Weimerskirch v. C. I. R., No. 77-2129

CourtUnited States Courts of Appeals. United States Court of Appeals (9th Circuit)
Writing for the CourtBefore GOODWIN and ANDERSON; J. BLAINE ANDERSON
Citation596 F.2d 358
Parties79-1 USTC P 9359 Johnny WEIMERSKIRCH, Petitioner-Appellant, v. COMMISSIONER OF INTERNAL REVENUE, Respondent-Appellee.
Docket NumberNo. 77-2129
Decision Date02 May 1979

Page 358

596 F.2d 358
79-1 USTC P 9359
Johnny WEIMERSKIRCH, Petitioner-Appellant,
v.
COMMISSIONER OF INTERNAL REVENUE, Respondent-Appellee.
No. 77-2129.
United States Court of Appeals,
Ninth Circuit.
May 2, 1979.

Page 359

Richard P. Algeo, Spokane, Wash., for petitioner-appellant.

Myron C. Baum, Washington, D.C., for respondent-appellee.

Appeal from the United States Tax Court.

Before GOODWIN and ANDERSON, Circuit Judges, and JAMESON, * District Judge.

J. BLAINE ANDERSON, Circuit Judge:

The Commissioner issued a 90-day letter claiming that Weimerskirch had not reported income he allegedly received from selling heroin. Weimerskirch petitioned the Tax Court for redetermination of the deficiency. 26 U.S.C. § 7442, Et seq. After the Tax Court upheld the deficiency determination, Weimerskirch appealed to this court. 26 U.S.C. § 7482.

The Tax Court held that Weimerskirch had failed to rebut the Commissioner's presumption of correctness which attaches to a deficiency determination. Johnny Weimerskirch, 67 T.C. 672 (1977). We find that the Commissioner was not entitled to rely solely upon the presumption of correctness and reverse.

FACTS

Weimerskirch reported income of $5,762.00 on his income tax return for 1972. The Commissioner issued a statutory notice of deficiency claiming that Weimerskirch had $24,608.00 of additional income which he had failed to report. This resulted in a total tax liability of $8,994.00 plus a penalty of $1,453.75. Weimerskirch petitioned the Tax Court for a redetermination of the deficiency.

Little in the way of substantive evidence was introduced at trial to either prove or disprove what Weimerskirch's taxable income was for 1972. Weimerskirch called four witnesses and by stipulation introduced the tax return which he had filed for 1972. The Commissioner called no witnesses and introduced no evidence.

Weimerskirch's mother testified that she and her husband gave him at least $1,900.00, including $370.00 in wages, as well as gifts or groceries, during 1972. The tax return which Weimerskirch had filed showed his 1972 income as $5,762.00, with $370.00 from wages and $5,392.00 from other income. This was the only substantive evidence which tended to prove or disprove what Weimerskirch's income was for 1972. 1

STANDARD OF REVIEW

On appeal, findings of fact made by the Tax Court are not overturned unless they are "clearly erroneous." Rockwell v. C.I.R., 512 F.2d 882, 884 (9th Cir. 1975), Cert. denied, 423 U.S. 1015, 96 S.Ct. 448, 46 L.Ed.2d 386; Caratan v. C.I.R., 442 F.2d 606, 609 (9th Cir. 1971). A finding is clearly erroneous when this court is "left with the definite

Page 360

and firm conviction that a mistake has been committed." C.I.R. v. Duberstein, 363 U.S. 278, 291, 80 S.Ct. 1190, 1200, 4 L.Ed.2d 1218 (1960). The determination by the Tax Court that Weimerskirch received income from the heroin sales was a finding of fact, and as such may only be overturned on review if it is clearly erroneous. See Gerardo v. C.I.R., 552 F.2d 549, 552 (3d Cir. 1977); Herbert v. C.I.R., 377 F.2d 65, 71 (9th Cir. 1967).
QUESTION PRESENTED

The only issue which we address is whether the Commissioner was entitled to rely upon the presumption of correctness on the facts of this particular case. 2 The Tax Court upheld the Commissioner's deficiency determination on the basis that Weimerskirch had failed to overcome the presumption of correctness. On appeal, the Commissioner argues that "(i)t is elementary that in a Tax Court suit, the Commissioner's deficiency determination is presumptively correct. . . ." 3 Commissioner's brief at 13. However, before the Commissioner can rely on this presumption of correctness, the Commissioner must offer some substantive evidence showing that the taxpayer received income from the charged activity. United States v. Janis, 428 U.S. 433, 441-442, 96 S.Ct. 3021, 49 L.Ed.2d 1046 (1976); Suarez v. United States, 582 F.2d 1007, 1010 n. 3 (5th Cir. 1978); Carson v. United States, 560 F.2d 693, 696-698 (5th Cir. 1977); Gerardo, supra, 552 F.2d at 554-555. This was not done in the present case.

DISCUSSION

In Janis, supra, the Supreme Court decided that the exclusionary rule did not prevent the Internal Revenue Service (IRS) from using illegally-seized evidence as the basis from which to extrapolate a taxpayer's unreported income from wagering activities. Prior to addressing the exclusionary question, the Court stated that if the illegally-seized evidence could not be used, then the result would be:

"a 'naked' assessment without Any foundation whatsoever . . . . The determination of tax due then may be one 'without rational foundation and excessive,' and not properly subject to the usual rule with respect to the burden of proof in tax cases." (citations and footnotes omitted)

428 U.S. at 441, 96 S.Ct. at 3026. The Court noted that there was apparently some conflict between the Federal Courts of Appeals as to the burden of proof in tax cases, and then went on to make these observations:

"However that may be, the debate does not extend to the situation where the assessment is shown to be naked and without Any foundation.

"Certainly, proof that an assessment is utterly without foundation is proof that it is arbitrary and erroneous."

Page 361

428 U.S. at 442, 96 S.Ct. at 3026. While the quoted language may not have been dispositive of the issue decided in Janis, supra, it certainly is a strong indication that the Commissioner must offer some foundational support for the deficiency determination before the presumption of correctness attaches to it. After all, as the Court observed in Elkins v. United States, 364 U.S. 206, 80 S.Ct. 1437, 4 L.Ed.2d 1669 (1960), ". . . as a practical matter it is never easy to prove a negative . . . ." 364 U.S. at 218, 80 S.Ct. at 1444. See also Flores v. United States, 551 F.2d 1169, 1175 (9th Cir. 1977).

A Tax Court decision finding unreported income from gambling activities was reversed in Gerardo, supra, because of the lack of any evidence to support the Commissioner's presumption of correctness. 4 The court reasoned as follows:

". . . in order to give effect to the...

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455 practice notes
  • In re Dakota Industries, Inc., Bankruptcy No. 87-40209-PKE.
    • United States
    • United States Bankruptcy Courts. Eighth Circuit. U.S. Bankruptcy Court — District of South Dakota
    • September 4, 1991
    ...unless the IRS presents some predicate evidence supporting its determination. Portillo, 932 F.2d at 1133; Weimerskirch v. Comm. of I.R.S., 596 F.2d 358, 360 (9th Cir.1979); Carson, 560 F.2d at 696. A CAWR assessment based on underreported 941's, 940, or erred W-2 submission is similar to un......
  • United States v. Boyce, Case No. CV 13–00601 MMM (JEMx).
    • United States
    • United States District Courts. 9th Circuit. United States District Courts. 9th Circuit. Central District of California
    • July 8, 2014
    ...evidence showing that the taxpayer received income” on which taxes were not paid, [38 F.Supp.3d 1152] Weimerskirch v. Commissioner, 596 F.2d 358, 360 (9th Cir.1979); see also Edwards v. Commissioner, 680 F.2d 1268, 1270 (9th Cir.1982) (per curiam) (holding that a factual foundation for the ......
  • United States v. Boyce, Case No. CV 13–00601 MMM JEMx.
    • United States
    • United States District Courts. 9th Circuit. United States District Courts. 9th Circuit. Central District of California
    • July 8, 2014
    ...evidence showing that the taxpayer received income” on which taxes were not paid, 38 F.Supp.3d 1152Weimerskirch v. Commissioner, 596 F.2d 358, 360 (9th Cir.1979) ; see also Edwards v. Commissioner, 680 F.2d 1268, 1270 (9th Cir.1982) (per curiam) (holding that a factual foundation for the as......
  • Estate of Kanter v. C.I.R., No. 01-4316.
    • United States
    • United States Courts of Appeals. United States Court of Appeals (7th Circuit)
    • July 24, 2003
    ...improper to give the Commissioner's assessment of a deficiency the usual presumption of correctness. See Weimerskirch v. Comm'r, 596 F.2d 358, 360 (9th Cir.1979) (finding no presumption of correctness when Commissioner's assessed deficiency lacks any reasonable foundation in the evidence). ......
  • Request a trial to view additional results
452 cases
  • In re Dakota Industries, Inc., Bankruptcy No. 87-40209-PKE.
    • United States
    • United States Bankruptcy Courts. Eighth Circuit. U.S. Bankruptcy Court — District of South Dakota
    • September 4, 1991
    ...unless the IRS presents some predicate evidence supporting its determination. Portillo, 932 F.2d at 1133; Weimerskirch v. Comm. of I.R.S., 596 F.2d 358, 360 (9th Cir.1979); Carson, 560 F.2d at 696. A CAWR assessment based on underreported 941's, 940, or erred W-2 submission is similar to un......
  • United States v. Boyce, Case No. CV 13–00601 MMM (JEMx).
    • United States
    • United States District Courts. 9th Circuit. United States District Courts. 9th Circuit. Central District of California
    • July 8, 2014
    ...evidence showing that the taxpayer received income” on which taxes were not paid, [38 F.Supp.3d 1152] Weimerskirch v. Commissioner, 596 F.2d 358, 360 (9th Cir.1979); see also Edwards v. Commissioner, 680 F.2d 1268, 1270 (9th Cir.1982) (per curiam) (holding that a factual foundation for the ......
  • United States v. Boyce, Case No. CV 13–00601 MMM JEMx.
    • United States
    • United States District Courts. 9th Circuit. United States District Courts. 9th Circuit. Central District of California
    • July 8, 2014
    ...evidence showing that the taxpayer received income” on which taxes were not paid, 38 F.Supp.3d 1152Weimerskirch v. Commissioner, 596 F.2d 358, 360 (9th Cir.1979) ; see also Edwards v. Commissioner, 680 F.2d 1268, 1270 (9th Cir.1982) (per curiam) (holding that a factual foundation for the as......
  • Estate of Kanter v. C.I.R., No. 01-4316.
    • United States
    • United States Courts of Appeals. United States Court of Appeals (7th Circuit)
    • July 24, 2003
    ...improper to give the Commissioner's assessment of a deficiency the usual presumption of correctness. See Weimerskirch v. Comm'r, 596 F.2d 358, 360 (9th Cir.1979) (finding no presumption of correctness when Commissioner's assessed deficiency lacks any reasonable foundation in the evidence). ......
  • Request a trial to view additional results
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