Robert Helbig, Trustee v. Cir

FILED
NOT FOR PUBLICATION OCT 19 2010
MOLLY C. DWYER, CLERK
UNITED STATES COURT OF APPEALS U.S . CO UR T OF AP PE A LS
FOR THE NINTH CIRCUIT
ROBERT HELBIG, No. 09-70339
Petitioner, Tax Ct. No. 8011-06
v.
MEMORANDUM *
COMMISSIONER OF INTERNAL
REVENUE,
Respondent.
Appeal from a Decision of the
United States Tax Court
Submitted October 8, 2010**
San Francisco, California
Before: THOMPSON, SILVERMAN and McKEOWN, Circuit Judges.
Robert Helbig, as trustee of the estate of Charles Don Helbig, appeals the
decision of the Tax Court that, based on disallowance of his claimed losses from
investing in a jojoba bean partnership, Helbig is properly liable for tax additions
*
This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
**
The panel unanimously concludes this case is suitable for decision
without oral argument. See Fed. R. App. P. 34(a)(2).
for negligence for tax years 1983, 1984, and 1985 and a substantial understatement
addition for tax year 1983. We review the Tax Court's findings of negligence for
clear error. Little v. Comm'r, 106 F.3d 1445, 1449 (9th Cir. 1997). 'We defer to
the expertise which the Tax Court brings to bear on complex factual situations',
Church by Mail, Inc. v. Comm'r, 765 F.2d 1387, 1390 (9th Cir. 1985), and we
acµnowledge here that the Tax Court had the benefit of a trial in maµing its factual
findings.
We note as a preliminary matter that Helbig and his lawyer failed to respond
to the Commissionerùs request for admissions, including request number 21, which
specifically asµed Helbig to admit that he did not exercise due care in claiming the
losses in question. Helbig v. Comm'r, T.C. Memo 2008-243 at 6-7. Thus, the
request was properly deemed admitted. As the Tax Court found, the effect of this
admission was to establish that Helbig failed to exercise due care. However, liµe
the Tax Court we also consider the merits of this case and find that even without
relying on the admission, the record establishes that the Tax Court did not commit
clear error in finding Helbig was properly subject to the negligence additions.
Helbig argues that he acted as a reasonable investor when claiming his
deduction by exercising due care and reasonably relying on the professional advice
of his certified public accountant ('CPA'). The Tax Court properly cited Ninth
2
Circuit precedent that a negligence determination 'depends upon both the
legitimacy of the underlying investment, and due care in the claiming of the
deduction.' Sacµs v. Comm'r, 82 F.3d 918, 920 (9th Cir. 1996). The Tax Court
reasonably relied upon a previous case binding upon all partners in the Contra
Costa Jojoba Research Partners in finding that the investment underlying this
appeal 'lacµed legitimacy from its inception.' Helbig v. Comm'r, T.C. Memo
2008-243 at 9. It further found 'the R&D agreement was designed and entered
into solely to provide a mechanism to disguise the capital contributions of the
limited partners as currently deductible expenditures'. Id.Once the Commissioner has made a finding of negligence, the burden is on
the taxpayer to show he exercised due care. Howard v. Comm'r, 931 F.2d 578,
582 (9th Cir. 1991). It was not clear error for the Tax Court to conclude, on the
record at trial, that Helbig did not meet this burden and thus find him liable for the
negligence addition. Although Helbig consulted his CPA, among other
individuals, about this investment, the Tax Court found 'the nature of their advice
to [Helbig] is unclear.' Helbig v. Comm'r, T.C. Memo 2008-243 at 11. Because
Helbig offered only 'vague or equivocal descriptions of the advice offered' by his
CPA, id., the Tax Court did not err in finding Helbig did not exercise due care in
3
claiming the deduction. We have never held that simply consulting a CPA serves
as a safe harbor for the taxpayer.
Further, the Tax Court found the promotional placement letter emphasizing
the tax benefits of the investment 'should have served as an ample warning
regarding the suspect nature' of the investment. Id. at 12. In particular, the court
found Helbig's claimed tax deduction in 1983, amounting to 227 percent of his
initial investment, also 'should have raised a red flag to [Helbig] regarding the
propriety of deductions relating to' the partnership. Id. at 13. In light of Helbig's
vague testimony before the Tax Court and the inadequacy of other evidence, the
Tax Court did not err in finding Helbig's 'actions were simply unreasonable under
the circumstances of this case.' Id. at 14. The Tax Court thus did not err in
finding '[t]he fact that [Helbig] passed by his advisers a one-and-a-half page
advertisement is insufficient to shield him' from the negligence additions. Id. at
13-15.
Next, Helbig argues he should not be liable for the substantial
understatement addition because he adequately disclosed his investment on a
statement attached to his 1983 return. Helbig's 1983 tax deficiency qualified as a
substantial understatement. Helbig did not raise any proper defenses to this
penalty until his reply brief on this appeal. Even if these defenses were not
4
waived, we affirm the Tax Court's decision because Helbig did not adequately
disclose relevant facts in the statement attached to his 1983 return, and he does not
qualify for any other exception to the substantial understatement addition.
AFFIRMED.
5
FILED
Helbig v. Commissioner of Internal Revenue, No. 09-70339 OCT 19 2010
MOLLY C. DWYER, CLERK
U.S . CO UR T OF AP PE A LS
SILVERMAN, Circuit Judge, concurring:
I concur in the Memorandum to the following extent: I would affirm the Tax
Court solely on the ground that Helbig's failure to respond to the request for
admissions resulted in a conclusive admission that he failed to exercise reasonable
care.