Visco v. Commissioner IRS ( 2002 )

Opinions of the United
2002 Decisions States Court of Appeals
for the Third Circuit
2-13-2002
Visco v. Commissioner IRS
Precedential or Non-Precedential:
Docket 0-2049
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Recommended Citation
"Visco v. Commissioner IRS" (2002). 2002 Decisions. Paper 116.
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Filed February 13, 2002
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 00-2049
DIANA T. VISCO,
Petitioner
v.
COMMISSIONER OF INTERNAL REVENUE
On Appeal From the United States Tax Court
(No. 97-23336)
Tax Court Judge: Honorable Robert P. Ruwe
Submitted Under Third Circuit LAR 34.1(a)
November 20, 2001
Before: NYGAARD, MCKEE and GARTH, Circuit Judges .
(Filed: February 13, 2002)
OPINION OF THE COURT
PER CURIAM:
Diana Visco appeals the United States Tax Court's
decision sustaining the Internal Revenue Service's ("IRS")
determination of a deficiency in Visco's 1992 Federal
income tax.1 We will affirm the Tax Court's order for the
reasons that follow.
I.
Visco was employed as a reading specialist for the
Cheltenham Township School District (the "district") until
1989.2 Visco was asked not to return to work in June of
1989, and in August 1989 was suspended. The district's
school board (the "board") voted to dismiss Visco in
November 1989. Visco appealed this decision. The Secretary
of Education for the Commonwealth of Pennsylvania
("Secretary") reversed the board's decision and ordered the
district to reinstate Visco to the same or a comparable
position and to award her back pay with interest for the
years she was wrongfully dismissed. The board appealed,
but the Secretary's order was affirmed by the
Commonwealth Court of Pennsylvania on June 3, 1991.
Visco returned to employment at the district for the 1991-
1992 school year, and was compensated for her work that
year. She did not return to work after June 1992.
In compliance with the Secretary's order, the district
attempted to pay Visco her back pay for the 1989-90 and
1990-91 school years. The district first issued two checks
on February 25, 1992 representing salary for the two years,
plus interest, less payroll deductions. Visco never cashed
_________________________________________________________________
1. The Tax Court reversed the Commissioner's assessment of an addition
to tax pursuant to 26 U.S.C. S 6651(a)(1). The IRS does not challenge
this ruling.
2. Unless otherwise indicated, the factual history is taken from the
"Findings of Fact" in the Tax Court's opinion. See Visco v. CIR, No.
23336-97, slip op. (U.S.Tax.Ct. March 7, 2000).
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these checks, and they were later voided by the district. On
December 21, 1992, the district again issued Visco two
checks, again for the back pay for the two school years,
plus interest, less payroll deductions. These checks, along
with a third for reimbursement for health benefits Visco
had not received, were delivered by courier to Visco on
December 28, 1992. She took the checks from the courier,
telephoned the district's attorney to inform him she was
refusing the checks, and then returned the checks to the
courier.
The district mailed Visco a Form W-2 for 1992, showing
taxable income and withholdings for 1992. It reflected the
salary she earned for 1992, plus the back pay she was
issued. On April 15, 1993, Visco filed a Form 4868,
"Application for Automatic Extension of Time to File U.S.
Individual Income Tax Return." Visco then filed a Form
4852, "Substitute for Form W-2, Wage and Tax Statement
of Form 1099R, Distributions from Pensions, Annuities,
Retirement or Profit-Sharing Plans, IRA's, Insurance
Contracts, etc." She filed this Form with the Criminal
Investigation Unit of the IRS in June 1993. In her
substitute Form W-2, Visco explained why she believed the
district's W-2 was inaccurate:
(1) Money reported as earnings may actually be
monies illegally withheld from taxpayer's
retirement fund during the years of credited
service (1963-1992);
(2) If, money reported as earnings, constitute
employer contractual liability for wrongful
discharge of taxpayer, the amount entered is
inaccurate. . . . .;
(3) Monies issued to taxpayer identified as payroll
checks . . . dated December 21, 1992 are not
constructively received because they are
inaccurately identified as retirement salary.
Taxpayer has not filed for any application for
retirement allowance. Moreover, these checks serve
to validate a grossly inaccurate retirement fund.
Consequently, the taxpayer does not know how to
complete tax filing for the 1992 tax year and
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kindly requests a thorough investigation into this
matter.
Visco v. CIR, at 6 (quoting Substitute form W-2) (footnotes
omitted). Along with her substitute Form W-2, Visco
submitted a letter requesting a criminal investigation into
the matter, in which she stated that she wished to file her
1992 tax return in a way which would allow her to preserve
her legal rights. Visco then filed a Form 2688,"Application
for Additional Extension of Time to File U.S. Individual
Income Tax Return," explaining that she was waiting for
information regarding her criminal investigation.
After Visco's refusal of the two checks, the
Commonwealth Court ordered the district to pay the total
back pay, plus interest and less payroll deductions, to the
Commonwealth Court. The Commonwealth Court later
opened a bank account with Dauphin Deposit Bank and
Trust Co. for Visco's benefit, and notified Visco by letter
that her back pay had been deposited in an interest bearing
account. On August 28, 1997, the IRS mailed a statutory
notice of deficiency to Visco for the taxable year 1992.
Visco has neither attempted to access the fund in the
Dauphin bank account, nor filed an income tax return for
1992.
II.
The Tax Court determined that Visco's gross income for
the taxable year 1992 included the paychecks she received
and cashed for her work in the district in 1992
($38,223.86). With respect to the back pay and interest
thereon, Visco argued, in the alternative that (1) she never
received these amounts; (2) the money was a damage award
and not back pay; and (3) the income is an unauthorized
withdrawal from her pension plan. The Tax Court
concluded that Visco constructively received the back pay
and interest on the back pay. Accordingly, the Tax Court
determined that the back pay and interest on back pay
must be included in Visco's 1992 gross income.
III.
On appeal, Visco raises three claims: (1) "[t]he chamber
conference held on January 19, 1999, immediately prior to
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the petitioner's bench trial culminated pre-trial practice
governed by the court that unfairly restrained petitioner's
discovery of respondent's case"; (2) "[t]he chamber
conference held on January 19, 1999 immediately prior to
the petitioner's bench trial culminated pre-trial practice
governed by the court that unfairly restrained petitioner's
development of her defense through substantive facts to be
made a part of the required stipulation of fact;" and (3)
"[t]he court committed plain error by entering findings and
opinion of tax deficiency predicated on legally insufficient
evidence and exclusion of substantive fact through trial
governance that manifested an arbitrary application of
motion in limine practice."
Visco's first and second claims relate to pretrial practice,
and are raised for the first time in this appeal. As these
claims were not raised before the Tax Court, we will not
consider them. Resyn Corp. v. United States, 851 F.2d 660,
664 (3d Cir. 1988) (citing Singleton v. Wulff , 428 U.S. 106,
120, 96 S.Ct. 2868, 2877 (1976). Further, as these claims
were not preserved below, they have been waived. See
Holmes v. Pension Plan of Bethlehelm Steel Corp., 213 F.3d
124, 139 (3d Cir. 2000). Visco was given the opportunity to
object to the pre-trial procedures, specifically the adoption
of the factual stipulations. She made no objections, but
instead endorsed the proceedings. (Notes of Transcript ("Tr.")3
at 3).
Visco's final claim appears to allege that the Tax Court's
opinion was based on insufficient evidence. This claim is
belied by the record before us. There was ample evidence in
the record to support the Tax Court's decision. The Tax
Court's opinion thoroughly outlines why Visco's challenges
fail under each of the alternative theories she presented.
First, the Tax Court correctly found that Visco had
constructively received the monies from the district. Visco
argues that because she neither accepted nor cashed the
checks from the district, and she failed to access the
Dauphin Bank account, she never "received" the funds. "So
long as the ``income . . . is subject to a man's unfettered
_________________________________________________________________
3. Transcript of proceedings in United States Tax Court on Tuesday,
January 19, 1999.
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command and . . . he is free to enjoy [it] at his option[, it]
may be taxed to him as income, whether he sees fit to enjoy
it or not.' " Leavens v. CIR, 467 F.2d 809, 813 (3d Cir.
1972) (quoting Corliss v. Bowers, 281 U.S. 376, 378, 50
S.Ct. 336, 337 (1930)). There were no restrictions on the
money when the district mailed Visco the checks or when
they were delivered to her by courier. See Walter v. United
States, 148 F.3d 1027, 1029 (8th Cir. 1998). Further, to
access the Dauphin Bank account, Visco need only write a
letter to the Commonwealth Court informing the court of
her interest in accessing the money, and the court will
notify the bank that Visco may receive the money. (Tr. at
126). Visco had unfettered access to and control of the
money; she just chose not to touch it.
Visco also asserts that the money from the district is not
back pay, but rather represents a settlement in a tort-like
situation. We agree with the Tax Court that there is nothing
in the record to support this claim. However, even if this
were an accurate description of the circumstances,
settlement funds would still be included in Visco's taxable
income for 1992. See Greer v. United States, 207 F.3d 322,
326 (3d Cir. 2000) (noting that settlement agreements
constitute gross income unless expressly excepted)
(citations omitted).
Finally, Visco alleges that the money from the district is
not for back pay, but rather involved her retirement salary.
There is nothing in the record to indicate that Visco's
retirement fund is involved with these payments from the
district, nor has she adequately explained her belief that
retirement funds were involved in this transaction. The Tax
Court correctly found this claim without merit.
As the Tax Court noted, it appears that Visco had
genuine concerns about the nature of her taxable income
for the year 1992, and refrained from filing her income tax
return until the matter could be resolved. Nevertheless, we
agree with the Tax Court's conclusion that the payments of
back pay, plus interest, were taxable income for 1992, and
as such the deficiency determined by the IRS stands. 4
_________________________________________________________________
4. The total amount of Visco's deficiency for 1992 was determined to be
$37,224. However, this is the total amount she owed for the year. The
district withheld $35,134.61 in federal taxes from Visco's paychecks in
1992. Visco then must only make a payment of the difference, $1,980
(plus interest).
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We will affirm the decision of the Tax Court. Visco's
motion for correction or modification of the record pursuant
to F.R.A.P. 10(e) is denied.
A True Copy:
Teste:
Clerk of the United States Court of Appeals
for the Third Circuit
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