Sher v. C.I.R., No. 88-4123
| Court | United States Courts of Appeals. United States Court of Appeals (5th Circuit) |
| Writing for the Court | Before THORNBERRY, RUBIN, and HIGGINBOTHAM; THORNBERRY |
| Citation | 861 F.2d 131 |
| Parties | -422, 88-2 USTC P 9618 Leopold Z. SHER and Karen B. Sher, Petitioners-Appellants, v. COMMISSIONER OF INTERNAL REVENUE, Respondent-Appellee. |
| Docket Number | No. 88-4123 |
| Decision Date | 05 December 1988 |
Page 131
v.
COMMISSIONER OF INTERNAL REVENUE, Respondent-Appellee.
Fifth Circuit.
Page 132
Steven I. Klein, New Orleans, La., for petitioners-appellants.
William F. Nelson, Chief Counsel, IRS, Linda E. Mosakowski, Gary R. Allen, Wm. S. Rose, Jr., Ann Belanger Durney, Asst. Attys. Gen., Dept. of Justice, Tax Div., Washington, D.C., for respondent-appellee.
Appeal from the Decisions of the United States Tax Court.
Before THORNBERRY, RUBIN, and HIGGINBOTHAM, Circuit Judges.
THORNBERRY, Circuit Judge:
The Defendants-Appellants Shers appeal the Tax Court's order denying their motion for attorney's fees incurred contesting an alleged tax deficiency. We affirm.
I. Facts.
In 1982, the Shers received $775 in interest income from A.G. Edwards & Sons (A.G. Edwards). A.G. Edwards mistakenly reported to the IRS that the Shers earned $1325 in dividend income from two different A.G. Edwards accounts. This $1325 listed as dividend income was actually $775 that A.G. Edwards should have reported as interest income to the Shers and $550 in interest income paid to Mr. Sher's qualified pension plan.
The Shers reported interest income of $740 from A.G. Edwards on their 1982 tax return. (The Shers concede they underreported $35 of their A.G. Edwards interest income). Relying upon A.G. Edwards' reported figures, the IRS concluded that the Shers received dividend income of $1325 in addition to the $740 interest income the Shers reported to the IRS. Over the course of almost a year, the IRS asserted that the Shers owed taxes on the $1325, while the Shers asserted that they received $775 in interest income from A.G. Edwards. The Shers did not know about the erroneous report A.G. Edwards submitted to the IRS, nor did the IRS know A.G. Edwards' report was erroneous. As a result, neither the IRS nor the Shers were able to identify the source of the problem giving rise to the IRS's mistaken charge that the Shers owed this tax deficiency.
From the time the Shers first learned of the alleged tax deficiency, they tried to rectify the problem. The Shers and an office manager for A.G. Edwards allegedly spoke with a representative of the IRS explaining that A.G. Edwards paid the Shers $775 in interest income. The IRS claims the Shers did not speak with the IRS representative. In November, Mr. Sher and A.G. Edwards wrote the IRS documenting that A.G. Edwards paid the Shers $775 in interest income. The IRS acknowledged Mr. Sher's letter, but made no other contact with the Shers.
In December 1985, the IRS sent the Shers a notice of deficiency. Mr. Sher again made several calls to the IRS in an attempt to discuss the alleged deficiency. One IRS representative told Mr. Sher that the notice of deficiency was probably a mistake. Another representative said the IRS would get back in touch with Mr. Sher. Despite Mr. Sher's attempts to resolve the issue of the deficiency, the IRS never responded further.
Page 133
The Shers retained an attorney who was an associate in the law firm in which Mr. Sher was a partner. The attorney suggested they file a petition in Tax Court to prevent the IRS from assessing an incorrect deficiency. The Shers filed a petition in March 1986 and attached copies of Mr. Sher's November letter to the IRS, the A.G. Edwards' statement that the Shers received $775 in interest income, and the relevant portion of the Shers' 1982 income tax return. The IRS District Counsel answered the Shers' petition denying their claims and reasserting the deficiency.
In the Spring of 1986, an IRS Appeals Officer requested a copy of the Shers' amended 1982 return and later scheduled a conference with the Shers' attorney. At the conference, the Appeals Officer and the Shers' attorney determined that the dividend income listed in the A.G. Edwards' report was actually the interest income the Shers had already reported. There still remained a discrepancy of $550.
The IRS Appeals Officer gave the Shers' attorney the information A.G. Edwards submitted to the IRS. The attorney reviewed this information and concluded that A.G. Edwards mistakenly listed $550 paid to Mr. Sher's pension fund as income to the Shers. The Shers' attorney wrote the Appeals Officer and explained the error he had discovered. Upon learning of the A.G. Edwards' mistake, the Appeals Officer indicated that the Shers did not owe a deficiency on the $1325 listed as dividend income.
The Shers then filed a motion for litigation costs, which the IRS opposed. The Tax Court denied the Shers' motion. The issues on appeal are (1) whether taxpayers can recover attorney's fees for actions of the IRS prior to the involvement of the District Counsel; (2) if the Shers are entitled to attorney's fees based on actions of the IRS after the District Counsel became involved; and (3) whether the Shers can recover attorney's fees even though their attorney was an associate in Mr. Sher's firm. Because we hold that the Shers are not entitled to attorney's fees, we need not reach the last issue.
II. Actions of the IRS prior to District Counsel involvement.
The Shers can only claim attorney's fees for expenses incurred after the District Counsel became...
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Powers v. Comm'r of Internal Revenue, No. 38805–86.
...revg. 89 T.C. 779 (1987); Sokol v. Commissioner, 92 T.C. 760, 763 n. 7 (1989); Sher v. Commissioner, 89 T.C. 79, 84 (1987), affd. 861 F.2d 131 (5th Cir.1988). The legislative history of EAJA states that the possibility that the Government's position was not substantially justified is clearl......
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Cellar v. Commissioner, Docket No. 11758-92.
...v. Commissioner [Dec. 45,194], 91 T.C. 963 (1988); Sher v. Commissioner [Dec. 44,035], 89 T.C. 79, 83 (1987), affd. [88-2 USTC ¶ 9618] 861 F.2d 131 (5th Cir. 1988). The taxpayer bears the burden of proving that he or she is entitled to an award of litigation costs. Rule 232(e); Coastal Petr......
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Tinsley v. Commissioner, Docket No. 28722-88.
...as applied to the factual development of the case. Sher v. Commissioner [Dec. 44,035], 89 T.C. 79, 84 (1987), affd. [88-2 USTC ¶ 9618] 861 F.2d 131 (5th Cir. 1988); Bayer v. Commissioner [Dec. 47,425(M)], T.C. Memo. 1991-282, modified [Dec. 48,051] 98 T.C. 19 (1992).1 We may also consider, ......
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Williford v. Commissioner, Docket No. 26613-89.
...1139, 1148 (9th Cir. 1992), affg. in part and revg. in part [Dec. 47,266(M)] T.C. Memo. 1991-144; Sher v. Commissioner [88-2 USTC ¶ 9618], 861 F.2d 131, 134-135 (5th Cir. 1988), affg. [Dec. 44,035] 89 T.C. 79 (1987). Respondent's counsel did not assert a position different from the position......
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Powers v. Comm'r of Internal Revenue, No. 38805–86.
...revg. 89 T.C. 779 (1987); Sokol v. Commissioner, 92 T.C. 760, 763 n. 7 (1989); Sher v. Commissioner, 89 T.C. 79, 84 (1987), affd. 861 F.2d 131 (5th Cir.1988). The legislative history of EAJA states that the possibility that the Government's position was not substantially justified is clearl......
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Cellar v. Commissioner, Docket No. 11758-92.
...v. Commissioner [Dec. 45,194], 91 T.C. 963 (1988); Sher v. Commissioner [Dec. 44,035], 89 T.C. 79, 83 (1987), affd. [88-2 USTC ¶ 9618] 861 F.2d 131 (5th Cir. 1988). The taxpayer bears the burden of proving that he or she is entitled to an award of litigation costs. Rule 232(e); Coastal Petr......
-
Tinsley v. Commissioner, Docket No. 28722-88.
...as applied to the factual development of the case. Sher v. Commissioner [Dec. 44,035], 89 T.C. 79, 84 (1987), affd. [88-2 USTC ¶ 9618] 861 F.2d 131 (5th Cir. 1988); Bayer v. Commissioner [Dec. 47,425(M)], T.C. Memo. 1991-282, modified [Dec. 48,051] 98 T.C. 19 (1992).1 We may also consider, ......
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Williford v. Commissioner, Docket No. 26613-89.
...1139, 1148 (9th Cir. 1992), affg. in part and revg. in part [Dec. 47,266(M)] T.C. Memo. 1991-144; Sher v. Commissioner [88-2 USTC ¶ 9618], 861 F.2d 131, 134-135 (5th Cir. 1988), affg. [Dec. 44,035] 89 T.C. 79 (1987). Respondent's counsel did not assert a position different from the position......