927 F. 2d 608 - Berg v. Commissioner Internal Revenue Service

MEMORANDUM**

Lester D. Berg appeals pro se the tax court's decision affirming the Commissioner of Internal Revenue's ("Commissioner") deficiency determination and additions to tax for the 1981 tax year. Berg contends as follows: (1) the tax court erred in placing upon him the burden of proving the deficiency determination arbitrary or erroneous, (2) the Commissioner improperly issued the deficiency notice shortly before Berg was incarcerated for committing fraud, (3) the deficiency determination was invalid because it was tainted by information improperly obtained from a grand jury, and (4) the tax court abused its discretion in not compelling the Commissioner to respond to Berg's discovery requests. We have jurisdiction pursuant to 26 U.S.C. Sec. 7482(a), and we affirm.

* Once the Commissioner provides some evidence that a taxpayer received unreported income, a presumption arises that the deficiency determination in a case involving unreported income is correct. Edelson v. Commissioner, 829 F.2d 828, 831 (9th Cir.1987); see United States v. Stonehill, 702 F.2d 1288, 1293 (9th Cir.1983), cert. denied, 465 U.S. 1079 (1984). The burden of proving the determination arbitrary or erroneous then rests with the taxpayer. Id. at 1293-94. Here, the Commissioner introduced a summary of bank deposits made to accounts under Berg's control. Thus, the tax court correctly placed upon Berg the burden of proving the deficiency determination arbitrary or erroneous. Moreover, the tax court's findings that Berg failed to prove arbitrariness or error are not clearly erroneous. See id. at 1295 (tax court's finding that deficiency determination was not arbitrary reviewed for clear error). In particular, the Commissioner's decision to reduce the amount of unreported income to account for transfers between Berg's numerous bank accounts did not show the remaining amount of unreported income to be arbitrary. See id. at 1294-95.

Although this court has, at times, reviewed the propriety of the Commissioner's motives in issuing a notice of deficiency, see, e.g., Karme v. Commissioner, 673 F.2d 1062, 1063-64 (9th Cir.1982), it has also held the Commissioner's motives are immaterial to the duty of the tax court and, therefore, to a review of the tax court's decision. Crowther v. Commissioner, 269 F.2d 292, 293 (9th Cir.1959). The latter rule governs Berg's claim that the Commissioner improperly issued the notice of deficiency too close in time to the beginning of Berg's incarceration for fraud.

The Commissioner's misuse of materials obtained from a grand jury might invalidate a deficiency determination. See LaFargue v. Commissioner, 800 F.2d 936, 940 (9th Cir.1986). Berg, however, shows no evidence that the Commissioner was able to review material possessed by a grand jury, nor does Berg show evidence contradicting the revenue agent's testimony that he was unable to review such material. We therefore find no reason here why the deficiency determination should be held invalid.

In response to Berg's discovery request, the Commissioner stated that two of the requested documents did not exist, and that one was available to the public at minimal cost. Berg does not dispute these assertions, although he contends it could have taken a year to obtain the publicly available document. The Commissioner complied with Berg's request for a fourth document, the revenue agent's worksheets, by providing a summary thereof. The only reason Berg gives for seeking these documents is to prove the deficiency determination was tainted by information improperly obtained from a grand jury. He does not explain how these documents would prove this allegation, which is contrary to the revenue agent's testimony. Under these circumstances, we cannot say the tax court abused its discretion in denying Berg's motion to compel production of the requested documents. Cf. Draper v. Coombs, 792 F.2d 915, 924 (9th Cir.1986) (district court's refusal to compel discovery reviewed for an abuse of discretion); 26 U.S.C. Sec. 7482(a) (tax court decisions reviewed in same manner as decisions from district courts in civil cases).

AFFIRMED.