Martens v. CIR ( 2001 )

UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
_______________________
No. 00-60418
Civil Docket #4652-98
_______________________
DAN E. MARTENS; SUSAN J. MARTENS,
Petitioners-Appellants,
versus
COMMISSIONER OF INTERNAL REVENUE,
Respondent-Appellee.
_________________________________________________________________
Appeal from the United States District Court
for the Northern District of Texas
_________________________________________________________________
February 21, 2001
Before REYNALDO G. GARZA, DAVIS, and JONES, Circuit Judges.
PER CURIAM *:
The court has carefully considered this appeal in
light of the Tax Court decision, the briefs, the facts, and oral
arguments of counsel. Having done so, we are unable to find clear
factual error or any legal error in the Tax Court’s conclusion that
the loans to the Stork Shop, Inc. by the taxpayers became non-
business bad debts in 1993 and were thus nondeductible. Garner v.
*
Pursuant to 5TH CIR. R. 47.5, the Court has determined that this
opinion should not be published and is not precedent except under the limited
circumstances set forth in 5TH CIR. R. 47.5.4.
Commissioner, 987 F.2d 267 (5th Cir. 1993). Further, the taxpayers
did not meet their burden of proving that their payment of the
Stork Shop’s debts in 1994 was an ordinary and necessary business
expense of the taxpayers.
However, because of this court’s decision in Streber v.
Commissioner, 138 F.3d 216, 223 (5th Cir. 1998), the Tax Court
erred in assessing a substantial understatement penalty on the tax
liability for the erroneously deducted non-business bad debt.
Inasmuch as this determination turned on a question of fact (the
taxpayers’ motive), where there was evidence going both ways, and
a multiplicity of authority existed, there was “substantial
authority” for the taxpayers’ position. See 26 U.S.C. §
6662(d)(2)(B); Osteen v. Commissioner, 62 F.3d 356, 359 (11th Cir.
1995). But by the same token, taxpayers did not advance sufficient
evidence or authority to insulate from this penalty the attempted
1994 business expense deduction, which is accordingly affirmed.
The judgment of the Tax Court is therefore affirmed as
modified to omit the substantial understatement penalty for the
1993 non-business bad debt.
AFFIRMED as MODIFIED.
2