Colvin v. CIR

United States Court of Appeals
Fifth Circuit
F I L E D
February 16, 2005
Charles R. Fulbruge III
Clerk
In the
United States Court of Appeals
for the Fifth Circuit
_______________
m 04-60507
Summary Calendar
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GARY LEE COLVIN,
Petitioner-Appellant,
VERSUS
COMMISSIONER OF INTERNAL REVENUE,
Respondent Appellee.
_________________________
Appeal from the United States Tax Court
m 11412-01
_________________________
Before DAVIS, SMITH and
DENNIS, Circuit Judges.
JERRY E. SMITH, Circuit Judge:*
Petitioner Gary Lee Colvin appeals a decis-
ion of the United States Tax Court, which
upheld the Internal Revenue Service’s findings
of deficiencies in the tax reported on certain of
his returns. Finding no error, we affirm.
I.
Colvin lived in a condominium development
during the tax years in question. It had 128
units were grouped into two “phases.” Colvin
* Pursuant to 5TH CIR. R. 47.5, the court has
determined that this opinion should not be pub-
lished and is not precedent except under the limited
circumstances set forth in 5TH CIR. R. 47.5.4.

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resided in Phase I.
Colvin perceived irregularities in the home-
owners association’s adoption of a new gov-
erning document that he believed favored
Phase II owners over Phase I owners. He
claimed that when he approached the associa-
tion’s board of directors to address his griev-
ances, he was refused an opportunity to speak
and was harassed and threatened, and the
board refused to hand over any financial infor-
mation related to the maintenance of Phase II.
Consequently, he filed several lawsuits against
the association, for which he incurred legal ex-
penses in 1997 and 1998.
Colvin’s first lawsuit alleged fraud, sup-
pression of facts, negligent misrepresentation,
libel, slander, abuse of process, and civil rights
abuses. He ultimately voluntarily dismissed
that suit and filed another against the associa-
tion seeking specific performance regarding
maintenance and repairs, declaratory relief as
to the validity of the covenants, conditions and
restrictions, and an injunction to restrain the
association from making certain water and
sewage charges. The trial court denied his
claim for specific performance but ruled in his
favor with regard to finding certain of the
association’s covenants, conditions, and re-
strictions invalid.
Colvin is employed as a network engineer
and reported wages on his tax returns from his
employment with Daou Systems in 1997 and
Network Computing Device Inc. in 1997 and
1998. He also attached to his tax returns for
those years Schedules C, Profit or Loss from
Business, for “Colvin Business Services II.”
The Schedules C reported losses for both
years (with zero gross receipts for 1998) and
deductions for legal and professional service
expenses, including expenses related to the
litigation described above.
Some of the legal expenses Colvin deducted
related to the litigation against the association,
and others related to a suit in which he sought
to recover wages from a former employer.
Colvin’s mother, in preparing his returns, tried
to allocate the various legal expenses to the
suit against the employer and the litigation
against the association. But, because the
billing records from the attorney did not ade-
quately describe the services performed, she
was unable to allocate the expenses.
On June 21, 2001, the Commissioner sent
Colvin a notice of deficiency stating that he
owed $1,918 for the 1997 tax year and $1,072
for the 1998 tax year. According to the no-
tice, Colvin was not entitled to deduct any
legal expenses in 1997 or $6,435 of the claim-
ed legal expenses in 1998, because he had fail-
ed to establish that he had incurred those ex-
penses for ordinary and necessary business
purposes.
In July 2001, Colvin mailed amended re-
turns for the tax years in question and a check
for $64. The Commissioner considered the
submission to be an offer in compromise and
refused to accept it. Colvin filed a petition in
the Tax Court seeking redetermination of the
deficiencies and challenging the Commis-
sioner’s refusal to accept his amended returns.
The court rejected all of Colvin’s claims and
affirmed the deficiencies.
II.
Colvin argues that the Commissioner
abused his discretion in not accepting the
amended return. We disagree, because al-
though the Commissioner has administratively
permitted their use, the filing of amended
returns is not a matter of right; there is no

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statutory provision expressly authorizing them
to be filed.1 The acceptance of amended
returns is a matter of the Commissioner’s
discretion.2 Moreover, even if the Commis-
sioner had a legal duty to accept the amended
return, it would have no impact on the defi-
ciencies upheld by the Tax Court, because they
were issued before Colvin attempted to submit
his amended return, and amended returns do
not vitiate deficiencies that have already been
issued.3
III.
Colvin challenges the Tax Court’s finding
that the legal expenses he incurred in his litiga-
tion against the homeowners association were
not deductible under Internal Revenue Code §
212, which provides:
In the case of an individual, there shall be
allowed as a deduction all the ordinary and
necessary expenses paid or incurred during
the taxable yearSS
(1) for the production or collection of
income;
(2) for the management, conservation or
maintenance of property held for the
production of income; or
(3) in connection with the determina-
tion, collection or refund of any tax.
A taxpayer may not, under § 212, deduct legal
fees that are personal expenses. I.R.C.
§ 262(a).4 Under United States v. Gilmore,
372 U.S. 39, 49 (1963), we look to the origin
of the claim to determine whether the purpose
1 Baradacco v. Commissioner, 464 U.S. 386,
393 (1984) (“[T]he Internal Revenue Code does
not explicitly provide either for a taxpayer’s filing,
or for the Commissioner’s acceptance, of an
amended return; instead, an amended return is a
creature of administrative origin and grace.”);
Evans Cooperage Co. v. United States, 712 F.2d
199, 204 (5th Cir. 1983) (“Neither the Internal
Revenue Code nor the Treasury Regulations make
any provision for the acceptance of an amended
return in place of the original return previously
filed.”).
2 Hillsboro Nat’l Bank v. Commissioner, 460
U.S. 370, 380 n.10 (1983) (stating that acceptance
of amended returns is “within the discretion of the
Commissioner”); Jones v. Commissioner, 338 F.3d
463, 466 (5th Cir. 2003) (“The IRS has discretion
to accept or reject an amended return.”); Dover
Corp. & Subsidiaries v. Commissioner, 148 F.3d
70, 72-73 (2d Cir. 1998) (“There is simply no
statutory provision authorizing the filing of
amended tax returns, and while the IRS has, as a
matter of internal administration, recognized and
accepted such returns for limited purposes, their
treatment has not been elevated beyond a matter of
internal discretion.”) (internal citations omitted).
3 See Koch v. Alexander, 561 F.2d 1115, 1117
(4th Cir. 1977); McCabe v. Commissioner, 46
T.C.M. (CCH) 390, 391 (1983) (stating that the
filing of “[a]n amended return does not . . . change
(continued...)
3(...continued)
an assessment that has been made or vitiate a no-
tice of deficiency on which the jurisdiction of [the
Tax] Court is based.”); Miskovsky v. United
States, 414 F.2d 954, 956 (3d Cir. 1969) (“[I]t
would be utterly disruptive of the administration of
the tax laws if a taxpayer could disregard his re-
turn and automatically change an assessment based
thereon by making an amended return in his favor
long after the expiration of the time for filing the
original return.”)
4 According to § 262(a), “[e]xcept as otherwise
expressly provided in this chapter, no deduction
shall be allowed for personal, living or family
expenses.”

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of litigation expenses was personal or for pro-
fit.5 We review the Tax Court’s determination
of the question of profit motive for clear
error.6
As noted by the Tax Court, Colvin is plain-
ly incorrect in asserting that his legal expenses
in suing the association are deductible under §
212 based on the fact that the consequence of
a successful suit would be the production of
taxable income or would assist in determining
his tax liabilitySSsuch a proposition was
outrightly rejected in Gilmore.7 The Tax
Court did not commit clear error in determin-
ing that the origin of the lawsuit against the
association was personal in nature, given that
it was Colvin’s primary residence and that his
stated purpose behind the first lawsuit was “to
stop the harassment.” Moreover, there was
substantial evidence in the record indicating
that the motivation for the suit was his anger
over the failure of the association properly to
manage, conserve, and maintain the condo-
minium property that he used for his personal
residence, expenses that the regulations relat-
ing to § 212 explicitly reference as being non-
deductible.
IV.
Colvin asserts that the Commissioner im-
properly denied him deductions for legal costs
that he assumed in lawsuits against Daou
Systems for unpaid wages. As noted below,
however, Colvin did not adequately address
the nature or amount of these expenses to the
Tax Court; although the Commissioner’s
written submissions contended that these
deductions were in fact allowedSSalbeit con-
verted from Schedule C to Schedule A de-
ductionsSSColvin’s submissions before the
Tax Court only addressed the issue of his
lawsuits against the homeowners association.8
It may be that Colvin was entitled to deduct
the legal expenses he incurred in his lawsuit
against Daou Systems, but we decline to eval-
uate the veracity of this claim, because the
issue was not adequately raised and presented
in the Tax Court.9
5 “[T]he origin and character of the claim with
respect to which an expense was incurred, rather
than its potential consequences upon the fortunes of
the taxpayer, is the controlling basic test . . . .”
Gilmore, 372 U.S. at 49. See also Srivastava v.
Commissioner, 220 F.3d 353, 357 (5th Cir. 2000).
6 Ogden v. Commissioner, 244 F.3d 970, 971
(5th Cir. 2001) (“We review for clear error the tax
court’s profit motive inquiry.”) (internal citations
omitted).
7 See Gilmore, 372 U.S. at 48 (“The principle
we derive . . . is that the characterization, as ‘busi-
ness’ or ‘personal,’ of the litigation costs of resist-
ing a claim depends on whether or not the claim
arises in connection with the taxpayer’s profit-
seeking activities. It does not depend on the conse-
quences that might result . . . .”) (emphasis added).
8 As stated by the Tax Court, “Although peti-
tioner might be entitled to deduct legal expenses in-
curred in connection with his former employment,
he has identified neither the amount nor the nature
of those expenditures.” Colvin claims that he did
raise the issue in a brief that is not available in the
record on appeal, but the language he quotes
merely states that such legal expenses were in-
curred and summarily concludes that they should
be deductible, without indicating their nature or
amount. By contrast, the Commissioner’s submis-
sions, included in the record, specifically indicate
that $1,217 and $1,787 were allowed as deductions
for legal expenses in the lawsuit against Daou Sys-
tems in tax years 1997 and 1998, respectively.
9 See, e.g., Nissho-Iwai Am. Corp v. Kline, 845
F.2d 1300, 1307 (5th Cir. 1998); Little v. Liquid
(continued...)

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AFFIRMED.
9(...continued)
Air Corp., 37 F.3d 1069, 1071 n. 1 (5th Cir. 1994)
(en banc).

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