NOT FOR PUBLICATION FILED
UNITED STATES COURT OF APPEALS DEC 1 2017
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
FREDRIC A. GARDNER and
Nos. 15-72851 & 15-72852
ELIZABETH A. GARDNER,
Tax Ct. Nos. 14877-13 & 2940-14
Petitioners-Appellants,
MEMORANDUM*
v.
COMMISSIONER OF INTERNAL
REVENUE,
Respondent-Appellee.
Petition from the
United States Tax Court
Submitted November 17, 2017**
San Francisco, California
*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
**
The panel unanimously concludes this case is suitable for decision
without oral argument. See Fed. R. App. P. 34(a)(2).
1
Before: GOULD and MURGUIA, Circuit Judges, and FREUDENTHAL,*** Chief
District Judge
Fredric A. Gardner and Elizabeth A. Gardner (the “Gardners”) petition for
review of a Tax Court order concluding the District Court proceedings and findings
in United States v. Gardner, No. CV05-3073-PCT-EHC, 2008 WL 906696 (D.Ariz.
Mar. 21, 2008) collaterally estopped the Gardners from disputing that they promoted
an abusive tax shelter in violation of 26 U.S.C. § 6700, and finding that the IRS
established the Gardners sold the corporation sole promotion1 to no fewer than 47
individuals, subjecting each of the Gardners to a penalty in the amount of
$47,000.00. We have jurisdiction under 26 U.S.C. § 7482(a)(1). We affirm.
Collateral estoppel applies if “(1) the issue at stake [is] identical to the one
alleged in the prior litigation; (2) the issue [was] actually litigated by the party
against whom preclusion is asserted in the prior litigation; and (3) the determination
of the issue in the prior litigation [was] a critical and necessary part of the judgment.”
***
The Honorable Nancy D. Freudenthal, Chief United States District
Judge for the District of Wyoming, sitting by designation.
1
The Gardners’ tax shelter promotion involved the use of trusts, limited
liability companies and, primarily, an entity known as a “corporation sole.” United
States v. Gardner, No. CV05-3073-PCT-EHC, 2008 WL 906696 (D.Ariz. Mar. 21,
2008), aff’d 457 F. App’x 611 (9th Cir. 2011). A “corporation sole” is “a corporate
form authorized under certain state laws to enable bona fide religious leaders to hold
property and conduct business for the benefit of the religious entity.” Gardner v.
Comm’r, 845 F.3d 971, 973 n.1 (9th Cir. 2016) (quoting Rev. Rul. 2004-27, 2004-1
C.B. 625, 626, 2004 WL 389673, at *1).
2
McQuillion v. Schwarzenegger, 369 F.3d 1091, 1096 (9th Cir. 2004) (internal
citation and quotation marks omitted). In this case, all elements of collateral estoppel
are present – the parties are identical, the section 6700 penalty issue is identical and
was actually, although unsuccessfully, litigated by the Gardners. The district court
issued its injunction based on its findings that the Gardners’ corporation sole
promotions violated 26 U.S.C. § 6700, which penalizes abusive tax shelter
promotions. Therefore, the Tax Court did not err in concluding the Gardners are
collaterally estopped from disputing this issue.
Further, the Tax Court’s factual findings on the amount of the penalty are
supported by the record and are not clearly erroneous. An IRS agent testified as to
his examination of the Gardners’ bank accounts, his selection of 47 corporations sole
organized by the Gardners, and the payments made to the Gardners for these 47
corporations sole. As part of the corporation sole promotions, each recipient
obtained a copy of the Gardners’ manual which contained the false/fraudulent
statements. The Tax Court’s legal conclusion is correct that the focus when
imposing the penalty is on the actions of the promoter, not the recipient or whether
the recipient makes use of the abusive tax shelter. United States v. Estate Pres.
Servs., 202 F.3d 1093, 1099 (9th Cir. 2000).
3
Finally, the Gardners argue the Chenery doctrine2 bars or denies the Notices
of Determinations because the Gardners never had the opportunity to challenge the
mistake by the revenue agent in arriving at the $47,000 penalty. This argument lacks
merit. The Tax Court affirmed the penalty on the grounds articulated by the revenue
agent who was available for examination by the Gardners at the hearing.
AFFIRMED.
2
In SEC v. Chenery Corp., 332 U.S. 194, 196 (1947), the Supreme Court held “a
reviewing court, in dealing with a determination or judgment which an
administrative agency alone is authorized to make, must judge the propriety of such
action solely by the grounds invoked by the agency.”
4