Kemper v. CIR

• Decision Date: 10 July 1959
• Docket Number: No. 16108.,16108.
• Citation: 269 F.2d 184
• Parties: James M. KEMPER, Petitioner, v. COMMISSIONER OF INTERNAL REVENUE, Respondent.
• Court: U.S. Court of Appeals — Eighth Circuit

269 F.2d 184 (1959)

James M. KEMPER, Petitioner, v. COMMISSIONER OF INTERNAL REVENUE, Respondent.

No. 16108.

United States Court of Appeals Eighth Circuit.

July 10, 1959.

Charles C. Shafer, Jr., Kansas City, Mo., for petitioner.

S. Dee Hanson, Atty., Dept. of Justice, Washington, D. C. (Charles K. Rice, Asst. Atty. Gen., Lee A. Jackson and Robert N. Anderson, Attys., Dept. of Justice, Washington, D. C., were with him on the brief), for respondent.

Before SANBORN, VOGEL and VAN OOSTERHOUT, Circuit Judges.

VOGEL, Circuit Judge.

James M. Kemper, petitioner herein, seeks review of a decision of the Tax Court of the United States whereby the Tax Court upheld a deficiency in Kemper's income tax in the amount of $10,300.35 for the year 1954. Jurisdiction is invoked under § 7482(a), I.R.C., 26 U.S. C.A. (I.R.C.1954) § 7482(a). The findings of fact and opinion of the Tax Court are reported in 30 T.C. 546. The basic issue is whether the Tax Court committed error in denying petitioner a casualty loss deduction of $12,500.00 under § 165 (c)(3) of the Internal Revenue Code of 1954 by reason of the loss of 17 trees on his residential property. 26 U.S.C.A. (I.R.C.1954) § 165 provides:

"(a) General rule. — There shall be allowed as a deduction any loss sustained during the taxable year and not compensated for by insurance or otherwise.

* * * * * *

"(c) Limitation on losses of individuals. — In the case of an individual, the deduction under subsection (a) shall be limited to —

* * * * * *

"(3) losses of property not connected with a trade or business, if such losses arise from fire, storm, shipwreck, or other casualty, or from theft. * * *"

It is petitioner's primary contention that, as a direct result of severe drought conditions in Kansas City, Missouri, during the summer of 1954, he lost 17 trees from his residence and that such loss is a "casualty" within the purview of the foregoing section. Holding that it was not necessary in this case to determine whether or not true loss by drought was a proper deduction under the statute, the Tax Court concluded:

"For the purpose of deciding this case we can pass the question for we are of the opinion petitioner failed in his burden of proving that the drought killed the trees."

At the beginning, we are met with the primary question of whether the Tax Court's holding that "petitioner failed in his burden of proving that the drought killed the trees" is clearly erroneous. This is a fact determination so that the jurisdiction of this as a reviewing court is strictly limited. 26 U.S.C.A. (I.R.C.1954) § 7482, giving the Courts of Appeals exclusive jurisdiction to review the decisions of the Tax Court, provides that such review shall be "* * * in the same manner and to the same extent as decisions of the district court in civil actions tried without a jury; * * *." Rule 52(a) of the Federal Rules of Civil Procedure, 28 U.S.C.A. provides that:

"Findings of facts shall not be set aside unless clearly erroneous, and due regard shall be given to the opportunity of the trial court to judge of the credibility of the witnesses."

It is beyond cavil that we, as a reviewing court, may not retry issues of fact, that we are not the judges of the credibility of the witnesses, that the findings of the Tax Court are presumptively correct, and that the burden rests with the petitioner to show that such findings are "clearly erroneous" before this court may set them aside. United States v. United States Gypsum Co., 333 U.S. 364, 394-395, 68 S.Ct. 525, 92 L.Ed. 746, rehearing denied 333 U.S. 869, 68 S.Ct. 788, 92 L.Ed. 1147; Joe Balestrieri & Co. v. Commissioner, 9 Cir., 1949, 177 F.2d 867, 873; Grace Bros. v. Commissioner, 9 Cir., 1949, 173 F.2d 170, 173-174.

The record indicates as follows: Petitioner purchased his home in Kansas City, Jackson County, Missouri, in 1930, at a cost of $100,000.00. Up until 1954, the year in question, he had added an additional $100,000.00 in improvements. His residence is of the mansion type located in an exclusive residential neighborhood of Kansas City and occupies about five acres of land. The house has 30 rooms, a four-car garage, a swimming pool and locker rooms, a patio and two formal gardens. The property was landscaped by numerous trees, including elms, maples, oaks, larch, spruce, pine and walnut. There is an ornamental fence along the front of the property and the remainder is enclosed in a chain-link fence.

In 1952 and 1953 drought conditions existed in Missouri and other western states. On August 2, 1954, the President of the United States recognized the severity of the continued drought and designated Missouri a drought disaster area.

During the year 1954 petitioner suffered the loss of the following trees on his property: 2 American elm, 1 Austrian pine, 1 Dwarf pine, 1 Scotchpine, 1 Colorado spruce, and 11 Norway spruce. For these trees petitioner claimed a $12,500.00 casualty loss on his 1954 income tax return.

The fact question revolves mainly about the testimony of two witnesses, Norman Klein, who testified in behalf of petitioner, and L. J. Gier, whose testimony was introduced by the respondent. Klein is an arborist and the owner of a company called Midwest Tree Experts, whose work consists of pruning and spraying trees. For approximately 20 years he had been employed by the petitioner "to care for his trees and do anything which would keep them in best condition". He was familiar with petitioner's trees in 1954 and prior thereto. In connection with the testimony of the witness Klein, the Tax Court stated:

"The only witness who testified the trees died of drought was Norman Klein, who testified that he was an arborist and that he had been employed by petitioner for about 20 years `to take care of his trees.\' He said he usually inspected them three times a year and that he had inspected them `several times during 1954.\' He could not recall when he had inspected the trees in 1954 prior to the time he was called to petitioner\'s home to examine the dead trees and determine the cause of death. The record shows he was called to examine 14 dead trees in June of 1954, and three dead trees in August, 1954.

"There was evidence to the effect that there had been a drought in this area, not only in 1954, but also in the years 1952 and 1953. Without giving any basis for his conclusion, Klein gave it as his opinion, that the trees died of drought. Later he said drought was the `primary\' cause. He said he examined some, but not all of the dead trees, and he found some separation of the bark, indicating phloem necrosis and some tunneling around in the bark indicating some beetle activity, and there were some borers. He said the other trees on petitioner\'s property were not affected by the drought but he added they were growing in lower places. Many of the pictures of the stumps that are in evidence show growing trees nearby. Petitioner testified he had watered the trees abundantly in the year 1954. Klein\'s examination of the trees to determine the cause of death was most superficial. He made no microscopic or laboratory examination.

"Petitioner argues that because Klein said drought was the cause of death and there is no evidence of any other cause, then we must determine that drought was the cause of death of the trees. But Klein\'s testimony was opinion evidence. It was admissible but its probative value rests on the facts upon which it is based. He gave nothing to support his conclusion and much of his testimony as to the facts he found, weakened his conclusion. It appears to rest on no more than knowledge that the area was suffering drought conditions. He found 17 dead trees and examined some of them and he found them infected with beetles, borers and phloem necrosis, and testified all 17 trees died of drought, even though neighboring trees were unaffected by drought."

L. J. Gier, respondent's expert witness, is a professor of biology and head of the Department of Biology of William Jewell College. Of Gier's testimony, the Tax Court stated:

"Respondent\'s expert witness, L. J. Gier, a botanist with graduate study in plant pathology, said it would take a drought of several years to kill a tree adapted to the Kansas City area. He told of the necessity for a miscroscopic examination and detailed analysis of the trunk and roots in order to determine the cause of death of a tree. He said that before trees were to die in a drought `you must have a lowered water table, which we do not have.\' There was some evidence that the water table was lower in 1954 than 1953, but no evidence that it had sunk below the reach of the roots of trees adaptable to the Kansas City area."

The record amply supports these statements with reference to the two expert witnesses.

In addition to the testimony of Klein and Gier, the petitioner himself testified that:

"In 1954, I watered my trees, and my shrubbery, and used a good deal of water on them. I am not a tree expert but I know this from the little experience I have had in connection with the lumber

...