Deanna Langille v. Commissioner of IRS

Procedural entryThis page is a short order in Deanna Langille v. Commissioner of IRS. Read the opinion of the Court — 447 F. App'x 130 →

Court of Appeals for the Eleventh Circuit·Decided November 22, 2011·No. 10-15130·Unpublished

Opinion

[DO NOT PUBLISH]

IN THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT ________________________

No. 10-15130 FILED ________________________ U.S. COURT OF APPEALS ELEVENTH CIRCUIT NOVEMBER 22, 2011 Agency No. 17227-08 JOHN LEY CLERK DEANNA LANGILLE, f.k.a. Deanna Birdsong,

Petitioner-Appellant,

versus

COMMISSIONER OF IRS,

Respondent-Appellee.

________________________

Petition for Review of a Decision of the U.S. Tax Court _________________________

(November 22, 2011)

Before EDMONDSON and ANDERSON, Circuit Judges, and LAWSON,* District Judge.

PER CURIAM: ________________________ *Honorable Hugh Lawson, United States District Judge for the Middle District of Georgia, sitting by designation. Deanna Langille, proceeding pro se, appeals the Tax Court’s final decision in

favor of the Commissioner of the Internal Revenue Service (“Commissioner” of the

“IRS”) on her petition for redetermination of deficiency for 1993, 1994, and 1995

and its denial of her various post-trial motions. On appeal, she argues that the Tax

Court failed to deduct business expenses for her law practice and losses from her

residential rental activity. Langille also argues that her underpayment of taxes was

not due to fraud, as the Tax Court found. In her post-trial motions, including a

motion to reconsider, two motions for new trial, and two motions to vacate, she

contended that she suffered from serious iron anemia beginning in 1994 or 1995,

and was not well enough to try her case at the time of her tax hearing in 2009.

During her tax trial, a potential buyer of her law practice testified that

Langille told him that she maintained two sets of books: one that was a “wash” and

the other that contained the “real receipts,” which she did not disclose to the IRS.

An IRS agent testified that during the execution of a search warrant at Langille’s

law office, he found records of a bank account that she did not disclose to the IRS

in plastic trash bags, which he later discovered contained unreported legal income.

A tax examiner testified as to how she determined Langille’s tax liability using the

bank deposit method.

2 We review the Tax Court’s factual findings for clear error and its legal

conclusions de novo. Estate of Whitt v. Comm’r of Internal Revenue, 751 F.2d

1548, 1556 (11th Cir. 1985). We construe briefs filed by pro se litigants liberally.

Timson v. Sampson, 518 F.3d 870, 874 (11th Cir. 2008).

The Sixteenth Amendment to the U.S. Constitution provides that “Congress

shall have power to lay and collect taxes on incomes, from whatever source

derived.” U.S. CONST. Amend XVI. The Internal Revenue Code (“I.R.C.”)

imposes a tax on taxable income of every individual who is a citizen or resident of

the United States, and estates and trusts, with some exceptions not applicable here.

26 U.S.C. § 1(a)-(e); 26 C.F.R. § 1.1-1(a). An income earner who fails to do so is

subject to civil penalties if she does not file a proper income tax return and pay any

taxes she owes. See, e.g., 26 U.S.C. § 6651(a) (imposing monetary penalties for

failing to file a tax return or pay taxes); 26 U.S.C. § 6654 (same if a taxpayer

underpays taxes).

I. TAX DEFICIENCIES

Langille argues that the tax examiner did not credit many of her business

expenses and instead treated them as personal expenses. She also contends that the

examiner duplicated her income where Langille transferred money into a different

account.

3 The Commissioner’s determination of a deficiency is presumed correct, and

the taxpayer has the burden of proving by a preponderance of the evidence that it is

incorrect. Estate of Whitt, 751 F.2d at 1556. Pursuant to I.R.C. § 7491, the

burden of proof as to factual matters may shift from the taxpayer to the

Commissioner, but only if the taxpayer introduces credible evidence regarding a

factual matter affecting her liability and only if she has maintained all required

records and cooperated with reasonable requests from the Commissioner, such as

providing information and documents. I.R.C. § 7491(a), 26 U.S.C. § 7491(a).

Section 6001 of the I.R.C. requires taxpayers to keep and maintain financial

records sufficient to permit verification of income and expenses. I.R.C. § 6001,

26 U.S.C. § 6001. If such records are lacking, the Commissioner may reconstruct

the taxpayer’s income by any reasonable indirect method. Holland v. United

States, 348 U.S. 121, 130-32, 75 S.Ct. 127, 132-34, 99 L.Ed. 150 (1954); 26 U.S.C.

§ 446(b). One such method of reconstructing a taxpayer’s income indirectly is

through the bank deposits method. Reaves v. Comm’r of Internal Revenue, 295

F.2d 336, 337-38 (5th Cir. 1961); Nicholas v. Comm’r of Internal Revenue, 70 T.C.

1057, 1064 (1978). Indeed, the tax court has held that a taxpayer’s bank deposits

provide prima facie evidence of income, and the taxpayer has the burden of proving

that the bank deposits are not taxable income. Tokarski v. Comm’r of Internal

4 Revenue, 87 T.C. 74, 77 (1986).

A taxpayer may deduct expenses that are ordinary and necessary in carrying

on a trade or business, but may not deduct personal, living, or family expenses. 26

U.S.C. § 262(a). To be deductible, an item must: “(1) be paid or incurred during

the taxable year, (2) be for carrying on any trade or business, (3) be an expense,

(4) be a necessary expense, and (5) be an ordinary expense.” Comm’r of Internal

Revenue v. Lincoln Sav. & Loan Ass’n, 403 U.S. 345, 352, 91 S.Ct. 1893, 1898, 29

L.Ed.2d 519 (1971) (quotations omitted). Taxpayers bear the burden of submitting

evidence that supports their claims of entitlement to a deduction and the amount of

that entitlement. Gatlin v. Comm’r of Internal Revenue, 754 F.2d 921, 923 (11th

Cir. 1985).

Langille did not meet her burden to plead facts and issues with specificity

and did not substantiate her business deductions for the amount she claimed in

1993, 1994, and 1995, in order to overcome the presumption that the

Commissioner had correctly determined the tax deficiencies using the bank deposit

method. In both the Tax Court and on appeal, Langille made only generalized

assertions and failed to cite any record evidence to support same. Therefore, the

tax court did not clearly err in entering a decision in favor of the Commissioner.

5 II. LOSSES FROM RENTAL ACTIVITY

Langille argues that her losses from her rental income should have been

Free access — add to your briefcase to read the full text and ask questions with AI