Curtis G. Lockett v. Commissioner of IRS

[DO NOT PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
________________________ FILED
U.S. COURT OF APPEALS
No. 08-12466 ELEVENTH CIRCUIT
JANUARY 5, 2009
Non-Argument Calendar
________________________ THOMAS K. KAHN
CLERK
Agency No. 10374-05
CURTIS G. LOCKETT,
EDNA L. LOCKETT,
Petitioners-Appellants,
versus
COMMISSIONER OF IRS,
Respondent-Appellee.
________________________
Petition for Review of a Decision of the
United States Tax Court
_________________________
(January 5, 2009)
Before ANDERSON, DUBINA and MARCUS, Circuit Judges.
PER CURIAM:
Appellants Curtis and Edna Lockett, pro se,1 appeal the Tax Court’s order
determining tax deficiencies in the amounts of $3,049.00 for 2001, $32,675.00 for
2002, and $2,581.00 for 2003. On appeal, the Locketts procedurally contend that
we should recuse ourselves and that we are without appellate jurisdiction. With
respect to the substantive issues, the Locketts argue that the Tax Court improperly
required them to substantiate their deductions and incorrectly found that they had
not substantiated the deductions claimed for tax years 2001, 2002, and 2003.2
I.
By statute, “[a]ny justice, judge, or magistrate judge of the United States
shall disqualify himself in any proceeding in which his impartiality might
reasonably be questioned.” 28 U.S.C. § 455(a). When considering whether recusal
is appropriate, we consider “whether an objective, disinterested, lay observer fully
informed of the facts underlying the grounds on which recusal was sought would
entertain a significant doubt about the judge’s impartiality.” Bolin v. Story,
1
We liberally construe pro se pleadings and briefs. See Finch v. City of Vernon,
877 F.2d 1497, 1504 (11th Cir. 1989).
2
The Locketts also challenge the Tax Court’s refusal to issue an order to enforce an
agreement allegedly reached in a separate federal district court civil action. However, issuance of
such an order would have exceeded the Tax Court’s jurisdiction. See 26 U.S.C. § 7429.
Additionally, the Locketts request review of the Tax Court’s denial of their motion for summary
judgment. However, review of a motion for summary judgment is not appropriate where, as
here, a judgment is entered following a full trial of the merits. Lind v. United Parcel Service,
Inc., 254 F.3d 1281, 1284 (11th Cir. 2001).
2
225 F.3d 1234, 1239 (11th Cir. 2000) (citation omitted). Generally, the claim of
bias under § 455 “must show that the bias is personal as distinguished from
judicial in nature.” Id. (citation omitted). Thus, unless “pervasive bias is shown,
a judge’s rulings in the same or a related case are not a sufficient basis for
recusal.” Id.
Because the record demonstrates that our only interaction with the Locketts
has been the issuance of opinions resolving their cases in the course of judicial
proceedings without a display of bias, we conclude that recusal is not necessary.
See Bolin, 225 F.3d at 1239.
II.
We review issues of jurisdiction de novo. Federal Election
Comm’n v. Reform Party of United States, 479 F.3d 1302, 1306-07 (11th Cir.
2007). Section 7429 of Title 26 of the United States Code authorizes the Tax
Court to exercise jurisdiction over, and enter a judgment in, a civil action for
determination of tax liability. 26 U.S.C. § 7429(b)(2)(B). Although its principal
office is in the District of Columbia, the Tax Court may sit anywhere in the United
States. 26 U.S.C. §§ 7445, 7446. Section 7482 of Title 26 of the United States
Code provides for appellate review of a Tax Court decision to be in the circuit of
the petitioner’s legal residence or where stipulated in writing by government and
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petitioner. 26 U.S.C. § 7482(b)(1)(A) and (2); Becker v. Comm’r of Internal
Revenue, 852 F.2d 524, 524-25 (11th Cir. 1988). If a Tax Court decision is
appealed to the wrong circuit, the circuit may transfer the appeal to the appropriate
circuit. Becker, 852 F.2d at 525-26.
Having reviewed the record and the briefs of the parties, we conclude that
jurisdiction is proper. The Locketts undisputedly live within the Eleventh Circuit.
The Internal Revenue Service has not stipulated to review in another circuit.
Therefore, the Circuit for the District of Columbia properly transferred this appeal
for our review. See 26 U.S.C. § 7482(b)(1)(A) and (2); Becker, 852 F.2d at
525-26.
III.
“We review de novo the tax court’s conclusions of law and review findings
of fact for clear error.” Davis v. Comm’r of Internal Revenue, 210 F.3d 1346,
1347 (11th Cir. 2000). The taxpayer bears the burden of submitting evidence that
supports his claim of entitlement to a deduction and the amount of that
entitlement. Gatlin v. Comm’r of Internal Revenue, 754 F.2d 921, 923
(11th Cir. 1985). Further, unsupported allegations by a taxpayer of misconduct by
the government and others is not considered as credible evidence to meet his
burden. Hradesky v. Comm’r of Internal Revenue, 540 F.2d 821, 823 n.2 (5th Cir.
4
1976).3
Section 6001 of the Internal Revenue Code (“IRC”) requires that a taxpayer
must keep and maintain financial records sufficient to permit verification of
income and expenses. 26 U.S.C. § 6001. When taxpayers’ records are lost or
destroyed through circumstances beyond their control, they are entitled to
substantiate the claimed deductions by use of other credible evidence. Villarreal
v. Comm’r of Internal Revenue, 76 T.C.M. (CCH) 920 (1998). However, the Tax
Court is not bound to accept unverified, undocumented testimony of a taxpayer.
Id. Although the Tax Court may estimate amounts, any estimations must have a
reasonable evidentiary basis. Id. From our review of the record, we discern no
evidentiary or burden of proof errors.
Discounting Mr. Lockett’s incredible testimony, the record does not support
a conclusion that the government had “unclean hands” in an equitable sense, or
that the Locketts’ property and possessions were illegally foreclosed upon, stolen,
or otherwise coerced from them. Further, Mr. Lockett admitted that the family
property was foreclosed due to failure to make mortgage payments, that he had
seven days to remove belongings, and that he had “seven warehouses” of
3
In Bonner v. City of Prichard, Ala., 661 F.2d 1206, 1209 (11th Cir.1981) (en banc), we
adopted as binding precedent decisions of the former Fifth Circuit issued before October 1, 1981.
5
documents related to the case. Thus, the Locketts did not demonstrate that records
were lost or destroyed due to circumstances beyond their control, so as to entitle
them to substantiate their deductions through other credible evidence. Even so,
the Tax Court did not require the Locketts to produce documents that were
allegedly destroyed or stolen. Instead, the Tax Court requested that the Locketts
present other credible evidence to support a reasonable estimate to determine the
deductible amount of the losses. However, the Locketts did not offer any
verification or documentation to support Mr. Lockett’s testimony with respect to
valuation.
IV.
In reviewing a Tax Court decision, we will only find clear error if we are
left with a definite conviction that a mistake was made. Coggin v. Comm’r of
Internal Revenue, 71 F.3d 855, 860 (11th Cir. 1996). Further, “[t]he
Commissioner’s determination of a deficiency is presumed correct, and the
taxpayer has the burden of proving it is incorrect.” Webb v. Comm’r of Internal
Revenue, 872 F.2d 380, 381 (11th Cir. 1989). Taxpayers must submit evidence
that supports their claims of entitlement to a deduction and the amount of that
entitlement. Gatlin, 754 F.2d at 923.
IRC section 165 permits for a deduction for any loss that: (1) occurs during
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the taxable year; and (2) is not compensated for by insurance, or otherwise.
26 U.S.C. § 165(a). Generally, the deductible amount is determined by the fair
market value prior to the loss or the adjusted basis in the property.
26 C.F.R. § 1.165-7(b).
Individuals may claim losses of property arising from fire or theft.
26 U.S.C. § 165(c). Individual casualty losses must exceed $600.00 ($100 for
taxable years beginning after December 31, 2009); their value is reduced by the
amounts of reimbursement received, and they may be claimed to the extent the
loss exceeds 10% of the taxpayer’s adjusted gross income. Id. § 165(h). Theft
losses are treated as being sustained during the taxable year in which they are
discovered. Id. § 165(e). We have defined theft as “any criminal appropriation of
another’s property to the use of the taker.” Edwards v. Bromberg, 232 F.2d 107,
110 (5th Cir. 1956); accord with 26 C.F.R. § 1.165-8(d). Generally, foreclosures
and repossession do not constitute theft or casualty loss. Johnson v. Comm’r of
Internal Revenue, 81 T.C.M. (CCH) 1538 (2001).
Additionally, individuals may claim losses incurred in a trade or business.
26 U.S.C. § 165(c). For a taxpayer to be carrying on a trade or business, the
“taxpayer must be involved in the activity with continuity and regularity and . . .
the taxpayer’s primary purpose for engaging in the activity must be for income or
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profit.” Comm’r of Internal Revenue v. Groetzinger, 480 U.S. 23, 35, 107 S.
Ct. 980, 987, 94 L. Ed. 2d 25 (1987).
A taxpayer may deduct expenses that are ordinary and necessary in carrying
on a trade or business, but may not deduct personal, living, or family expenses.
26 U.S.C. § 262(a). To be deductible, an item must: “(1) be paid or incurred
during the taxable year; (2) be for carrying on any trade or business; (3) be an
expense; (4) be a necessary expense; and (5) be an ordinary expense.” Comm’r of
Internal Revenue v. Lincoln Sav. & Loan Ass’n, 403 U.S. 345, 352, 91 S. Ct. 1893,
1898, 29 L. Ed. 2d 519 (1971) (internal quotation marks omitted).
IRC section 217 allows as “a deduction moving expenses paid or incurred
during the taxable year in connection with the commencement of work by the
taxpayer as an employee or as a self-employed individual at a new principal place
of work.” 26 U.S.C. § 217(a). The new principal place of work must be at least
50 miles from the taxpayer’s former residence. Id. § 217(c)(1)(A).
Based on our review of the record, we discern no error in the Tax Court’s
determination that the tax deficiencies for tax years 2001, 2002, and 2003 were
correct. Although the Locketts submitted pictures of a burned residence, they did
not present any documentary evidence to support the valuation they claimed for
their residence and the personal property therein, to establish their adjusted basis
8
for the residence and other items, to explain any insurance amounts that were paid
or not paid, or to explain their failure to claim the loss until 2001. Further,
Mr. Lockett admitted that he did not know the value and suggested that he had
received some insurance reimbursement for the loss.
Similarly, the Locketts submitted pictures of the foreclosure of their real
estate and eviction of their personal property that they characterized as a theft and
destruction of their property. However, the theft claim form submitted to prove
theft related to a theft alleged to have occurred in June 2003, which was not the
year in which the theft losses were claimed. Moreover, the record shows that they
were lawfully foreclosed upon for failure to pay their mortgage resulting in their
eviction in 2001. Because foreclosure and eviction are not criminal acts, the
Locketts did not demonstrate that they were victims of theft for purposes of
26 U.S.C. § 165(c).
With regard to business losses and deductions, Mr. Lockett admitted that
some of the deductions were incorrect. He suggested that he claimed business
losses based on his inability to work while incarcerated for 22 months during the
applicable period. Due to his incarceration and lack of sales activity, Mr. Lockett
did not demonstrate that he was carrying on a trade or business during the
applicable tax years to deduct expenses under 26 U.S.C. § 262(a). Further, he
9
failed to demonstrate, as required, that any amounts he paid or incurred during the
claimed year were necessary or ordinary.
Lastly, the Locketts did not offer any documentary evidence or testimony to
support the incurrence of $41,952.00 in moving expenses during 2002.
Mr. Lockett’s testimony supports that conclusion that he and his family moved in
September 2001 because they were foreclosed upon, not due to new employment.
In summary, the Locketts failed to present credible evidence to substantiate
the deductions they claimed for tax years 2001, 2002, and 2003 in order to
overcome the presumption that the IRS had correctly determined the tax
deficiencies. See Gatlin, 754 F.2d at 923; Webb, 872 F.2d at 381. Accordingly,
we affirm the judgment of the Tax Court.
AFFIRMED.
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