deduction. She then petitioned the tax court for a
redetermination. At trial, the tax court characterized the primary issue for decision
as whether she was entitled to all or part of the $38,046,524 loss deduction claimed
on her 1998 return as the carryover of a 1992 business loss.2 Ms. Blodgett also
claimed the following specific items as deductible losses: (1) $733,500 for the theft
loss of a pension fund; (2) $225,000 as carryforward legal expenses; (3) a $142,482
investment loss on a condominium and lot in Florida; (4) a $42,500 investment loss
on a Simbari painting; (5) a $561,375 carryforward business or investment loss on
rare coins; and (6) a $125,403 carryforward business or investment loss on historical
documents.

       The tax court entered a decision in favor of the I.R.S., finding Ms. Blodgett
failed to meet her burden of proof on the issues of ownership, loss, value and
deductibility of the items contributed to the settlement. She subsequently filed the
current appeal. On appeal, she contends the tax court erred in not shifting the burden

      1
         Ms. Blodgett claimed deductions on her 1994, 1995, 1996, and 1997 returns
that were similar in amount and nature to the loss deduction claimed on the 1998
return. She claimed and received refunds of her annual withholdings of $736.36 in
1996 and $2,722.78 in 1997. The 1996 and 1997 returns also attached explanatory
letters. In the letter attached to the 1996 return, petitioner alleged that the FTC stole
the pension plan funds worth $815,000 and claimed that the assets turned over to
settle the FTC case “were still ‘our’ property when the FTC made hundreds of illegal
sales in commercially unreasonable manner--while serving as fiduciary.”
      2
       At trial, petitioner stated that she was no longer claiming the entire amount of
that deduction; yet, she reiterated that she was entitled to deduct losses carried
forward from T.G. Morgan.

                                          -4-
of proof to the Commissioner of Internal Revenue, pursuant to 26 U.S.C. § 7491, as
to whether there was a loss; in failing to likewise shift the burden of proof when the
Commissioner introduced new evidence on the eve of trial; and in treating the
trustee’s tax return as presumptively correct without further authentication.

                                          II

       We apply different standards of review to different components of a tax court’s
decision. We review a tax court’s factual determinations under a clearly erroneous
standard. Clajon Gas Co. v. C.I.R., 354 F.3d 786, 789 (8th Cir. 2004). Under this
standard, “[w]e will uphold the Tax Court’s finding unless we are ‘left with a definite
and firm conviction’ that the Tax Court has committed a mistake.” Estate of Ford v.
C.I.R., 53 F.3d 924, 926-27 (8th Cir. 1995) (quoting Estate of Palmer v. C.I.R., 839
F.2d 420, 423 (8th Cir. 1988)). When the tax court’s fact finding is based on a
credibility determination, such finding is nearly unreviewable. See Anderson v. City
of Bessemer City, 470 U.S. 564, 575 (1985) (stating a fact finder’s determination on
credibility can virtually never be considered clearly erroneous). In contrast, a tax
court’s legal conclusions and mixed questions of law and fact are subject to de novo
review. Clajon Gas, 354 F.3d at 789.

A.    Shifting Burden of Proof on Tax Loss

       The question of whether a taxpayer produced evidence sufficient to shift the
burden of proof to the I.R.S. under 26 U.S.C. § 7491 is a legal one which we review
de novo. Estate of Mitchell v. C.I.R., 250 F.3d 696, 701 (9th Cir. 2001). We evaluate
the sufficiency of the evidence under the applicable standard of review against a
backdrop of each party’s burden of proof. Limited, Inc. v. C.I.R., 286 F.3d 324, 331
(6th Cir. 2000). Generally, the I.R.S. determination on the existence of a tax
deficiency is presumed correct; thus, the taxpayer generally bears the burden of
proving entitlement to a claimed deduction by a preponderance of the evidence.

                                         -5-
Griffin v. C.I.R., 315 F.3d 1017, 1021 (8th Cir. 2003). This burden, however, may
shift to the I.R.S. to disprove entitlement to a claimed deduction if the taxpayer
introduces “credible evidence” complete with the necessary substantiation and
documentation sufficient to fulfill the requirements of § 7491.3 Interex, Inc. v. C.I.R.,
321 F.3d 55, 58 (1st Cir. 2003).

       We begin with a discussion of credible evidence. In Griffin, we defined
“credible evidence” for purposes of § 7491 as “the quality of evidence, which after
critical analysis, the court would find sufficient upon which to base a decision on the
issue if no contrary evidence were submitted (without regard to the judicial
presumption of IRS correctness).” 315 F.3d at 1021. Ms. Blodgett contends the tax
court ignored § 7491 by failing to shift the burden of disproving her loss to the

      3
       Section 7491(a) states, in relevant part:

      (1) General rule--If, in any court proceeding, a taxpayer introduces
      credible evidence with respect to any factual issue relevant to
      ascertaining the liability of the taxpayer for any tax imposed by subtitle
      A or B, the Secretary shall have the burden of proof with respect to such
      issue.
      (2) Limitations--Paragraph (1) shall apply with respect to an issue only
      if--
      (A) the taxpayer has complied with the requirements under this title to
      substantiate any item;
      (B) the taxpayer has maintained all records required under this title and
      has cooperated with reasonable requests by the Secretary for witnesses,
      information, documents, meetings, and interviews; and
      (C) in the case of a partnership, corporation, or trust, the taxpayer is
      described in section 7430(c)(4)(A)(ii).
      (3) Coordination--Paragraph (1) shall not apply to any issue if any
      other provision of this title provides for a specific burden of proof with
      respect to such issue.

                                          -6-
Commissioner after she introduced uncontroverted testimony, which she alleges was
thoroughly corroborated by documentary evidence, that, as part of the settlement
agreement, she irrevocably lost millions of dollars in assets when she turned over the
assets to the FTC receiver. Ms. Blodgett’s argument, however, fails to the extent
she relies on Griffin for the proposition any testimony offered by the taxpayer
tending to support a claimed deduction is sufficient to shift the burden of proof to
the I.R.S. While a tax court must consider the testimony as “if no contrary evidence
were submitted (without regard to the judicial presumption of IRS correctness),” a
tax court has the right in the first instance to reject the testimony as incredible. See
Marcella v. C.I.R., 222 F.2d 878, 883 (8th Cir. 1955) (stating a tax court “is not
compelled to believe evidence which to it seems improbable, or to accept as true
uncorroborated evidence of interested witnesses even though uncontradicted”); cf.
Willis v. State Farm Fire and Cas. Co., 219 F.3d 715, 720 (8th Cir. 2000) (stating “a
jury is free to disbelieve any witness, even if the testimony is uncontradicted or
unimpeached”). A fact finder may choose to disbelieve evidence on its face even
without evidence to the contrary. See Steel v. Downs, 438 F.2d 310, 312 (8th Cir.
1971) (stating “[t]he trier of the facts is not required to accept the uncontradicted
testimony of an uncorroborated interested party, although such testimony is not
contradicted by other testimony.”); cf. Anderson, 470 U.S. at 575 (highlighting a trial
judge’s ability to “. . .be aware of the variations in demeanor and tone of voice that
bear so heavily on the listener’s understanding of and belief in what is being said.”).
This concept is not only fundamental since incredible testimony, axiomatically,
cannot constitute credible evidence, but this concept is contained within the
definition of credible evidence. Ms. Blodgett conveniently disregards the portion
of the credible evidence definition requiring a tax court to conduct a “critical
analysis” of the evidence. If a critical analysis requires nothing else, it requires a tax
court to conduct a credibility determination before labeling evidence “credible.”
With this qualification on her interpretation of Griffin, we will now analyze each
claimed deduction.

                                           -7-
      1.     Business Carryover Expenses

       Ms. Blodgett claimed a deduction for a $38,046,524 net operating loss
suffered by T.G. Morgan in 1992 stemming from the turnover of assets to the FTC.
Sub-S corporation losses are generally deductible by its shareholders to the extent
of the shareholder’s basis. 26 U.S.C. § 1366(a) & (d)(1). As proof of the loss, she
introduced evidence the FTC filed a $38 million proof of claim as creditor of T.G.
Morgan in the bankruptcy proceeding. She also introduced the testimony of her
husband who testified part of the $38 million turned over to the FTC were personal
assets. The question before us is whether this evidence was “credible evidence”
sufficient to shift the burden of proof to the I.R.S. Even though the deduction was
a mere $45,788.24 out of the claimed $38 million loss, we find the evidence was not
sufficient to support the deduction.

        The testimony establishes the FTC made a claim, but it does not establish the
claim was actually paid. Assuming the claim was paid, the loss would only be
deductible to the extent of Ms. Blodgett’s basis in the corporation. Oren v. C.I.R.,
357 F.3d 854, 857 (8th Cir. 2004). Relying upon T.G. Morgan’s 1992 tax return, the
tax court concluded her basis in the corporation was zero. While she disputes the
accuracy of the return and argues the personal assets turned over to the FTC as part
of the $38 million settlement increased her basis in the corporation, we find the tax
court did not clearly err in reaching its basis conclusion in light of the bankruptcy
trustee’s notice and the lack of certainty as to the ownership of the assets contributed
to the settlement. However, even if we assume the claim was paid and further
assume she had sufficient basis in the corporation, the deduction is only allowed if
she did not already deduct the loss in a prior year. She did not introduce evidence
in this regard. At a minimum, a taxpayer must produce credible evidence as to each
material factual assertion necessary to support a claimed deduction before the burden
shifts to the I.R.S. See Griffin, 315 F.3d at 1021 (defining credible evidence as the
quality of evidence sufficient to support a favorable decision on an issue).

                                          -8-
Furthermore, she failed to maintain and produce the proper records to substantiate
her claim, thus she did not meet the burden shifting requirements. See 26 U.S.C.
§§ 7491(2)(A) & (B).

      2.     Theft Loss of Pension Fund

       Ms. Blodgett claimed a deduction of $733,500 for the theft loss of a pension
fund, which she alleged was stolen by the FTC and other governmental agencies and
officials.4 The only evidence this loss occurred as a result of theft was her testimony.
She argues her testimony is sufficient to shift the burden of proof. Griffin, 315 F.3d
at 1020-21 (reversing a tax court finding that the taxpayer’s uncorroborated and self-
serving testimony was not enough to shift the burden to the I.R.S.). If all she needed
to show to support the deduction was evidence of theft, then she may be correct.
However, in addition to evidence of an actual theft, theft losses are deductible only
in the year discovered. 26 U.S.C. § 165(e). Therefore, she must have produced
evidence of her discovering the loss in 1998, which she failed to do. The tax court
found insufficient evidence to prove even the mere existence of a pension fund. The
court also found incredible her contention government officials involved in the
bankruptcy proceeding and civil action stole the money from the pension fund. Even
if a pension fund did exist and it was stolen by government officials, she is not
entitled to a deduction because the tax court found she would have discovered these
happenings well before 1998.

      4
       According to the tax court, T.G. Morgan had a defined benefit pension plan,
the T.G. Morgan Defined Benefit Pension Plan (pension plan). However, the record
is not complete with respect to the formation, administration, and records of the
pension plan. Insofar as the record reveals, its activity was not reported to the
Internal Revenue Service on Form 5500-EZ, Annual Return of One-Participant
(Owners and Their Spouses) Retirement Plan. Ms. Blodgett introduced at trial an
unfiled Form 5500-EZ relating to the pension plan.
                                          -9-
      3.     Carryforward Legal Expenses

      Ms. Blodgett claimed a deduction of $225,000 for carryforward legal
expenses. Legal expenses incurred as an ordinary and necessary business expense
are deductible, but legal expenses incurred as a personal expense are nondeductible.
26 U.S.C. § 162(a). It is unclear from the record what evidence, if any, she produced
in support of the deduction for carryforward legal expenses, but the tax court found
“she failed to prove that her costs, if any, for defending herself and Mr. Blodgett
from civil and criminal liability connected with the business were other than
nondeductible personal expenses.” Furthermore, to the extent she could have shown
a business purpose, her loss could only be deducted in proportion to her basis in the
corporation. Oren, 357 F.3d at 857. As mentioned, she failed to produce convincing
evidence showing her basis in the corporation.

      4.     Loss of Condominium

        Ms. Blodgett testified to the purchase of a condominium in Florida for the
purpose of renting it out and sustained a $142,482 investment loss when the property
was transferred to the settlement estate and later the bankruptcy trustee. The Tax
Code allows a deduction for a loss incurred in connection with a transaction
conducted for profit, but does not allow a deduction for a personal, living or family
expense. 26 U.S.C. § 165 (c)(2). Ms. Blodgett testified she and her husband bought
the property as an investment. She argues her testimony is sufficient to shift the
burden of proof. The tax court, however, found her testimony lacked credibility at
trial. Incredible testimony is not sufficient to shift the burden of proof. Griffin, 315
F.3d at 1021. In any event, the tax court ultimately found the objective evidence,
namely, the evidence of the Blodgetts’ lack of expertise in the real estate business,
lack of market analysis prior to purchase, and the failure to actually rent out the
property, outweighed any incredible statements supporting the deduction. The tax

                                          -10-
court concluded the Blodgetts purchased the property for personal, living and family
purposes.

      5.     Loss on Simbari Painting

        Ms. Blodgett testified she purchased an $85,000 Simbari oil painting as an
investment and claimed to suffer a $42,500 loss (one-half of its cost) when the
painting was transferred to the settlement estate. The Tax Code allows a deduction
for a loss incurred in connection with a transaction conducted for profit, but does not
allow a deduction for a personal, living or family expense. 26 U.S.C. § 165 (c)(2).
Her testimony indicated she bought the painting as an investment. She argues her
testimony is sufficient to shift the burden of proof. The tax court’s decision is
unclear as to the credibility of her testimony in support of this specific deduction.
The tax court, when necessary, clearly dismissed the credibility of her singular
testimony in support of the other claimed deductions, but the manner in which this
portion of the tax court’s decision reads it only dismissed the credibility after
considering the objective evidence to the contrary. In the light of the overall tone
of the decision, this discrepancy may be inadvertent, but if Ms. Blodgett’s testimony
is credible, the burden of disproving entitlement to this deduction should have
shifted to the I.R.S. Griffin, 315 F.3d at 1021 (defining credible evidence).
However, regardless of which party bore the burden of proof, the overwhelming
weight of evidence supported a finding for the I.R.S. The tax court found both Mr.
and Ms. Blodgetts’ lack of expertise in art, their lack of history in art investments
and their failure to obtain a market analysis of the painting did not support her claim
the painting was purchased as an investment. The tax court found, based on Mr.
Blodgett’s testimony, that personal pleasure was the primary reason for owning the
painting. Therefore, even if the tax court erred in not shifting the burden of proof,
any such error was harmless, as will be explained in subsection 7 below.

                                         -11-
      6.     Loss on Rare Coins and Historical Documents

       Ms. Blodgett testified she suffered deductible carryforward business or
investment losses on $561,375 in rare coins and $125,403 in historical documents.
The tax court, however, found her self-serving testimony incredible. She produced
no other specific evidence regarding the ownership, value and transfer of the rare
coins and historical documents claimed as carryforward business or investment
losses. Accordingly, the tax court found she did not meet her burden of proof with
respect to the ownership, value, and transfer of the rare coins and historical
documents. Considerable evidence existed showing the Blodgetts did not own the
coins and documents, rather T.G. Morgan and its customers did. Moreover, if she
claimed the losses as theft losses, such are only deductible in the year discovered,
and she did not show when she discovered them. 26 U.S.C. § 165(e).

      7.     Significance of the Burden Shift

       According to Ms. Blodgett, any failure to shift the burden of proof would
require us to reverse the decision of the tax court and remand the case with
instructions to retry it with the burden assigned to the I.R.S. Once again, she relies
on Griffin. See 315 F.3d at 1022 (reversing and remanding for failure to shift the
burden of proof). In Griffin, like the instant case, the tax court declined to shift the
burden of proof to the I.R.S. under § 7491 because the taxpayer’s “uncorroborated
and self-serving testimony was not enough to overcome the clear evidence of non-
deductibility.” Id. at 1021. On appeal, the taxpayer claimed he produced sufficient
“credible evidence” within the meaning of § 7491 to shift the burden of proving the
issue of non-deductibility to the I.R.S. Id. at 1020-21. The court agreed. Upon
reviewing the taxpayer’s testimony in absence of any evidence or presumptions to
the contrary, the court determined the taxpayer produced enough credible evidence
to support the claimed deductions. Id. The court remanded the case to the tax court
for further proceedings despite the tax court’s statement in its opinion the burden of

                                          -12-
proof was irrelevant because the weight of the evidence supported a finding for the
I.R.S. Id. at 1022. Rebuking the tax court, the court declared “it is not sufficient to
summarily conclude that the outcome is the same regardless of who bears the burden
of proof; if that were the case, § 7491 would have no meaning.” Id.

      In contrast to Griffin, another panel of this Court has found a tax court does
not commit error in not addressing the burden of proof because “‘[t]he shifting of the
evidentiary burden of preponderance is of practical consequence only in the rare
event of an evidentiary tie.’” Polack v. C.I.R., 366 F.3d 608, 613 (8th Cir. 2004)
(quoting Cigaran v. Heston, 159 F.3d 355, 357 (8th Cir. 1998)). While the Polack
panel addressed the burden shift in the context of a new matter rather than under
§ 7491, id., the significance of a burden shift is of general application. The
circumstances of Griffin and Polack are remarkably similar in that the tax court in
both cases did not decide the burden of proof question because the weight of the
evidence supported a finding for the I.R.S. Compare Griffin, 315 F.3d at 1020, with
Polack, 366 F.3d at 613. We are thus faced with an apparent conflict in precedents
on the significance of the shifting burden of proof.

        “When faced with conflicting precedents we are free to choose which line of
cases to follow.” Graham v. Contract Transp., Inc., 220 F.3d 910, 914 (8th Cir.
2000). We choose to follow the guidance of Polack. There is a simple reason for
our choice. In a situation in which both parties have satisfied their burden of
production by offering some evidence, then the party supported by the weight of the
evidence will prevail regardless of which party bore the burden of persuasion, proof
or preponderance. See Philip N. Jones, The Eighth Circuit Weighs In on the Burden
of Proof–Will It Change the Outcome After All?, 98 J. Tax’n 226, 230 (2003).
Therefore, a shift in the burden of preponderance has real significance only in the
rare event of an evidentiary tie. Id. Here, the record is clear, if the tax court did err
in failing to shift the burden of proof, any error was harmless because the weight of
the evidence supported a decision for the Commissioner.

                                          -13-
B.    Shifting Burden of Proof on New Evidence

       Ms. Blodgett claims the tax court erred by not shifting the burden of proof to
the I.R.S. on an alleged new issue on the eve of trial. Tax Court Rule 142 states,
“[t]he burden of proof shall be upon the [taxpayer], . . . except that, in respect of any
new matter, . . . it shall be upon the [Commissioner].” A new position taken by the
Commissioner is not necessarily a “new matter” if it merely clarifies or develops the
Commissioner’s original determination without requiring the presentation of
different evidence, being inconsistent with the Commissioner’s original
determination, or increasing the amount of the deficiency. Estate of Kanter v. C.I.R.,
337 F.3d 833, 851 (7th Cir. 2003).

        We review de novo the question of whether the alleged new issue is
considered a “new matter” for Rule 142 burden shifting purposes. Id. The asserted
“new matter” involves the 1992 tax return of the T.G. Morgan bankruptcy estate,
discovered and disclosed five days before trial, which allegedly uncovered evidence
there was insufficient basis to support the claimed deductions. However, the
discovery of the tax return and the I.R.S.’s subsequent reliance on the tax return does
not constitute a “new matter.” In its first trial memorandum fourteen months before
trial, the I.R.S. alleged Ms. Blodgett did not have sufficient basis in the corporation
to support the deduction. The discovery of the tax return only supplements the
Commissioner’s original allegation. Furthermore, the discovery of the tax return did
not increase the amount of the deficiency, but was merely evidence tending to
disprove her entitlement to the deduction. Thus, the matter was not new and the tax
court did not err by failing to shift the burden of proof.

C.    Admission of Trustee’s Tax Return

       Finally, Ms. Blodgett argues the contents of the tax return prepared by the
trustee represent inadmissible hearsay; thus, the tax court’s treatment of the return

                                          -14-
as presumptively correct was reversible error. A tax return is generally considered
inadmissible hearsay with the exception that the return may constitute an admission
by the taxpayer or someone on the taxpayer’s behalf. Greenbaum v. United States,
80 F.2d 113, 125 (9th Cir. 1935). We express no opinion on the possible hearsay
nature of the return, but note she failed to raise this hearsay objection at trial. An
argument not raised at trial cannot be raised for the first time on appeal “unless the
obvious result would be a plain miscarriage of justice.” United States v. Gutierrez,
130 F.3d 330, 332 (8th Cir. 1997) (plain error review) (quoting Davis v. Wyrick, 766
F.2d 1197, 1204 (8th Cir. 1985)). Ms. Blodgett, however, not only failed to raise a
hearsay objection at trial, she stipulated to the authenticity and admissibility of the
return. Although she did not stipulate to the return’s accuracy, relevancy or
materiality, by stipulating to the return’s admissibility without further reservation she
waived any hearsay objection and thus forfeited any right to appellate plain error
review. See United States v. Olano, 507 U.S. 725, 732-33 (1991) (finding an
intentional relinquishment of a right extinguishes plain error review); United States
v. Tulk, 171 F.3d 596, 600 (8th Cir. 1999) (finding plain error review of the trial
court’s admission of a prior misdemeanor conviction was precluded because of the
defendant’s deliberate waiver).

                                           III

      We affirm the judgment of the tax court.
                      ______________________________

                                          -15-