Clark v. CIR

UNITED STATES COURT OF APPEALS
for the Fifth Circuit

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No. 95-60054
Summary Calendar
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MONROE S. CLARK, JR., and
BARBARA A. CLARK,

Petitioners-Appellants,

VERSUS

COMMISSIONER OF INTERNAL REVENUE,

Respondent-Appellee.

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Appeal from the United States Tax Court
(3489 90)
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September 5, 1995
Before HIGGINBOTHAM, DUHÉ, and EMILIO M. GARZA, Circuit Judges.

PER CURIAM:1

The tax court upheld a deficiency entered by the IRS against

Monroe and Barbara Clark. The Clarks, proceeding pro se, petition

us to review the tax court's decision. Petitioners contend that

limitations bar the deficiency and that the tax court improperly

disallowed several deductions. We affirm.

BACKGROUND

The parties agreed to extend the limitations period on

petitioners' 1984 tax return until April 15, 1989. Before that

1
Local Rule 47.5 provides: "The publication of opinions that
have no precedential value and merely decide particular cases on
the basis of well-settled principles of law imposes needless
expense on the public and burdens on the legal profession."
Pursuant to that Rule, the Court has determined that this opinion
should not be published.
time, the IRS served a summons on a third party seeking

petitioners' tax records for 1984. The Clarks were unsuccessful in

their attempt to quash the summons, and we dismissed their appeal

on June 13, 1989. The IRS mailed a notice of deficiency to the

Clarks on November 30, 1989, for the tax years 1984, 1985, and

1986.

In upholding the deficiency, the tax court determined that

limitations did not bar the IRS's examination of the Clarks' 1984

tax return because the summons proceeding suspended the limitations

period. The tax court also found that several deductions were

improper. One deduction came from a loan repayment and another

came from the giving of a loan, neither of which are deductible.

The Clarks failed to sustain their burden of proving several other

deductions. Finally, the tax court upheld the assessment of

penalties against the Clarks.

DISCUSSION

We review the tax court's legal conclusions and its

interpretations of the Internal Revenue Code de novo. Harris v.

Commissioner of Internal Revenue, 16 F.3d 75, 81 (5th Cir. 1994).

We accept the tax court's findings of fact unless they are clearly

erroneous. Id.

I.

The Clarks contend that limitations bar the deficiency because

it was not mailed before the agreed extension date. The normal

three-year limitations period may be extended by agreement between

the IRS and the taxpayer. I.R.C. § 6501(a), (c)(4) (1988). When

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a taxpayer intervenes to quash a notice of summons served on a

third party, however, "the running of any period of limitations

under section 6501 (relating to the assessment and collection of

tax) . . . with respect to [the taxpayer] shall be suspended for

the period during which a proceeding, an appeals therein, with

respect to the enforcement of such summons is pending." I.R.C. §

7609(e)(1) (1988). The tax court determined that § 7609(e)(1)

suspended the limitations period during the pendency of the summons

proceeding so that the IRS's notice of deficiency was not untimely.

The Clarks contend that § 7609(e)(1) does not apply to a

limitations period that has been extended by agreement. In view of

the plain language of the statutes, we disagree. Section

7609(e)(1) refers to "any period of limitations under section

6501." Section 6501(c)(4) merely extends the applicable

limitations period. Therefore, by its plain meaning § 7609(e)(1)

applies to suspend a limitations period extended by § 6501(c)(4).

Our conclusion is supported by courts' interpretation of §

6503(a)(1), which also suspends the § 6501 limitations period.

Section 6503(a)(1) suspends "[t]he running of the period of

limitations provided in section 6501." I.R.C. § 6503(a)(1). A

limitations period extended by § 6501(c)(4) is a limitations period

within the meaning of § 6501 and subject to the suspension

provision of § 6503(a)(1). Meridian Wood Prods. Co. v. United

States, 725 F.2d 1183, 1188 (9th Cir. 1984); Ramirez v. United

States, 538 F.2d 888, 893 (Ct. Cl.), cert. denied, 429 U.S. 1024

(1976). Section 6503's reference to § 6501 is very similar to that

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contained in § 7609(e)(1). Consequently, we conclude that §

7609(e)(1) suspends a limitations period extended by § 6501(c)(4).

The tax court correctly held that limitations did not bar the

deficiency against the Clarks.

II.

As taxpayers, the Clarks have the burden to prove that they

are entitled to the deductions they claimed on their tax returns.

Patton v. Commissioner of Internal Revenue, 799 F.2d 166, 170 (5th

Cir. 1986). When the tax court finds that a taxpayer is not

entitled to a claimed deduction, we review that finding for clear

error. Id.

The first deduction the Clarks claim is based on the

withholding of commissions by Mr. Clark's employer, American

Fidelity Life Insurance Company (AMFI). AMFI paid Mr. Clark

commissions on his sales of life insurance policies between 1983

and 1986. To provide new agents with a sufficient income at first,

AMFI pays a portion of their commissions in advance. Afterwards,

AMFI retains a portion of their commissions and applies them

against the advances. In other words, AMFI advances a loan that

the agent subsequently repays. The repayment of loans is not

deductible. Brenner v. Commissioner of Internal Revenue, 62 T.C.

878, 883 (1974). The tax court's disallowance of this deduction

was not clearly erroneous.

The second deduction the Clarks claim concerns payments made

to Abe Tyrone Thomas. I.R.C. § 162(a)(1) allows a taxpayer to

deduct wages paid to an employee working in the taxpayer's

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business. Patton, 799 F.2d at 169-70. The tax court found that

most of the Clarks' payments to Thomas, however, were loans, not

wages. The Clarks contend that Thomas defaulted on the loans, but

they provide no evidence in support thereof. Therefore, the tax

court's finding is not clearly erroneous.

The third deduction the Clarks claim concerns depreciation and

business miles on their vehicles for 1985. The Clarks presented no

evidence to support this deduction to the tax court. Rather, the

Clarks argue that the IRS conceded this item before trial.

Nevertheless, the Clarks present no proof of this concession. We

see no clear error.

The last deduction the Clarks claim concerns depreciation on

Mr. Clark's car during 1986. In June 1986, Mr. Clark became the

pastor of his church, and he still worked for AMFI until September

1986. Mr. Clark used his car to commute between his home and his

church, to travel between AMFI and his church, and to transport

church members to different functions. The tax court found that

the transportation of church members was a business expense, but

that the rest of his mileage was not deductible. Miles commuted

between one's home and one's business are nondeductible personal

expenses, but miles commuted between two places of business are

deductible. Steinhort v. Commissioner of Internal Revenue, 335

F.2d 496, 503-04 (5th Cir. 1964). Although the Clarks could deduct

the miles commuting between AMFI and the church between June and

September 1986, they provided no substantiation of such mileage.

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We conclude that the tax court's finding was not clearly

erroneous.2

CONCLUSION

For the foregoing reasons, the decision of the tax court is

AFFIRMED.

2
The Clarks also argue that we should reverse the penalties
imposed by the IRS, but they provide no basis for overturning the
penalties. Therefore, we affirm the tax court's upholding of the
penalties.

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