Court Opinion

ID: 61653
Source: CourtListenerOpinion
Date Created: 2010-04-26 04:09:58+00
Date Added: 2024-06-11T14:58:33.477386
License: Public Domain

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             IN THE UNITED STATES COURT OF APPEALS
                                                                     FILED
                     FOR THE ELEVENTH CIRCUIT U.S. COURT OF APPEALS
                       ________________________ ELEVENTH CIRCUIT
                                                                April 2, 2008
                             No. 07-14207                     THOMAS K. KAHN
                         Non-Argument Calendar                    CLERK
                       ________________________

                           Tax Court No. 8832-06

JUDY C. CARGILL,

                                                              Petitioner-Appellant,

                                   versus

COMMISSIONER OF INTERNAL REVENUE,

                                                          Respondent-Appellee.

                       ________________________

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

                               (April 2, 2008)

Before ANDERSON, HULL and FAY, Circuit Judges.

PER CURIAM:
      Judy C. Cargill, pro se, appeals the U.S. Tax Court’s order (1) dismissing

Cargill’s petition for redetermination of a deficiency, pursuant to Rule 149(b) of

the Tax Court Rules of Practice and Procedure for failure to produce evidence,

(2) determining the amount of deficiency and additional tax due, and (3) ordering

that Cargill pay a $4,000 penalty as a sanction, pursuant to 26 U.S.C.

§ 6673(a)(1)(B). Cargill argues that the Tax Court abused its discretion by

dismissing her petition because it failed to acknowledge her signed 1999 tax return,

which, according to Cargill, shifted the burden to the Commissioner to show that

the deficiency was correct. In addition, Cargill maintains her argument that she

was exempt from filing a federal income tax return because the Internal Revenue

Service (“IRS”) 1040 Tax Form was not compliant with the 1995 Paperwork

Reduction Act (“PRA”), 44 U.S.C. §§ 3501-3520, due to the absence of a valid

Office of Management and Budget (“OMB”) control number. Cargill also argues

that the Tax Court abused its discretion by imposing a sanction against her for

maintaining a frivolous position. Both parties filed motions for sanctions in this

Court. For the reasons set forth more fully below, we affirm the decision of the

Tax Court. In addition, we grant the Commissioner’s motion for sanctions and

deny Cargill’s motion.

      The Commissioner notified Cargill that she was deficient for the 1999 tax

year because she failed to report $19,147 in income. In her pro se original and
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amended petitions seeking a redetermination of the deficiency, Cargill claimed that

she was not required to file a federal tax return because the 1999 1040 IRS Tax

Form was not compliant with the PRA. Thus, Cargill argued that the burden

shifted to the Commissioner, pursuant to 26 U.S.C. § 7491, to prove the amount of

deficiency.

       In its written order, the Tax Court stated that both the original and amended

petitions contained “frivolous and groundless arguments that merit no extended

discussion.” The court stated, “[s]uffice it to say that the lack of an OMB number

does not serve to invalidate an IRS notice nor does the lack of an OMB number

violate the [PRA,] . . . [and Cargill’s] argument regarding the exemption amount is

equally frivolous.” In a footnote, the court stated that Cargill had a previous tax

case dismissed for failure to state a claim and a $1,000 penalty was imposed

against her, pursuant to 26 U.S.C. 6673(a). The court ordered that Cargill file an

amendment to the petition in order to identify specific exemptions, deductions, and

credits.

       In her “Amendment to Amended Petition,” Cargill again asserted her PRA

argument. Cargill attached a copy of an unsigned joint 1999 IRS 1040 return 1 and

a corresponding IRS Schedule A that itemized various deductions and an IRS

       1
         Cargill later provided a signed copy of the 1999 joint return. However, the
Commissioner maintains that the joint return is not valid because both Cargill and her husband
had already filed individual returns for the 1999 tax year.
                                                 3
Schedule C that itemized various business expenses.

      In its written order of dismissal and decision, the Tax Court dismissed the

petition, pursuant to Rule 149(b), because Cargill failed to produce evidence. The

court noted that it based its decision on the Commissioner’s stipulation of facts that

were deemed established. The court specifically found that Cargill failed to

substantiate her claimed deductions and business expenses set forth on her

unsigned joint IRS 1040 Form. The court also determined that, for the 1999 tax

year, there was (1) a deficiency in income tax due in the amount of $4,419, (2) an

addition to tax due in the amount of $662.85, pursuant to I.R.C. § 6651(a)(1), and

(3) a $4,000 penalty as a sanction, pursuant to I.R.C. § 6673. Cargill appeals the

Tax Court’s decision.

                                          I.

      We review a Tax Court’s dismissal for failure to appear or adduce evidence,

pursuant to Rule 149(b), for abuse of discretion. See Crandall v. C.I.R., 650 F.2d

659, 660 (5th Cir. Unit B July 13, 1981) (applying abuse of discretion standard to

dismissal for failure to properly prosecute, pursuant to Rule 123(b)). “The Tax

Court’s findings must stand unless clearly erroneous.” Webb v. C.I.R., 872 F.2d

380, 381 (11th Cir. 1989).        A pro se appellate brief is entitled to liberal

construction. See Finch v. City of Vernon, 877 F.2d 1497, 1504 (11th Cir. 1989).

      The Tax Court has promulgated Rules of Practice and Procedure governing
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the conduct of proceedings in that court. See 26 U.S.C. § 7453. Under Rule

149(b):

      Failure to produce evidence, in support of an issue of fact as to which
      a party has the burden of proof and which has not been conceded by
      such party’s adversary, may be ground for dismissal or for
      determination of the affected issue against that party. Facts may be
      established by stipulation in accordance with Rule 91, but the mere
      filing of such stipulation does not relieve the party, upon whom rests
      the burden of proof, of the necessity of properly producing evidence
      in support of facts not adequately established by such stipulation.

26 U.S.C. foll. § 7453, Tax Court Rule 149; see also Roat v. C.I.R., 847 F.2d 1379,

1383 (9th Cir. 1988) (determining that the Tax Court was within its discretion to

grant the Commissioner’s motions to dismiss because the taxpayer failed to argue

the merits of the deficiencies).

      Under Rule 123(b) of the Tax Court Rules of Practice and Procedure:

      For failure of a petitioner properly to prosecute or to comply with
      these Rules or any order of the Court or for other cause which the
      Court deems sufficient, the Court may dismiss a case at any time and
      enter a decision against the petitioner. The Court may, for similar
      reasons, decide against any party any issue as to which such party has
      the burden of proof, and such decision shall be treated as a dismissal.

26 U.S.C. foll. § 7453, Tax Court Rule 123(b). Moreover, “a decision rendered . . .

in consequence of a dismissal, other than a dismissal for lack of jurisdiction, shall

operate as an adjudication on the merits.” Id., Tax Court Rule 123(d).

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

the taxpayer has the burden of proving it is incorrect.” Webb, 872 F.2d at 381.
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Nonetheless, “[i]f, 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.” 26 U.S.C. § 7491(a)(1) (emphasis

added).

      The PRA of 1980, Pub. L. No. 96-511, 94 Stat. 2812 (1980), states, in part,

that “no person shall be subject to any penalty for failing to maintain or provide

information to any agency if the information collection request involved . . . does

not display a current control number assigned by the [OMB] Director.” Neff, 954

F.2d at 699 (quoting 44 U.S.C. § 3512 (1980)) (emphasis added). As a result of

the 1995 Amendments, that provision now provides:

      (a) Notwithstanding any other provision of law, no person shall be
      subject to any penalty for failing to comply with a collection of
      information that is subject to this subchapter if--

            (1) the collection of information does not display a valid
            control number assigned by the Director in accordance
            with this subchapter; or

            (2) the agency fails to inform the person who is to
            respond to the collection of information that such person
            is not required to respond to the collection of information
            unless it displays a valid control number.

44 U.S.C. § 3512(a) (1995) (emphasis added). Tax forms are covered by the PRA.

See Dole v. United Steelworkers of Am., 494 U.S. 26, 32-33, 110 S.Ct. 929, 933,

                                         6
108 L.Ed.2d 23 (1990).

      In Neff, we rejected the argument that a tax return need not be filed because

of the absence of an OMB control number on Treas.Reg. § 1.6091-2 (as amended

in 1978), which states where income tax returns must be filed. Neff, 954 F.2d at

699-700. Specifically, we stated that “Congress created [the taxpayer’s] duty to

file the Returns in 26 U.S.C. § 6012(a), and . . . Congress did not enact the PRA’s

public protection provision to allow OMB to abrogate any duty imposed by

Congress.” Id.; see also 26 U.S.C. § 7203 (stating penalties for willful failure to

file return, supply information, or pay tax); James v. United States, 970 F.2d 750,

753 n.6 (10th Cir. 1992) (noting that the lack of an OMB number on IRS notices

and forms does not violate the PRA).

      At least one circuit court has determined that the 1995 PRA Amendments do

not alter the conclusion that the IRS 1040 Form is in compliance with the PRA.

See United States v. Patridge, 507 F.3d 1092, 1094 (7th Cir. 2007), pet. for cert.

filed, (U.S. Feb. 11, 2008) (No. 07-1045) (rejecting taxpayer’s argument that the

IRS 1040 Form lacked a valid OMB number and stating that “we have no doubt

that the IRS has complied with the [PRA],” even though the OMB number

displayed on the IRS 1040 Form has been constant since 1981).

      Initially, Cargill’s claim that she was not required to file a federal tax return

because the IRS 1040 Form failed to comply with the 1995 PRA is without merit,
                                          7
and the 1995 Amendments did not alter that result.

      Despite Cargill’s claim to the contrary, both the Commissioner and the Tax

Court acknowledged the Schedule A itemized deductions and the Schedule C

business expenses, even though the Commissioner maintained that the 1999 joint

return was invalid. However, the stipulation of facts, which was deemed admitted,

provided that Cargill had not filed a valid return for the 1999 tax year and had not

provided any substantiation to support the claimed deductions and expenses on her

unsigned joint return. Further, other than the addition of her signature, Cargill

failed to provide any evidence that she was entitled to those deductions and

expenses she claimed on the return, even though the Tax Court provided her with

ample opportunity to do so. Thus, the Commissioner’s deficiency determination

was presumptively correct, and Cargill failed to meet her burden of introducing

credible evidence with respect to the issue of whether she was entitled to the

deductions and expenses she claimed.          Accordingly, because Cargill failed to

produce evidence on an issue of fact to which she had the burden of proof, the Tax

Court did not abuse its discretion by dismissing Cargill’s petition for

redetermination of a deficiency.

                                        II.

      We review the Tax Court’s imposition of sanctions for an abuse of

discretion. Roberts v. C.I.R., 329 F.3d 1224, 1229 (11th Cir. 2003).
                                         8
      Section 6673 permits the Tax Court to impose sanctions in any amount up to

$25,000, if the taxpayer “institutes or maintains proceedings primarily for delay or

his position is frivolous or groundless.” Id.; see also 26 U.S.C. § 6673(a)(1)(A)-

(B). In Roberts, we affirmed sanctions where the law was settled prior to the

proceedings, and the taxpayer was “on notice that his claims were frivolous.”

Roberts, 329 F.3d at 1229; see also Pollard v. Comm’r, 816 F.2d 603, 604-05 (11th

Cir. 1987) (holding no abuse of discretion where (1) Tax Court specifically found

frivolous taxpayer’s argument that had been rejected by this Court on numerous

occasions, and (2) taxpayer had previously brought other frivolous tax claims);

Webb, 872 F.2d at 381 (holding that the Tax Court did not abuse its discretion by

imposing a $2,300 sanction against the taxpayers because, even though the

taxpayers claimed charitable contribution deductions on their federal income tax

returns, the taxpayers failed to demonstrate any charitable contributions to a

qualified organization).

      Cargill’s claim that she was not required to file a federal tax return has been

rejected by this Court. Moreover, (1) Cargill was on notice that her claim was

frivolous and that she would be sanctioned, (2) Cargill continued to maintain her

position, and (3) Cargill previously had been sanctioned by the Tax Court.

Accordingly, the Tax Court did not abuse its discretion in imposing $4,000 in

sanctions against Cargill.
                                         9
                                        III.

      The Commissioner moves for sanctions to be imposed against Cargill for

maintaining a frivolous appeal, pursuant to Rule 38 of the Federal Rules of

Appellate Procedure and 28 U.S.C. § 1912. The Commissioner reports that the

average expense in attorney salaries and other costs incurred in the defense of

frivolous taxpayer appeals in which sanctions were awarded during 2004 and 2005

is greater than $11,000 and asks that this Court impose a sanction against Cargill in

the amount of $8,000.

      Cargill also moves for sanctions against four attorneys with the Department

of Justice, Tax Division, Appellate Section.      According to Cargill, this Court

should impose $8,000 in sanctions, pursuant to Rule 38 and Rule 11 of the Federal

Rules of Civil Procedure, for maintaining a frivolous position and denying Cargill

protection under the PRA.

      Pursuant to Rule 38, “[i]f a court of appeals determines the appeal is

frivolous, it may, after a separately filed motion or notice from the court and

reasonable opportunity to respond, award just damages and single or double costs

to the appellee.” Fed.R.App.P. 38; see also 26 U.S.C. § 7482(c)(4) (“The United

States Court of Appeals and the Supreme Court shall have the power to require the

taxpayer to pay to the United States a penalty in any case where the decision of the

Tax Court is affirmed and it appears that the appeal was instituted or maintained
                                         10
primarily for delay or that the taxpayer’s position in the appeal is frivolous or

groundless”); 28 U.S.C. § 1912 (“Where a judgment is affirmed by the Supreme

Court or a court of appeals, the court in its discretion may adjudge to the prevailing

party just damages for his delay, and single or double costs”).        “The advisory

committee notes to Fed.R.App.P. 38 clearly indicate that attorney’s fees, as well as

double costs, can be awarded to the appellee in the event that the appellant

prosecutes a frivolous appeal.” Biermann v. Comm’r, 769 F.2d 707, 708 n.1 (11th

Cir. 1985).

      In light of the settled case law rejecting the position advanced by Cargill,

together with the explicit warnings offered by the Tax Court, Rule 38 sanctions

against Cargill are appropriate.

      Cargill’s motion for sanctions against the Commissioner is without merit.

Accordingly, Cargill’s motion for sanctions is DENIED.

      In light of the foregoing, the decision of the Tax Court is

      AFFIRMED; the Commissioner’s motion for sanctions in the lump-sum of

$8,000 is GRANTED.

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