             NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
                        File Name: 11a0296n.06

                                      No. 10-1145

                      UNITED STATES COURT OF APPEALS
                           FOR THE SIXTH CIRCUIT

PETER M. COMENSOLI,
                                                                              FILED
                                                                         May 05, 2011
                                                                    LEONARD GREEN, Clerk
      Petitioner-Appellant,

             v.                                             On Appeal from the
                                                            United States Tax Court
COMMISSIONER OF INTERNAL REVENUE,

      Respondent-Appellee.




                                                      /


Before:      GUY, COOK, and STRANCH, Circuit Judges.

      RALPH B. GUY, JR., Circuit Judge.         Petitioner Peter M. Comensoli appeals from

the decision of the Tax Court upholding the levy and federal tax lien assessed against

Comensoli personally for unpaid employment taxes, including penalties and interest, owed

by Paradym Group, LLC, for the fourth quarter of 2005. There is no dispute that Paradym

was a single-member entity and did not make an affirmative election to be treated as a

corporation separate from its owner under the applicable “check-the-box” regulations. Nor

did Comensoli contest the fact or amount of the debt. The only disputed issue was whether

the owner of Paradym was Comensoli, or a corporation that was, in turn, owned by

Comensoli. Finding no clear error, we affirm the decision of the Tax Court.

                                           I.
No. 10-1145                                                                                   2

       The Internal Revenue Service (IRS) determined Paradym’s employment tax liability,

including penalties and interest, to be $42,016.62, and sent Comensoli a Notice of Intent to

Levy in April 2007, and a Notice of Federal Tax Lien Filing in June 2007. Comensoli

requested and received collection-due-process hearings under 26 U.S.C. §§ 6330 and 6320.

The IRS issued a Notice of Determination upholding the levy on September 18, 2007, and

a Notice of Determination upholding the lien on January 11, 2008. Those determinations

rejected Comensoli’s contention that he was not the sole owner of Paradym. Comensoli filed

separate petitions contesting the determinations, which were consolidated for trial. Trial was

held on February 3, 2009, and the Tax Court issued its decision in favor of the Commissioner

on October 26, 2009. This appeal followed.

                                              II.

       We review the Tax Court’s legal conclusions de novo and its factual findings for clear

error. Zack v. Comm’r, 291 F.3d 407, 412 (6th Cir. 2002); Ekman v. Comm’r, 184 F.3d 522,

524 (6th Cir. 1999). “A finding is clearly erroneous when, although there is evidence to

support it, a review of the entire record leaves the reviewing court with the definite and firm

conviction that a mistake has been made.” Gross v. Comm’r, 272 F.3d 333, 343 (6th Cir.

2001); see also Holmes v. Comm’r, 184 F.3d 536, 543 (6th Cir. 1999). “Where there are two

permissible views of the evidence, the factfinder’s choice between them cannot be clearly

erroneous.” Anderson v. City of Bessemer City, 470 U.S. 564, 574 (1985). Further, we give

considerable deference to the Tax Court’s “first-hand assessment of the credibility of

witnesses.” Kosinski v. Comm’r, 541 F.3d 671, 680 (6th Cir. 2008); see also Indmar Prods.
No. 10-1145                                                                                              3

Co. v. Comm’r, 444 F.3d 771, 778 (6th Cir. 2006).

        Paradym Group, LLC, admittedly a one-member limited liability company, did not file

a Form 8832, Entity Classification Election, electing to be treated as a separate entity for

federal tax purposes under the check-the-box regulations, Treas. Reg. § 301.7701-3(a) (26

C.F.R., 2005 ed.). As a result, Paradym was “disregarded” as an entity separate from its

owner and deemed to be a sole proprietorship for all federal tax purposes, Treas. Reg. §§

301.7701-2(a), (c)(2), and 301.7701-3(b)(ii). By not electing treatment as a separate entity,

Paradym’s owner avoided double taxation. See Littriello v. United States, 484 F.3d 372, 375-

76 (6th Cir. 2007) (upholding the validity of these regulations). As noted, the only disputed

issue was whether Comensoli or a corporation owned by him was the owner of Paradym.1

A.      Facts

        The stipulated facts and evidence admitted at trial included Paradym’s “Articles of

Organization,” filed with the State of Michigan on December 20, 2004, which identified

Paradym as a “temporary and contract labor agency.” This organizing document was signed

and filed by Comensoli as Paradym’s “Organizer.” Both the 2006 and 2007 Limited Liability

Company Annual Statements for Paradym were signed by Comensoli in the box for

“authorized member, manager or agent.” On the 2006 Annual Statement, dated December

4, 2005, Comensoli wrote in his title as “Managing Member,” while on the 2007 Annual

Statement, dated January 12, 2007, Comensoli wrote in his title as “Owner.” No other person


        1
         Although these regulations have been amended to provide that a single-owner entity is no longer
disregarded for employment tax purposes only, they are inapplicable here because the amended provisions
apply to wages paid after January 1, 2009, Treas. Reg. § 301.7701-2(a), (c)(iv) and (e)(5) (26 C.F.R., 2009
ed).
No. 10-1145                                                                                 4

or entity was identified in these documents as an owner, member, or manager of Paradym.

       Federal employment taxes were paid by Paradym for the first three quarters of 2005.

The returns for the first two quarters were signed by Comensoli as Paradym’s “President.”

The third and fourth quarter returns were also prepared with a signature block for Comensoli

to sign as “President,” but both signature blocks were left blank. All four quarterly returns

automatically listed A. Adonu Idahosa, CPA, PLC, and the firm Symphony Financial

Services, Inc., in the section for “paid preparers,” although none of these returns were

prepared or signed by Idahosa. Comensoli and Idahosa, friends and long-time business

associates, divided office space between themselves, Symphony, and Paradym. Comensoli

testified that he reported his income and expenses from Symphony on Schedule C of his

personal tax return.

       Symphony was initially incorporated as TCF Leasing, Inc., by Comensoli and several

family members in 1992, and later filed a certificate of assumed name to do business as Allen

Associates. In 2000, after selling the name to TCF Bank, TCF Leasing filed an amendment

changing its name to Symphony Financial Services, Inc., and renewed the certificate of

assumed name to do business as Allen Associates. In April 2007, another amendment was

filed changing the corporation’s name from Symphony to Back Porch Workout, Inc. (Back

Porch, f/k/a Symphony). All of these filings were signed by Comensoli on behalf of the

corporation. Comensoli testified that he is the sole shareholder of Back Porch.

       Comensoli, who had a degree in accounting and almost five years of experience

working as an IRS Revenue Agent, testified that he did not know that the fourth quarter
No. 10-1145                                                                                5

employment taxes had not been paid until collection action was taken against him personally

in January 2007. At trial, Comensoli claimed that although deposits had been made with the

IRS by Paradym for the fourth quarter of 2005, the deposits were returned because Paradym

had contracted with a payroll processing company that also made deposits on behalf of

Paradym. As a result, Comensoli did not know about the deficiency when he took a personal

loan of $35,000 to $40,000 from Paradym to invest in a restaurant franchise in early 2006.

Judy Cherrington, the payroll manager for Paradym, confirmed at trial that this transaction

was booked as a loan to Comensoli.

       Comensoli testified that Back Porch—as Symphony—paid the filing fee associated

with organizing Paradym in December 2004, but offered no evidence substantiating that

claim. Comensoli did offer one check written by him from Allen Associates—the registered

assumed name for the corporation—to Paradym for $3,600 and dated June 22, 2006. This,

Comensoli testified, was a contribution of working capital by the corporation. Although he

claimed that other contributions were also made, this was the only check produced. No

accounting records were offered to corroborate that this (or other payments) were

contributions to Paradym’s capital account.

       When interviewed by a Revenue Agent in April 2007, Comensoli denied that he was

the owner of Paradym, claimed that he had not known about the tax liability, and explained

that he had been unable to attend to his business or personal matters for nearly two years

following the death of his son from cancer in March 2005. He added that Cherrington was

getting the records together, which were “very incomplete,” and said that he would be filing
No. 10-1145                                                                                  6

returns to establish Back Porch’s ownership of Paradym. In fact, at trial, Comensoli

explained that he had reported income from the corporation on his individual return until

2007, when he “chose to start using it as a[n] ownership vehicle” for the tax year 2005.

       Comensoli provided the IRS with a preliminary draft of a partnership income tax

return for Paradym for 2005 (Form 1065), which was prepared in June 2007. Attached to the

Form 1065 was a Schedule K-1 listing Back Porch as the 100% member manager of Paradym

and reflecting a pass-through loss of $25,968.00 for the year 2005. Also, a second K-1 listed

“Anyone” as a 0% LLC member manager. Idahosa explained that this second K-1 was

created because the tax preparation software would not let him print the return with only one

“partner.” This return was admitted into evidence, as were corporate income tax returns for

Back Porch for 2005 and 2006 (Form 1120). The corporation’s tax return for 2005, also

prepared in June 2007, showed a loss from Paradym of $25,968.00 and had the K-1 attached

that listed Back Porch as the 100% LLC member-manager of Paradym. Idahosa signed both

of these returns as the tax preparer using the name Symphony Financial Services, while

Comensoli signed only Paradym’s partnership return. Comensoli testified that it was

Idahosa’s error that caused a partnership return to be prepared for the LLC.

       Finally, at trial, Comensoli produced for the first time what purported to be a copy of

an “Operating Agreement for Paradym Group, LLC,” “made effective as of December 7,

2004, by and among PARADYM GROUP, LLC a Michigan Limited Liability Company (the

‘Company’), and SYMPHONY FINANCIAL SERVICES, INC., which shall hereafter

collectively be referred to as the ‘Member.’” This document is signed but not dated by
No. 10-1145                                                                              7

Comensoli for Paradym and for Symphony, as Paradym’s member. (Above the signature is

“PARADYM GROUP, LLC, a Michigan Limited Liability Company,” and below the

signature is “Symphony Financial Services, Inc. Its: Member.”) Comensoli testified that he

found this copy in a file while looking for records in response to the Commissioner’s trial

subpoenas.    No original or other corroboration was offered.       When asked why then

Paradym’s filings with the State of Michigan did not identify Symphony (now Back Porch)

as Paradym’s owner or member, Comensoli attributed his earlier representations that he was

Paradym’s “member” or “owner” to mistake and grief-stricken inattention caused by his

son’s death in March 2005.

B.     Analysis

       On the dispositive question, the Tax Court determined as a factual matter that

Comensoli was the sole member of Paradym Group, LLC, explaining that:

              Petitioner’s argument that Back Porch Workout owned Paradym is not
       credible. Petitioner formed Paradym, and he has not offered any evidence to
       indicate that he transferred any of his membership units in Paradym since it
       was formed. Since its inception, petitioner has held himself out as owner of
       Paradym.

              Although petitioner offered a Form 1065, U.S. Return of Partnership
       Income, for Paradym for tax year 2005, that document is not credible. . . . Not
       only was the Form 1065 created in 2007 after respondent had begun collection
       proceedings, but petitioner testified that the second Schedule K-1 was
       fabricated because it was the only way to process a partnership return for
       Paradym using petitioner’s and Mr. Idahosa’s tax return preparation software.

The Tax Court concluded that: “Paradym is disregarded pursuant to section 301.7701-

3(b)(1)(ii), Proced. & Admin. Regs.” and “Respondent is authorized to collect Paradym’s

unpaid tax from petitioner by means of the lien and levy.”
No. 10-1145                                                                                 8

       Claiming that the Tax Court’s finding is clearly erroneous, Comensoli points to

several minor factual errors in the Memorandum Opinion; asserts that too much weight was

afforded to the titles and designations used in Paradym’s filings with the State of Michigan;

and faults the decision for disregarding both the Operating Agreement identifying Paradym’s

member as Symphony and the check written to Paradym by Allen Associates (a/k/a

Symphony).    The factual errors included (1) misidentifying the family members who

incorporated TCF Leasing as his wife and children, instead of his wife and parents; (2)

stating that Comensoli “repeatedly” changed the name of TCF Leasing, when it was changed

only twice (to Symphony and then to Back Porch); and (3) referring to Back Porch as an

LLC, when there was no dispute that Back Porch was a corporation. None of these errors

are material to the Tax Court’s decision, however.

       Comensoli also asserts that the Tax Court misapprehended the issue by characterizing

his argument to be that he was not the sole member of Paradym. On the contrary, it is clear

that the Tax Court correctly understood the question to be whether Paradym, a single-

member LLC, was owned by Comensoli as the Commissioner contended, or was owned by

the corporation Back Porch (f/k/a Symphony) as Comensoli claimed. Further, Comensoli’s

argument that the Tax Court improperly relied on the failure to file the Form 8832 to suggest

that Comensoli was the owner of Paradym also misses the mark. The record is clear that the

Tax Court relied on the failure of Paradym to make the election to establish that Paradym is

a disregarded entity whose owner, whomever that might prove to be, would be liable as the

employer.
No. 10-1145                                                                                  9

       Finally, Comensoli argues that the Tax Court clearly erred (1) by affording improper

weight to the titles and designations he used on Paradym’s filings with the State of Michigan,

and to Idahosa’s mistakes in preparing the partnership return for Paradym; and (2) by giving

no weight to either the belatedly produced Operating Agreement, or the purported capital

contribution from Allen Associates.       Comensoli argues that under Michigan law an

“organizer” of an LLC can be, but does not have to be, a member of the LLC. Be that as it

may, the fact that Comensoli personally identified himself as Paradym’s “organizer” was

relevant. Comensoli’s undisputed self-identification as Paradym’s “managing member” and

“owner” in the Annual Reports filed with the State for 2005 and 2006 is evidence that he

held himself out as Paradym’s sole member until collection action was taken against him

personally.

       Nor was it improper to consider the irregularity and questionable nature of the tax

returns that Idahosa prepared at Comensoli’s behest for Paradym and Back Porch Workout

in June 2007. The judge was in a position to assess the credibility of the witnesses, including

whether Comensoli’s state of mind following the death of his son in March 2005 had any

bearing on his representation that he was Paradym’s owner. Although the decision did not

state the reasons for discounting the check to Paradym or the copy of the Operating

Agreement, there can be no question that this evidence was necessarily discounted as proof

of Paradym’s ownership. The check was admitted into evidence, but there was no showing

of how it was treated on Paradym’s books or other corroboration of any kind that it was a

capital contribution by the corporation. Further, the copy of the Operating Agreement, while
No. 10-1145                                                                               10

probably the most direct evidence that Paradym was organized with Symphony as its single

member, was unauthenticated, undated, and uncorroborated even though it was purportedly

signed by Comensoli.     We cannot conclude that it was clear error to disregard this

questionable evidence. Conti v. Comm’r, 39 F.3d 658, 664 (6th Cir. 1994) (recognizing that

the Tax Court may disregard even uncontradicted testimony when it finds that it is lacking

in credibility, or is improbable, unreasonable or questionable).

       Giving appropriate deference to the fact-finder’s credibility determinations, there is

scant evidence to support Comensoli’s claim that Paradym was indeed organized and owned

by the corporation Symphony (n/k/a Back Porch). Although there was evidence to the

contrary, mostly through Comensoli’s own testimony, the fact-finder’s choice between

permissible views of the evidence cannot be clearly erroneous and we are not left with a

definite and firm conviction that a mistake has been made.

       AFFIRMED.
