841 F.3d 1241 (11th Cir. 2016), 16-11042, Tucker v. Commissioner of Internal Revenue

Docket Nº:16-11042
Citation:841 F.3d 1241, 26 Fla.L.Weekly Fed. C 1011
Opinion Judge:HULL, Circuit Judge:
Party Name:HARVEY L. TUCKER, Petitioner-Appellant, v. COMMISSIONER OF INTERNAL REVENUE, Respondent-Appellee,
Attorney:For HARVEY L. TUCKER, Petitioner - Appellant: Merritt A. Gardner, Gardner Law Office, TAMPA, FL. For COMMISSIONER OF INTERNAL REVENUE, Respondent - Appellee: Julie Ciamporcero Avetta, U.S. Department of Justice, Chief Appellate Section Tax Division, WASHINGTON, DC; Gary A. Begun, Internal Revenue...
Judge Panel:Before TJOFLAT and HULL, Circuit Judges, and MENDOZA,[*] District Judge.
Case Date:November 21, 2016
Court:United States Courts of Appeals, Court of Appeals for the Eleventh Circuit
SUMMARY

Petitioner seeks review of the Commissioner's determination that he owes income tax deficiencies and related penalties for 2004, 2005, and 2006. Petitioner was the president, director, and sole shareholder of a Florida “S” corporation called Paragon Homes Corporation. I.R.C. 165(a) allows a deduction for “any loss sustained during the taxable year and not compensated for by insurance or otherwise.... (see full summary)

 
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Page 1241

841 F.3d 1241 (11th Cir. 2016)

26 Fla.L.Weekly Fed. C 1011

HARVEY L. TUCKER, Petitioner-Appellant,

v.

COMMISSIONER OF INTERNAL REVENUE, Respondent-Appellee,

No. 16-11042

United States Court of Appeals, Eleventh Circuit

November 21, 2016

Petition for Review of a Decision of the U.S. Tax Court. Agency No. 019797-13.

AFFIRMED.

For HARVEY L. TUCKER, Petitioner - Appellant: Merritt A. Gardner, Gardner Law Office, TAMPA, FL.

For COMMISSIONER OF INTERNAL REVENUE, Respondent - Appellee: Julie Ciamporcero Avetta, U.S. Department of Justice, Chief Appellate Section Tax Division, WASHINGTON, DC; Gary A. Begun, Internal Revenue Service, JACKSONVILLE, FL; Richard Farber, U.S. Department of Justice, Chief Appellate Section Tax Division, WASHINGTON, DC.

Before TJOFLAT and HULL, Circuit Judges, and MENDOZA,[*] District Judge.

OPINION

HULL, Circuit Judge:

Appellant Harvey L. Tucker petitions for review of the United States Tax Court's decision upholding the Commissioner of Internal Revenue's (the " Commissioner" ) determination that he owes income tax deficiencies and related penalties1 for 2004, 2005, and 2006. After review and oral argument, we affirm.

I. FACTUAL BACKGROUND

A. Tucker's Real Estate Development Company

At all times relevant to this appeal, Tucker was the president, director, and sole shareholder of a Florida " S" corporation2 called Paragon Homes Corporation (" Paragon" ), which was in the business of real estate acquisition, development, and sales. Paragon was incorporated in November 1997. Paragon filed annual reports in 2008, 2010, and 2011. Paragon remained an active corporation until September 28, 2012. Paragon owned several properties in Hillsborough County, Florida, including multiacre tracts, platted subdivisions, lots, and single-family homes. At the beginning of 2008, Paragon was a solvent company meeting its payroll and paying its mortgage obligations, rent, insurance premiums, real estate taxes, and utility bills.

In order to obtain the funds to purchase real property, Paragon took out mortgages with several banks, including Platinum Bank (" Platinum" ), Branch Banking & Trust Co. (" BB& T" ), Wachovia Bank (" Wachovia" ), and Fidelity Bank (" Fidelity" ). All mortgages were with recourse to Paragon. Tucker also personally guaranteed the mortgage loans on Paragon's properties.

B. The 2008 Housing Market Crash

In 2007 and 2008, the residential real estate market in Hillsborough County went into sharp decline, with annual housing starts down 79% from their peak in June 2006, annual closings down 65% from that date, and with a 36% decline in median home price for a single-family unit.

According to Tucker's trial testimony, Paragon was out of business and insolvent by the end of 2008. Paragon had no sales and no revenue. As a result, Paragon " cease[d] . . . operations" at the end of 2008--it closed its office, dismissed its employees, and stopped making payments on its mortgages, insurance premiums, and taxes. At the close of 2008, Paragon had little over $12,000 in its bank accounts. In Tucker's mind, Paragon's real estate inventory--individually and in the aggregate--was " worthless" as of December 31, 2008, because " prices had fallen through the floor. There was no demand and we couldn't generate any sales. So, Paragon Homes . . . had no value, had a negative value."

C. Paragon's Properties

According to the record evidence, Paragon owned (and owed mortgages on) the following properties3 as of December 31, 2008:

Property Name Fair Market Balance due on Bank that owned
Value (" FMV" )4 mortgages5 the mortgage
Long Pond / $1,250,000 $1,859,725 Platinum
Hunter's Lake
Culbreath Estates $510,0006 $591,244 Platinum
(3 properties) (total) (total)
Massaro II / $475,000 $643,500 BB& T
Meadow Chase
Amberwave $127,500 $115,000 BB& T
Estates--Lot 1
Walden Reserve-- $270,000 $270,113 BB& T
Lot 11 / Block 2
Walden Reserve-- $270,000 $206,478 Fidelity
Lot 15 / Block 2
Walden Reserve-- $270,000 $192,524 Fidelity
Lot 3 / Block 2
Walden Reserve-- $1,180,000 $2,126,158 Fidelity
Lot 8 / Block 2 and (total) (total)
Walden Reserve
Vacant Lots
Misty Glen-- $270,000 $223,000 Fidelity
Lot 5 / Block B
Walden Reserve-- $260,000 $198,298 Wachovia
Lot 19 / Block 1
Misty Glen-- $307,000 $293,739 Wachovia
Lot 2 / Block B
...

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