Unpublished Disposition, 902 F.2d 38 (9th Cir. 1986)

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US Court of Appeals for the Ninth Circuit - 902 F.2d 38 (9th Cir. 1986)

Larkin C. CRAIG, Petitioner-Appellant,v.COMMISSIONER INTERNAL REVENUE SERVICE, Respondent-Appellee.

No. 88-7240.

United States Court of Appeals, Ninth Circuit.

Submitted March 15, 1990.* Decided May 8, 1990.

Before JAMES R. BROWNING, KILKENNY and RYMER, Circuit Judges.


Larkin C. Craig petitions pro se for review of the tax court's order affirming the Commissioner of Internal Revenue's determination of deficiency in Craig's federal income tax for tax year 1983. We affirm.

* A

Craig contends that the tax court erred in its decision disallowing his deduction for business bad debt of $9795 owed to him by Master Coach and claimed on his 1983 federal income tax return.

A deduction shall be allowed for any debt which becomes worthless during the taxable year. I.R.C. Sec. 166(a) (1). However, a bad debt deduction may not be claimed unless it has previously been included in the taxpayer's return of income for the year the bad debt is claimed, or for a prior taxable year. " [A]n amount of anticipated income ... which a taxpayer, ... using the cash method of accounting, has not reported as income may not be deducted as a bad debt, under section 166, when such amount becomes uncollectible." Carroll v. Commissioner, 42 TCM (CCH) 326, 327 (1981) (citing Treas.Reg. Sec. 1.166-1(e)).

There is no evidence in the record that Craig reported the $9,795 as income in 1983, or in any year prior to 1983 as required by I.R.C. Sec. 166.1  Craig therefore failed to meet his burden of "demonstrat [ing] entitlement to [the $9,795] deduction by showing that he comes within the terms of a statute allowing the deduction." Smith v. Commissioner, 800 F.2d 930, 933 (9th Cir. 1986).


On his 1983 income tax return, Craig also claimed a deduction of $950 for legal fees incurred in 1981 and 1982 in his attempt to collect on the Master Coach debt. Craig did not claim deductions for the legal fees when they were incurred because he mistakenly believed he could not claim a deduction for the legal fees until his suit against Master Coach was terminated. Legal fees are deductible only in the year in which they are incurred. Landreth v. Commissioner, 859 F.2d 643, 649 (9th Cir. 1988). Accordingly, Craig may not claim a deduction for those fees on his 1983 return.


Craig contends that the tax court does not have jurisdiction because the statutory notice of deficiency was void. Specifically, Craig points out that the notice of deficiency (1) was not sent by certified or registered mail in accordance with I.R.C. Sec. 6212, and (2) was unsigned and only initialed "L.C.U."

Section 6212(a) speaks only in terms of "authorizing" the Commissioner to send the notice of deficiency by registered or certified mail. The statute does not make it mandatory that the Commissioner use registered or certified mail. Moreover, Craig does not deny receiving the notice of deficiency. "Actual notice" is the central goal of section 6212. Clodfelter v. Commissioner, 527 F.2d 754, 756 (9th Cir. 1975). Since Craig received actual notice as required by section 6212, the mail service the Commission utilized is irrelevant. "The fact that a notice of deficiency is unsigned does not affect its validity.... Sections [sic] 6212(a) provides that the Secretary is authorized to send a notice of deficiency to the taxpayer; it does not require that he sign it." Lillis v. Commissioner, 45 TCM (CCH) 1000, 1003 n. 6. The tax court did not err in finding the statutory notice of deficiency valid and in asserting jurisdiction over Craig.2 


Craig contends that the Commissioner's answer to his tax court petition was untimely.

The tax court rules allow the Commissioner 60 days from the date the petition is served to file an answer. See T.C. Rule 36. The record indicates Craig's petition was served on July 30, 1986, and that the Commissioner's answer was filed on September 26, 1986, within 60 days of the service of the petition.


Finally, Craig contends that the tax court erred by admitting a copy of his 1977 Schedule C over his objection.

Admission of the contested copy apparently violated Tax Court Rule 143(d).3  However, admission of inappropriate evidence is reversible error only if it affects the "substantial rights of the parties." T.C. Rule 160. The copy of the 1977 Schedule C provided no evidence relevant to the tax court's ruling. If the tax court judge had not allowed the copy of Craig's Schedule C into evidence, Craig still would have failed to prove entitlement to the deductions he claimed.

The decision of the tax court is AFFIRMED.


The panel finds this case appropriate for submission without argument pursuant to 9th Cir.R. 34-4 and Fed. R. App. P. 34(a)


This disposition is not appropriate for publication and may not be cited to or by the courts of this circuit except as provided by 9th Cir.R. 36-3


Judge Parr based her decision in part on Craig's alleged admission that he did not report the $9,795.00 amount he deducted for the bad check as income in 1977. The record does not reflect that Craig made such an admission. However, Craig did not prove he reported as income the amount deducted as required by the I.R.C. Judge Parr's finding that Craig was not entitled to his claimed deduction of $9,795.00 for the bad check is therefore correct


Craig's contention that neither the IRS nor the tax court have jurisdiction over him because an individual is not a "person" or "taxpayer" subject to the I.R.C. is frivolous. See United States v. Studley, 783 F.2d 934, 937 (9th Cir. 1981)


T.C. Rule 143(d) states in relevant part: "A clearly legible copy ... may be offered directly in evidence ... where there is no objection...."