Fickling v. U.S.

• Decision Date: 15 November 2007
• Docket Number: No. 06-12461.,06-12461.
• Citation: 507 F.3d 1302
• Parties: William A. FICKLING, Jr., Neva L. Fickling, Plaintiffs-Appellants, v. UNITED STATES of America, Defendant-Appellee.
• Court: U.S. Court of Appeals — Eleventh Circuit

507 F.3d 1302

William A. FICKLING, Jr., Neva L. Fickling, Plaintiffs-Appellants, v. UNITED STATES of America, Defendant-Appellee.

No. 06-12461.

United States Court of Appeals, Eleventh Circuit.

November 15, 2007.

Anthony J. Rollins, Tyler & Rollins, LLP, John P. Tyler, Jackson & Tyler, L.L.P., Atlanta, GA, for Plaintiffs-Appellants.

Teresa E. McLaughlin, Tax Div., Annette M. Wietecha, OIL, U.S. Dept. of Justice, Washington, DC, for U.S.

Appeal from the United States District Court for the Middle District of Georgia.

Before EDMONDSON, Chief Judge, and TJOFLAT and GIBSON,^* Circuit Judges.

PER CURIAM:

This case is a taxpayer refund suit originating from a settlement between the taxpayers and the Internal Revenue Service ("Service") over claimed capital losses from a sale of securities in 1990. The settlement permitted the taxpayers to recognize seventy percent of their claimed losses from the sale. Now taxpayers assert that the thirty percent of losses disallowed should be treated as if thirty percent of the sale were a disregarded transaction, and they have filed amended returns that deduct from more recent capital gains this thirty percent as "unused basis." The district court granted the Government summary judgment. We affirm.

I.

William A. Fickling, Jr., founder and chairman of Charter Medical Corporation ("Charter"), and his family had owned a sizable portion of Charter's common stock. In February 1990, following a management-led leveraged buy out of Charter, William Fickling and his wife, Neva Fickling (collectively, "Taxpayers"), converted a block of their shares of Charter into debentures with a claimed market value of $16,041,839.¹ By December 1990, the market for Charter debentures had soured, and company-issued debt was selling for pennies on the dollar.

On December 19, 1990, Taxpayers, along with their adult children ("Fickling Children"), sold some $22 million of face-value Charter debentures to William H. Anderson II for approximately $170,000. Included in this sale was the $16,041,839 worth of debentures at issue in this appeal, for which Taxpayers received $129,790.93 from Anderson. Taxpayers claimed a capital loss of $15,912,048 in their 1990 federal income tax return.² Fifty-four days after the sale, on February 11, 1991, Anderson sold the same $22 million worth of debt back to the Fickling Children for $193,987.86.

Faced with continued financial difficulty, Charter underwent restructuring in 1992. As part of the process, it exchanged outstanding debentures for common shares of the new Charter, including the debentures owned by the Fickling Children after the purchase from Anderson. Over the next three years, the Fickling Children sold on the open market their new Charter shares and reported their respective capital gains.

In 1995, the Service initiated an audit of the Taxpayers' personal income tax returns for the years 1988 through 1992. After an investigation, the Revenue Agent for the audit proposed a series of adjustments to the Taxpayers' returns for 1988, 1990, 1991, and 1992. Among the proposed adjustments was the disallowance of $15,912,048 in losses that the Taxpayers claimed as a result of the sale to Anderson. The Revenue Agent's report of the Service's position offered three grounds for the disallowance, namely that the transaction between Taxpayers, Anderson, and the Fickling Children was either a wash sale, a transaction that lacked economic substance, or a related party transaction. The Taxpayers appealed the determination and ultimately reached a formal settlement with the Service's Georgia Appeals Division in September 1999. The settlement agreement provided that the Taxpayers would recognize as a loss seventy percent of what they had initially claimed in the 1990 return, or $11,138,433. To memorialize the settlement, the parties executed an Offer to Waive Restrictions on Assessment and Collection of Tax Deficiency and to Accept Over Assessment (Form 870-AD).

During the pendency of the appeal, the Taxpayers amended their returns for the years 1993, 1994, and 1995 — the same years in which the Fickling Children sold their shares of the newly-reorganized Charter — and reduced the combined reported capital gains for these years by a total of $7,077,121.³ Based on these amended capital gains, the Taxpayers claimed overpayments for the years 1993 through 1995 totaling $1,709,809. In October 2002, the Service denied the deductions claimed in the amendment on the grounds that the 1990 settlement had already accounted for the entire basis of the debentures, and that the Taxpayers in effect had waived their claim for thirty percent of the loss that they are now seeking.

The Taxpayers initiated this refund suit in July 2003. The parties filed cross-motions for summary judgment in March 2005; the district court denied the Taxpayers' motion and granted the Government's motion in an order issued on March 13, 2006. The Taxpayers timely filed their notice of appeal.

II.

We review the district court's grant of summary judgment de novo. Sierra Club v. Leavitt, 488 F.3d 904, 911 (11th Cir. 2007). Summary judgment is appropriate only when, after viewing the evidence and all reasonable inferences drawn from it in the light most favorable to the nonmoving party, the court nonetheless concludes that no genuine issue of material fact exists and the moving party is entitled to judgment as a matter of law. Id. The moving party carries the initial burden of production, which can be met by showing that the nonmoving plaintiff has "fail[ed] to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986). Once this burden is met, the nonmoving party must present evidence beyond the pleadings showing that a reasonable jury could find in its favor. Walker v. Darby, 911 F.2d 1573, 1577 (11th Cir.1990). At issue in this case is whether the Taxpayers presented sufficient evidence that they have a basis in the Charter shares on which they filed the amended returns for 1993 through 1995.

In granting the Government's motion for summary judgment, the district court held that the Taxpayers have produced no evidence that they were entitled to a refund based on the amendments. The evidence that the Taxpayers did present — calculations of the so-called "unused basis" constituting thirty...