Unpublished Disposition, 904 F.2d 40 (9th Cir. 1990)Annotate this Case
Charles W. FOREST; Frieda A. Forest, Appellants,v.UNITED STATES of America, Appellee.
United States Court of Appeals, Ninth Circuit.
Submitted March 2, 1990.* Decided May 25, 1990.
Before MERRILL, KILKENNY and DAVID R. THOMPSON, Circuit Judges.
Charles and Frieda Forest ("Forests" or "appellants") appeal from the district court's entry of summary judgment in favor of the Commissioner of Internal Revenue ("Commissioner") on the appellants' claim for refund of a portion of their 1982 federal personal income taxes. The Forests contend that the district court erred both by disallowing their deduction for charitable contributions to a bank account held in trust for the Universal Life Church, Inc. ("ULC"), and for upholding the Commissioner's additions to tax imposed under 26 U.S.C. §§ 6653(a) and 6661(a). We disagree and affirm.
At the outset we note that the appellants bore the burden of proof on both their claim that they were entitled to a deduction for charitable contributions under 26 U.S.C. § 170 and their contention that the Commissioner's additions to tax were improper. See Hansen v. C.I.R., 820 F.2d 1464, 1467, 1469 (CA9 1987). Because this matter was disposed of on summary judgment rather than after a trial on the merits, we are to determine whether the Forests' "response, by affidavits or ... otherwise ... set forth specific facts showing that there [was] a genuine issue for trial." FRCivP 56(e). In making that determination, we will uphold the district court's ruling if our independent review of the pleadings and supporting documents reveals that the appellants did not "make a showing sufficient to establish a genuine dispute of fact with respect to the existence of [any] element" of the above claims. California Architectural Bldg. Prods., Inc. v. Franciscan Ceramics, Inc., 818 F.2d 1466, 1468 (CA9 1987) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 323-24 (1986)), cert. denied, 484 U.S. 1006 (1988).
Our examination of the record in a light most favorable to the non-movants reveals that the Forests established the bank account in question and made all deposits thereto with their own personal funds. They and members of their family were the only ones with access to the monies in that account. Charles Forest wrote all checks drawn on the account and used the proceeds to purchase and remodel property held in the appellants' names. This property was treated as belonging to their marital estate in the Forests' subsequent divorce settlement. On these facts we hold that the appellants did not present specific facts showing that there was a genuine issue for trial on whether they made an effective gift for purposes of section 170 by placing their "contributions" beyond their own dominion and control. See FRCivP 56(c), (e); Hansen, 820 F.2d at 1468.
The only evidence offered by the Forests in support of their contention that the bank account was being held in trust for the ULC was the presence of ULC's name and employer identification number on the account and the appellants' bald statements that the funds were being held in trust. This limited evidence, when viewed in light of the facts set forth above and coupled with the Forests' failure to show that their account somehow benefited the ULC, raises no question of fact which would support their contention that the funds were being held in trust for the ULC. See California Architectural Bldg. Prods., 818 F.2d at 1468; see also Smith v. C.I.R., 800 F.2d 930, 934 (CA9 1986).
The appellants' second argument is that the Commissioner should not have imposed any additions to tax under section 6653(a). In the face of a long line of existent authority denying deductions for claims based on similar schemes, see, e.g., Magin v. Commissioner, 44 T.C.M. (CCH) 397 (1982); Schilberg v. Commissioner, 44 T.C.M. (CCH) 148 (1982); Solander v. Commissioner, 43 T.C.M. (CCH) 934 (1982); Hilburn v. Commissioner, 43 T.C.M. (CCH) 226 (1981), the Forests clearly should have known that they could not reasonably claim any deduction for these "charitable contributions". See Smith, 800 F.2d at 934. Their contention that they relied on the Commissioner's acceptance of their 1981 refund is disingenuous, since that refund was not granted until long after they had filed their 1982 return. This unreasonable lack of due care, see id., combined with the appellants' failure to rebut the presumption of correctness in favor of the Commissioner's imposition of the additions to tax under section 6653(a), see Hansen, 820 F.2d at 1469, renders their argument on this point meritless.
We note with respect to the Forests' final argument that their understatement of income is both greater than ten per cent of their tax liability for 1982 and more than $5,000. See 26 U.S.C. § 6661(b) (1) (A) (i), (ii). In the absence of any showing by the appellants that they relied on "substantial authority" for that understatement, see 26 U.S.C. § 6661(b) (2) (B) (i), or made adequate disclosure of "relevant facts affecting the item's tax treatment", see 26 U.S.C. § 6661(b) (2) (B) (ii), the Forests failed to make a showing that there was a genuine issue for trial on the question whether the Commissioner properly imposed the addition to tax under section 6661(a). See FRCivP 56(c), (e); Burwell v. Commissioner, 89 T.C. 580, 595-97 (1987).