Betty Amos v. Commissioner of Internal Revenue

[DO NOT PUBLISH]
In the
United States Court of Appeals
For the Eleventh Circuit
____________________
No. 23-10532
Non-Argument Calendar
____________________
BETTY AMOS,
Petitioner,
versus
COMMISSIONER OF INTERNAL REVENUE,
Respondent.
____________________
Petition for Review of a Decision of the
U.S. Tax Court
Agency No. 4331-18
____________________
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2 Opinion of the Court 23-10532
Before R OSENBAUM , GRANT, and ANDERSON, Circuit Judges.
PER CURIAM:
Betty Amos appeals the decision of the Tax Court conclu-
sion that she failed to prove her entitlement to deductions for net
operating loss (“NOL”) carryforwards in her 2014 and 2015 tax re-
turns and that she was liable for negligence penalties for claiming
the deductions without adequate documentation.
I. FACTS
We write only for the parties who are already familiar with
the facts. Accordingly, we include only such facts as are necessary
to understand our opinion. Briefly, the IRS sent Amos a notice of
deficiency in 2018 that determined deficiencies in her 2014 and
2015 tax returns and determined penalties under 26 U.S.C. § 6662(a)
for both years. The IRS explained that it had disallowed the claimed
NOL carryforward deductions of $4,220,639 for 2014 and
$4,149,326 for 2015 on the ground that Amos had not established
that she sustained the loss in prior years or that the loss was availa-
ble to be carried over.
The claimed losses stemmed from 1999 and 2000. In their
1999 return, Amos and her husband1 claimed losses and showed a
NOL available to carry forward of $1,498,512. The couple claimed
additional losses in the year 2000, exceeding their income by
1 Her husband died in 2002.
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23-10532 Opinion of the Court 3
$371,663, leaving that amount available to carry forward. Adding
that amount to the $1,498,512 carryforward from 1999, their 2000
return showed $1,870,175 available to carry forward.2 The IRS au-
dited their 2000 return but ultimately agreed there was no defi-
ciency. As the Tax Court noted, by the 2008 tax return, the claimed
NOL carryforward had ballooned to $5,747,514 and by her 2013
return, it had decreased to $4,302,895. Amos petitioned the Tax
Court regarding a notice of deficiency with respect to her 2009 tax
return; this resulted in a stipulated decision determining a defi-
ciency of $11,545 and additions to tax. The parties stipulated that
the deficiency amount did not take into account the NOLs from
prior years, with Amos reserving the right to claim NOLs in the
future and the IRS reserving the right to challenge any claimed loss.
After a bench trial, the Tax Court first noted that Amos bore
the burden of proof to show that the notice of deficiency was er-
roneous and that she was entitled to the NOL carryforward deduc-
tions. It held that she had not “substantiated the items at issue nor
maintained adequate records” such that she could shift the burden
of proof to the IRS. Doc. 52 at 6. The court concluded that Amos
had not established the existence of the NOLs in 1999 and 2000.
The court also held that Amos had not shown sufficient details with
respect to whether carryforwards had been absorbed in years inter-
vening between 2000 and 2014 such that there were carryforward
NOLs available for 2014 and 2015. The court also rejected Amos’s
argument that the IRS should be estopped from disallowing the
2 The taxpayers elected to forego any carryback in 1999 and 2000.
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4 Opinion of the Court 23-10532
NOLs because it had not disallowed the NOLs in earlier years; the
court stated that by not pursuing this argument that she raised at
trial in post-hearing briefing, she had abandoned it. However, the
court also rejected it on the merits because the prior allowance of
a deduction does not bind the agency and she had not satisfied the
requirements for equitable or collateral estoppel. Finally, it sus-
tained the negligence penalty because Amos did not show that she
had acted with reasonable cause and in good faith. It cited her fail-
ure to keep records and the fact that she was a longtime CPA.
II. STANDARD OF REVIEW
We review the Tax Court’s legal conclusions as well as stat-
utory interpretations de novo. Greenberg v Comm’r, 10 F.4th 1136,
1155 (11th Cir. 2021). We review the Tax Court’s factual findings
for clear error. Id. “A finding of fact is clearly erroneous if the rec-
ord lacks substantial evidence to support it, so that our review of
the entire evidence leaves us with the definite and firm conviction
that a mistake has been committed.” Ocmulgee Fields, Inc. v. Comm’r,
613 F.3d 1360, 1364 (11th Cir. 2010) (quoting Atlanta Athletic Club v.
Comm’r, 980 F.2d 1409, 1411–12 (11th Cir. 1993)).
III. DISCUSSION
A. NOL Deduction
The Commissioner’s determination of a deficiency is pre-
sumed correct, and the taxpayer has the burden of proving other-
wise. Tucker v. Comm’r of Internal Revenue, 841 F.3d 1241, 1249 (11th
Cir. 2016). Additionally, deductions are a matter of legislative
grace, and the taxpayer has the burden of proving his entitlement
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23-10532 Opinion of the Court 5
to any claimed deduction. Id. We have stated that the burden is on
the taxpayer to “come forward with evidence to support his enti-
tlement to [a] deduction and the amount of that entitlement.” Gat-
lin v. Comm’r, 754 F.2d 921, 923 (11th Cir. 1985)
Taxpayers are required to substantiate expenses underlying
each claimed deduction by maintaining records sufficient to estab-
lish the amount of the deduction and to enable the Commissioner
to determine the correct tax liability. See 26 U.S.C. § 6001. Taxpay-
ers cannot rely solely on their own income tax returns to establish
the losses they sustained. See Roberts v. Comm’r, 62 T.C. 834, 837
(1974). Instead, taxpayers are required to “keep such permanent
books of account or records, including inventories, as are sufficient
to establish the amount of gross income, deductions, credits, or
other matters required to be shown by such person in any return
of such tax or information.” 26 C.F.R. § 1.6001-1.
A taxpayer must comply with 28 U.S.C. § 172(b) to carry for-
ward a NOL from a previous year. “Every taxpayer claiming a net
operating loss deduction for any taxable year shall file with his re-
turn for such year a concise statement setting forth the amount of
the net operating loss deduction claimed and all material and perti-
nent facts relative thereto, including a detailed schedule showing the
computation of the net operating loss deduction.” 26 C.F.R. §
1.172-1(c) (emphasis added).
In this case, the Tax Court made several rulings, all of which
we affirm. We discuss each in turn.
1. Waived Arguments
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6 Opinion of the Court 23-10532
The Tax Court ruled that Amos had the burden of proving:
a) the fact and amount of the NOL originally incurred in 1999 and
2000; and b) the fact and amount of any NOL carryforward to the
years 2014 and 2015, as well as the extent to which any such NOL
carryforward was absorbed in the intervening years. The Tax
Court also held that Amos had failed to maintain the required rec-
ords that might have enabled her to shift the burden of proof. In
Amos’s brief on appeal, she failed to challenge these holdings and
thus has abandoned any such challenge. Sapuppo v. Allstate Floridian
Ins. Co., 739 F.3d 678, 680 (11th Cir. 2014).
2. Amos’s Challenges to the Tax Court’s Rulings
The Tax Court also ruled that Amos is not entitled to the
claimed NOL carryforwards for 2014 and 2015 because: a) she
failed to provide sufficient evidence of the underlying NOLs in
1999 and 2000; and b) she failed to show that any such 1999-2000
NOL was still available to carry forward for 2014 or 2015, rather
than having been absorbed in the intervening years.
To the extent that Amos challenges3 theses holdings on ap-
peal, any such challenge fails. In her Statement of the Case, in her
brief on appeal, Amos suggests a factual challenge to the Tax
Court’s findings both with respect to the fact and amount of any
losses incurred in 1999 and 2000, and with respect to the fact and
3 Amos’s brief does not contain an argument section and instead includes her
arguments, to the extent they are made, within her Statement of the Case.
Her arguments even there are sketchy and almost entirely without citation of
authority.
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23-10532 Opinion of the Court 7
amount of NOL carryforwards therefrom—i.e., amounts absorbed
in the intervening years, and the fact and amount of NOL carryfor-
wards available for 2014 and 2015. To support such a factual chal-
lenge, Amos relies primarily on her tax return for the year 2000, on
snippets from her tax returns for some of the intervening years and
on her “Detail NOL Carryover Worksheet.” We agree with the Tax
Court that such proof is insufficient to substantiate Amos’s entitle-
ment to the claimed carryforwards. The law is clear that “merely
signing a tax return under penalty of perjury does not establish the
facts contained therein. . . . The tax return signed under penalties
of perjury is merely a statement of the petitioner’s claim.” Roberts,
62 T.C. at 837. Moreover, with respect to the worksheet, the Tax
Court found that Amos “failed to introduce any support that might
lend credence to the specific assertions in her worksheets.” Doc 52
at 9.
In her Statement of the Case in her appellate brief, Amos
also suggests that the validity of her claimed losses in 1999 and 2000
is supported by her assertion that her 2000 return was audited and
resulted in a no deficiency finding. She also suggests that her return
was also audited in 2003, 2005, and 2008 and resulted in no defi-
ciency findings; she suggests this also supports the validity of her
claimed losses in 1999 and 2000 and the availability of the claimed
NOL carryforwards.
With respect to the significance of previous audits, the Tax
Court held: a) that Amos abandoned the issue by failing to raise it
either in her petition or in her post-trial brief; and b) alternatively,
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8 Opinion of the Court 23-10532
on the merits, that a deduction condoned or agreed to in a former
year does not bind the IRS with respect to other years, leaving the
IRS free to challenge it in a succeeding year. Amos’s brief on appeal
fails to challenge either ruling; thus, Amos has doubly abandoned
the Tax Court’s abandonment ruling, and has also abandoned any
equitable estoppel issue on the merits of whether the prior audits
could establish the validity of the NOL carryforwards.
Amos also suggests in her appellate brief that the trial testi-
mony of Vengel supports her claimed losses in 1999 and 2000.
Vengel was a manager of the CPA firm that prepared her 1999 and
2000 returns and testified with respect to his firm’s representation
of Amos during the IRS audit of her 2000 return. To the extent
that Amos is suggesting that Vengel’s testimony confirmed the fact
and amount of the losses claimed on the 1999 and 2000 returns
were approved by the IRS in the audit, any such evidence cannot
assist Amos because, as set out above, the Tax Court held that a
deduction condoned or agreed to in a former year does not bind
the IRS in a succeeding year, and because Amos has abandoned any
challenge to that ruling. Moreover, contrary to Amos’s suggestion,
Vengel’s testimony did not confirm the fact or amount of losses on
Amos’s returns. Vengel testified that his firm did not conduct an
audit of the materials produced by Amos in 2000 when preparing
her tax returns. He clarified:
[W]e didn’t do an audit, so there was no examining.
Like we didn’t make a selection of transactions, and
examine supporting documentation in that sense. We
weren’t going to that extent. We would look at -- we
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23-10532 Opinion of the Court 9
were doing a review engagement. So under a review
engagement, it’s a lot of inquiries, and a lot of analyt-
ics. Looking at ratios, looking at changes in accounts
from one year to another, why things might change,
asking clients the question of why this balance is
higher than previous years.
Tr. at 28. Thus, Vengel’s testimony did not confirm the veracity of
the amounts listed as losses on Amos’s 2000 return or in her testi-
mony.4
With respect to the Tax Court’s ruling that Amos failed to
show that any 1999-2000 NOL was still available to carry forward
for 2014 or 2015 (rather than having been absorbed in the interven-
ing years), Amos suggests in her appellate brief5 that her challenge
is based on her tax returns for the years intervening between 2000
and 2014 and especially her “Detail NOL Carryover Worksheet.”
However, as noted above, such evidence is insufficient, being
merely a statement of the taxpayer’s claims. See Roberts, 62 T.C. at
837. Moreover, the Tax Court found that Amos failed to introduce
4 Further, even if it were relevant, Vengel’s testimony regarding the 2000 tax
year audit does not go to proving the larger 1999 NOL because 2000 was also
a loss year for Amos and she would have used that loss to offset income instead
of the 1999 NOL.
Moreover, in the context of this case—where the losses derive from
deemed distributions from subchapter S corporations—proving the deductible
amount from NOL carryforwards would also require proof of Amos’s adjusted
basis of her S corporation stock.
5 Again, only in her Statement of the Case.
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10 Opinion of the Court 23-10532
a complete set of her tax returns from 2001 to 2013, and that the
snippets that were introduced were insufficient to determine how
much of any 1999-2000 NOL carryforward might have been ab-
sorbed before 2014. And with respect to Amos’s “Detail NOL Car-
ryover Worksheet,” the Tax Court also rejected that filing because
she “failed to introduce any support that might lend credence to
the specific assertions in her worksheets.” Doc. 52 at 9; 26 C.F.R. §
1.172-1(c). We cannot conclude that the Tax Court’s findings in this
regard were clearly erroneous. Amos’s appellate brief points to lit-
tle or no evidence that might bolster the credence of her worksheet
other than the testimony of Vengel, but, as noted above, Vengel’s
testimony does not help Amos. Further, her brief on appeal and
the worksheet are odds, with her worksheet alleging different years
that she used the NOL carryforward than the brief.6
In short, with respect to the NOL carryforward issues, Amos
has failed to show that the Tax Court’s findings of fact are clearly
erroneous, or that it committed errors of law.
6 To the extent that Amos argues the audits in 2003, 2005, and 2008 all resulted
in no deficiency findings and therefore support the continuing availability and
validity of the NOL carryforwards, we noted above that the Tax Court held
that a deduction condoned or agreed to in a former year does not bind the IRS
with respect to a succeeding year, and that Amos has abandoned any challenge
to that ruling. Moreover, the evidence indicates with respect to the audit of
the year 2009 that the IRS did not allow any NOL carryover for that year and
reserved the right to challenge NOL carryforwards in future years.
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23-10532 Opinion of the Court 11
B. Accuracy-related Penalties
Amos argues7 that the Tax Court erred when it found her
liable for the penalty under 26 U.S.C. § 6662(a) because she reason-
ably believed the NOL to be available after claiming it for multiple
years. Section 6662(a) imposes a 20% accuracy-related penalty on
underpayment of tax for reasons listed in § 6662(b), including
“[n]egligence or disregard of rules or regulations.” Curtis Inv. Co.,
LLC v. Comm'r of Internal Revenue, 909 F.3d 1339, 1350 (11th Cir.
2018). The IRS bears the burden of production with respect to a
taxpayer’s liability for a § 6662(a) penalty and must produce suffi-
cient evidence supporting imposition of the penalty. See 26 U.S.C.
§ 7491(c). If the IRS meets this burden (which IRS has satisfied here
because Amos failed to maintain the required records and could
not substantiate the claimed deductions), “‘[t]he taxpayer bears the
burden of establishing that he acted with reasonable cause and in
good faith’” with respect to the underpayment to avoid the impo-
sition of misstatement penalties described in 26 U.S.C. § 6662. Cur-
tis, 909 F.3d at 1351 (quoting Gustashaw v. Comm’r, 696 F.3d 1124,
1134 (11th Cir. 2012)). The regulations instruct that the determina-
tion of good faith and reasonable cause is a finding of fact based on
the totality of the circumstances. Treas. Reg. § 1.6664-4(b)(1). “Cir-
cumstances that may indicate reasonable cause and good faith in-
clude an honest misunderstanding of fact or law that is reasonable
7 Again, Amos’s argument is only in her Statement of the Case.
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12 Opinion of the Court 23-10532
in light of all of the facts and circumstances, including the experi-
ence, knowledge, and education of the taxpayer.” Id.
Amos argues that she reasonably took the NOL deduction
because it had been sustained in earlier audits and successfully de-
fended by a prominent accounting firm. The Tax Court rejected
Amos’s arguments because the record contains little information
regarding the previous tax years, making it impossible to determine
if they were pertinent. Indeed, Amos concedes that she no longer
has the documents supporting the 2003 audit of the 2000 return.
While Amos concedes that she was an accountant, she argues that
she was not a tax expert and employed an accounting firm to pre-
pare her returns in 1999 and 2000. But, as the Tax Court stated, the
accounting firm did not opine on whether the NOL deduction
would be available in 2014 and 2015. Further, while she may not
have been a tax expert, the court stated “[i]t beggars belief that she
would be unaware that each tax year stands alone and that it was
her responsibility to demonstrate her entitlement to the deductions
she claimed.” Doc. 52 at 11. We agree. It is a basic tenet of tax law
that the taxpayer bears the burden of proving entitlement to de-
ductions and retaining records to support them. Amos did neither.
We cannot conclude that the Tax Court was clearly erroneous in
finding that Amos failed to prove that she acted with reasonable
cause and in good faith.
For the foregoing reasons, the judgment of the Tax Court is
AFFIRMED.
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