BERRY v. COMMISSIONER OF INTERNAL REVENUE (2020)

MEMORANDUM **

Ronald Gene Berry and Linda Kathryn Berry appeal pro se from the Tax Court's decision, following a bench trial, upholding the Commissioner of Internal Revenue's determination of deficiencies and accuracy-related penalties for the 2011 tax year. We have jurisdiction under 26 U.S.C. § 7482(a)(1). We review de novo the Tax Court's conclusions of law and for clear error its factual findings. Meruelo v. Comm'r, 691 F.3d 1108, 1114 (9th Cir. 2012). We affirm.

The Tax Court did not clearly err in determining that Phoenix Construction and Remodeling, Inc. (“Phoenix”) did not overreport its gross income because the Berrys failed to establish that the $60,000.00 cash deposit from petitioner Linda Berry's father to Phoenix was a loan. See 26 U.S.C. § 61(a) (defining gross income); Welch v. Comm'r, 204 F.3d 1228, 1230-31 (9th Cir. 2000) (explaining that the taxpayer must establish that income resulted from a nontaxable loan and setting forth factors for determining whether a transaction is a loan). Contrary to the Berrys’ contention, the Tax Court was not required to accept their proffered documentary evidence of the alleged loan as true.

The Tax Court did not clearly err in determining that the Berrys failed to produce sufficient evidence to demonstrate that Phoenix was entitled to further deductions for car and truck expenses and cost of goods sold as business expenses. See 26 U.S.C. §§ 162(a) (business expenses), 274(d) (vehicle expenses); 26 C.F.R. § 1.61-3(a) (cost of goods sold to be deducted from gross income to determine business income); Sparkman v. Comm'r, 509 F.3d 1149, 1159 (9th Cir. 2007) (taxpayer bears burden of clearly showing right to claimed deduction).

We do not consider arguments and allegations raised for the first time on appeal. See Padgett v. Wright, 587 F.3d 983, 985 n.2 (9th Cir. 2009).

We do not consider any contentions in the opening brief that are raised on behalf of or by non-party Andrew Berry because they are outside the scope of this appeal.

AFFIRMED.