Ninth Circuit Upholds Deficiency Determinations, Penalties

JAMES A. LLOYD,
Petitioner-Appellant,
v.
COMMISSIONER OF INTERNAL REVENUE,
Respondent-Appellee.

NOT FOR PUBLICATION

UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT

MEMORANDUM^*

Appeal from a Decision of the United States Tax Court

Submitted October 13, 2022^**
San Francisco, California

Before: WALLACE, FERNANDEZ, and SILVERMAN, Circuit Judges.

James Lloyd appeals pro se from the Tax Court's judgment sustaining the Commissioner's determination of income tax deficiencies and imposition of penalties against him for the tax years 2005 to 2010. We have jurisdiction under 26 U.S.C. § 7482(a)(1). We review the Tax Court's conclusions of law de novo, its findings of fact for clear error, and its imposition of a monetary penalty under I.R.C. § 6673 for an abuse of discretion. Emert v. Comm'r, 249 F.3d 1130, 1131 (9th Cir. 2001); Wolf v. Comm'r, 4 F.3d 709, 716 (9th Cir. 1993). We affirm.

The Tax Court did not clearly err in sustaining the Commissioner's deficiency determination because the determination is supported by substantial evidence and Lloyd did not provide any rebutting evidence. See Bradford v. Comm'r, 796 F.2d 303, 305 (9th Cir. 1996) (once Commissioner produces “substantial evidence . . . demonstrating that the taxpayer received unreported income,” the burden shifts to the taxpayer to show “by a preponderance of the evidence that the determination is arbitrary and erroneous” (cleaned up)).

Nor did the Tax Court clearly err in determining that Lloyd was liable to additions to tax for failure to timely file tax returns, failure to pay income tax liabilities on their due date, or failure to pay estimated tax, given that Lloyd himself admitted he did not file tax returns or pay income taxes for those years. See I.R.C. §§ 6651(a)(1)–(2), 6654. The Tax Court did not clearly err in determining Lloyd was subject to the self-employment tax because he did not submit evidence that he was a licensed or ordained minister or file a Form 4361 with the I.R.S. I.R.C. §§ 1402(c)(4), (e).

Lloyd's arguments that he has no income tax liability are unpersuasive. First, Lloyd is not exempt from the income tax because the income was derived from Christian Media Network (CMN), a series of websites through which Lloyd sold and distributed religious paraphernalia and publications. Even if CMN could be classified as a church, the Tax Court did not clearly err in determining that CMN's earnings inured to the benefit of Lloyd, an individual, to pay his personal expenses in violation of the plain language of Section 501(c)(3). See Church of Scientology v. Comm'r, 823 F.2d 1310, 1316 (9th Cir. 1987) (churches eligible for tax exempt status “only if no part of their net earnings inure[s] to the benefit of private individuals”). Second, the substitutes for returns prepared by the Commissioner satisfied all relevant statutory and regulatory requirements, to the extent they were required to make deficiency determinations at all. See Roat v. Comm'r, 847 F.2d 1379, 1381 (9th Cir. 1988). Third, Lloyd has produced no evidence that statutory requirements for the revenue agent's use of a pseudonym in court were not satisfied. See I.R.C. § 7804 note.

Finally, “[w]e hardly need comment on the patent absurdity and frivolity” of Lloyd's argument that the income tax itself is null and void. See In re Becraft, 885 F.2d 547, 548 (9th Cir. 1989). The Tax Court did not abuse its discretion in imposing a $2,500 statutory penalty under I.R.C. § 6673 for pursuing this frivolous position after Lloyd was warned about doing so. See Larsen v. Comm'r, 765 F.2d 939, 941 (9th Cir. 1985).

The motion to file an oversized brief (Dkt. No. 22) is GRANTED.

AFFIRMED.