Couple Seeks Supreme Court Review in McVeigh Papers Charitable Deduction Ruling

Couple Seeks Supreme Court Review in McVeigh Papers Charitable Deduction Ruling

News story posted in U.S. Supreme Court on 16 September 2009| 1 comments
audience: National Publication | last updated: 18 May 2011
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Summary

A married couple have requested a review by the United States Supreme Court in connection with a Tenth Circuit Court's decision denying them a $300,000 income tax charitable deduction claimed by Leslie Stephen Jones, lead counsel for the defense of Timothy McVeigh in the 1995 bombing of the Alfred P. Murrah Federal Building in Oklahoma City, for the donation of his papers in the case to the University of Texas.
Sherrel Jones et vir v. Commissioner; No. 09-192

PGDC Editor's Note: For prior coverage, see 10th Circuit Denies $300k Charitable Deduction Claimed by Timothy McVeigh's Lawyer for Donation of Work Papers

Full Text:

August 11, 2009

SHERREL AND LESLIE STEPHEN JONES,
Petitioners
v.
COMMISSIONER OF INTERNAL REVENUE

IN THE
SUPREME COURT OF THE UNITED STATES

PETITION FOR A WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE TENTH CIRCUIT

PETITION FOR WRIT OF CERTIORARI

Stephen Jones
Counsel of Record
Jones, Otjen, Davis & Tebow
114 East Broadway,
Suite 1100
Post Office Box 472
Enid, Oklahoma 73702
(580) 242-5500

QUESTION PRESENTED

Whether the court below interpreted 26 U.S.C. § 1221(a)(3)(B) too broadly in light of conflicting revenue rulings by holding that Petitioner was not entitled to a charitable contribution deduction on the material in question because it constituted a letter, memorandum or similar property that was prepared and produced for Petitioner's benefit.

TABLE OF CONTENTS

 QUESTION PRESENTED

 TABLE OF AUTHORITIES

 OPINIONS BELOW

 JURISDICTION

 RELEVANT PROVISIONS INVOLVED

 STATEMENT

 REASONS FOR GRANTING THE PETITION

 CONCLUSION

 APPENDIX

Circuit Court of Appeals Opinion
Tax Court Decision
Order Denying Rehearing

TABLE OF AUTHORITIES

CASES

 CORN PRODUCTS REFINING CO. V. COMMISSIONER, 350 U.S. 46, 52, 76 S.CT.
 20, 100 L.ED. 29 (1955)

 BRADY V. MARYLAND, 373 U.S. 83, 83 S.CT. 1194, 10 L.ED.2D 215 (1963)

 GIGLIO V. UNITED STATES, 405 U.S. 150, 92 S.CT. 763, 31 L.ED.2D 104 (1972)

 GLEN V. COMMISSIONER, 79 T.C. 208, 214 (1982)

 MORRISON V. COMMISSIONER, 71 T.C. 683 (1979)

STATUTES

 18 U.S.C. § 3500

 26 U.S.C. § 1221(a)

 26 U.S.C. § 1221(a)(3)

 26 U.S.C. § 1221(a)(3)(A)

 26 U.S.C. § 1221(a)(3)(b)

 28 U.S.C. § 1254(1)

OPINIONS BELOW

The opinion issued by the United States Court of Appeals for the Tenth Circuit (App., infra, 1a) is reported at 560 F.3d 1196 (10th Cir. 2009). The opinion of the Tax Court (App., infra, 12a) is reported at 129 T.C. 146 (2007).

JURISDICTION

The decision of the United States Court of Appeals for the Tenth Circuit, affirming the decision of the United States Tax Court on other grounds, was handed down on March 27, 2009.

A timely petition for rehearing was denied (App., infra, 32a) on May 13, 2009. This Court has .jurisdiction pursuant to 28 U.S.C. § 1254(1).


RELEVANT PROVISIONS INVOLVED

26 U.S.C. § 121(a)

    For purposes of this subtitle, the term 'capital asset' means property held by a taxpayer (whether or not connected with his trade or business), but does not include --

      * * *

      (3) a copyright, a literary, musical, or artistic composition, a letter or memorandum, or similar property, held by --


        (A) a taxpayer whose personal efforts created such property,

        (B) in the ease of a letter, memorandum, or similar property, a taxpayer for whom such property was prepared or produced, or

        (C) a taxpayer in whose hands the basis of such property is determined, for purposes determining grain from a sale or exchange, in whole or part by reference to the basis of such property in the hands of a taxpayer described in subparagraph (A).

STATEMENT

In July 2004 the Commissioner of Internal Revenue (Commissioner) issued a notice of deficiency to Petitioners Sherrel and Stephen Jones for the years 2000 and 2001 in the amount of $14,784.99. The basis for the deficiency was the Commissioner's determination that Petitioners improperly claimed an income tax deduction for a charitable contribution of discovery material that Stephen Jones acquired while serving as lead defense counsel in the Oklahoma City bombing trial.

Petitioners filed a petition in United States Tax Court, seeking a redetermination of the deficiencies. The tax court issued its opinion, first ruling that Petitioner Stephen Jones did not own the donated material under Oklahoma law. (App., infra, 28a) The tax court determined that the material was provided to Stephen Jones only in his representative capacity lead defense counsel for Timothy McVeigh. Relying on precedent from jurisdictions outside Oklahoma and the Oklahoma Rules of Professional Conduct, the tax court held that primary ownership in an attorney's case file belongs with the client and not the attorney. (App., infra, 21a-28a) In the alternative, the tax court ruled that if Petitioner owned the donated material, it was not a "capital asset" because it qualified as letters, memoranda, and similar property prepared by Petitioner's personal efforts. (App., infra, 30a) Such property is excluded from the definition of "capital asset" pursuant to 26 U.S.C. § 1221(a)(3)(A), and the deduction value is limited to Petitioner's basis in the property. Since Petitioner's basis was zero, the tax court held that Petitioners (filing jointly) could not claim a charitable contribution deduction.

On appeal, the Tenth Circuit affirmed the tax court's ruling, but did so on entirely different grounds. The circuit court concluded that the discovery material Petitioners donated to the University of Texas must be excluded from the definition of "capital asset" because it constituted a letter, memoranda or similar property that was prepared and produced for Petitioner's benefit pursuant to 26 U.S.C. § 1221(a)(3)(b). (App., infra, 7a) In other words, the circuit found that the material in question was prepared and/or produced for Stephen Jones as lead defense counsel for Timothy McVeigh and therefore must be excluded from the definition of capital asset pursuant to § 1221(a)(3)(b).

This Petition seeks to have the Court review the circuit court's interpretation of 26 U.S.C. § 1221(a)(3)(B) in light of the absence of case law on the subject and conflicting Internal Revenue Code rulings involving the same statutory section. While this Court is not bound by such rulings and they may not be cited as precedent, Petitioners bring them to the Court's attention as evidence that the statute has been interpreted in varying ways.


REASON FOR GRANTING THE PETITION

The materials donated to the University of Texas were items that Timothy McVeigh received from the government. These items included FBI 302s, FBI notes, photographs taken by the government, state medical examiner's reports and other investigative material compiled by the government for the prosecution of the perpetrator of the bombing of the Alfred P. Murrah building. They were compiled for the government's use and then a copy was provided to Mr. McVeigh. The set in question was Petitioner's copy of what the government had already prepared, produced and organized for its own benefit in the prosecution of Mr. McVeigh.

The Federal Rules of Criminal Procedure, the Jencks Act, 18 U.S.C. § 3500 (West 2007), Brady v. Maryland, 373 U.S. 83, 83 S.Ct. 1194, 10 L.Ed.2d 215 (1963), Giglio v. United States, 405 U.S. 150, 92 S.Ct. 763, 31 L.Ed.2d 104 (1972), and other rules and procedures require the government in criminal cases to provide the defense with certain discovery documents. In the case of United States v. McVeigh, the government went above and beyond what they were required to produce under the law. The overwhelming majority of material that furnished the gift for which a deduction was claimed far exceeded any requirement under Rule 16 or Brady. The Commissioner conceded this point before the tax court when it acknowledged that "[t]he individual items included in the 'archive' were not created by or for petitioner." (Doc. No. 21, Opening Br. of Resp., filed 4/12/07 at 39) The circuit court's conclusion to the contrary, i.e., that the material was prepared and/or produced for Petitioner, required an overly broad interpretation of 26 U.S.C. § 1221(a)(3)(B), and one that is in conflict with the Commissioner's previous interpretations of that section.

The Internal Revenue Service, in Revenue Ruling 75-342, considered whether bound volumes of the Congressional Record accumulated by a taxpayer, a member of the United States Congress during his tenure in office, constituted literary compositions, letters or memorandums, or similar property, within the meaning of 26 U.S.C. § 1221(a)(3). See Rev. Rul. 75-342, 1975-2 C.B. 341, 1975 WL 34974. "Held, the bound volumes of the Congressional Record accumulated by the taxpayer are not literary compositions, letters or memorandums, or similar property, within the meaning of section 1221(3) of the Code." Id.

In Glen v. Commissioner, 79 T.C. 208, 214 (1982), the tax court analyzed the term "similar property" for purposes of § 1221-1(c)(2) and concluded that the statute is dealing with property created by a taxpayer. "Since the statute is obviously geared to a type of property which a taxpayer himself creates, in our view, the regulation including transcripts of an oral recording or an oral recording of any type of transcript of an oral interview is a proper interpretation of similar property referred to in the statute." Id. (citing § 1.1221-1(c)(2)).

In Internal Revenue Service Technical Advice Memorandum 8240009, the taxpayer, a physicist who worked on the Manhattan Project to develop the atomic bomb during World Ward II (as well as serving as a civilian technical advisor on one of the flights that dropped an atomic bomb on Japan), retrieved non-classified strike orders for the two atomic bomb missions as the orders were about to be discarded by military authorities or after they had been discarded. The taxpayer donated these strike orders to a qualifying charitable organization and claimed a charitable contribution deduction for the fair market value of the documents. The IRS held that the strike orders donated by the taxpayers were capital assets as defined by § 1221 because the documents were not government publications within the meaning of § 1221(5) and thereby excluded from the definition of capital assets.

In both of the above-referenced IRS rulings (which Petitioners acknowledge are not precedent) a narrower application of the statutory language was applied to the factual scenario presented. While the circuit court relied upon this Court's holding in Products Refining Co. v. Commissioner, 350 U.S. 52, 76 S.Ct. 20, 100 L.Ed. 29 (1955), for the reasoning that exclusions to the definition of capital asset should be interpreted broadly, it is clearly not done so in all situations, and this case presents an issue of first impression, and one that is in conflict with the Commissioner's own interpretive rulings.

The circuit court correctly noted that the Commissioner conceded that the property which Appellant claimed as a charitable contribution was not created by Petitioner's own efforts (App., infra, 7a), but it failed to recognize that the Commissioner also conceded that "[t]he individual items included in the 'archive' were not created for petitioner." (Doc. No. 21, Opening Br. of Resp., filed 4/12/07 at 39) (emphasis added). Contrary to the factual scenario of Morrison v. Commissioner, 71 T.C. 683 (1979), in which letters to and from a congressman were deemed prepared or produced for him, the documents in the present case were not prepared or produced specifically for Stephen Jones within the statutory meaning of § 1221.

The circuit court initially rightfully acknowledged this fact, stating that "the discovery material was not originally created for Taxpayer's benefit. Rather, the Government first compiled the material to assist in its investigation and prosecution of McVeigh." (App., infra, 9a) However, in the absence of guidance from IRS regulations and/or reported case law on the meaning of "for whom such property was prepared or produced," the circuit court reverted to the dictionary to determine the plain and ordinary meaning of "prepared or produced." (App., infra, 8a-9a) Whereupon, the circuit court concluded that the government "offered" or "presented" the material to Petitioner for his "view," "consideration," and "use" in representing McVeigh. (App., infra, 9a) Contrary to the circuit court's finding (App., infra, 10a), the bulk of the material making up the donation was not the typical discovery material produced pursuant to Rule 16 or Brady. As such, the court applied 26 U.S.C. § 1221(a)(2)(B) too broadly in excluding the material in question from the definition of capital asset.


CONCLUSION

For the reasons set forth above, Petitioners respectfully request the issuance of a writ of certiorari to the United States Court of Appeals for the Tenth Circuit. Respectfully submitted,

Stephen Jones
Jones, Otjen, Davis & Tebow
114 East Broadway, Suite 1100
Post Office Box 472
Enid, Oklahoma 73702
(580) 242-5500

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Certiorari Denied

It has been reported independently that certiorari has been denied by the U.S. Supreme Court.

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