                                                                           FILED
                             NOT FOR PUBLICATION                            OCT 25 2010

                                                                        MOLLY C. DWYER, CLERK
                    UNITED STATES COURT OF APPEALS                       U .S. C O U R T OF APPE ALS




                             FOR THE NINTH CIRCUIT



LARRY J. WADSWORTH and                           No. 08-74956
SHERILYN WADSWORTH,
                                                 Tax Ct. No. 10823-05
              Petitioners,

  v.                                             MEMORANDUM *

COMMISSIONER OF INTERNAL
REVENUE,

              Respondent.



                             Appeal from a Decision of the
                               United States Tax Court

                      Argued and Submitted October 5, 2010
                              Pasadena, California

Before: FISHER and BYBEE, Circuit Judges, and STROM, District Judge.**

       Larry and Sherilyn Wadsworth (“Petitioners”) filed amended individual

income tax returns for 2001 and 2002 resulting in tax refunds exceeding $200,000.

After auditing Petitioners, the Commissioner of Internal Revenue

        *
             This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
       **
              The Honorable Lyle E. Strom, Senior United States District Judge for
the District of Nebraska, sitting by designation.
(“Commissioner”) determined tax deficiencies for 2001 and 2002 in amounts

identical to Petitioners’ claimed tax refunds and assessed accuracy-related

penalties under I.R.C. § 6662 for substantial understatements of income tax. At

trial, Petitioners conceded the tax deficiencies but contested the penalties. The tax

court found Petitioners liable for accuracy-related penalties and Petitioners now

appeal to this court. We affirm.

      Petitioners raise seven main arguments on appeal. First, Petitioners argue

the Commissioner failed to present any evidence at trial establishing that

Petitioners underpaid their income tax. We reject this argument because

Petitioners conceded their tax liability at trial. Even assuming Petitioners did not

concede their tax liability, the record amply supports the conclusion that

Petitioners claimed and received tax refunds they were not entitled to. Because

these refunds led to underpayments attributable to substantial understatements of

income tax, the tax court properly assessed accuracy-related penalties. See I.R.C.

§§ 6662, 6664.

      Second, Petitioners argue I.R.C. § 6662 does not apply to them because their

substantial tax understatements arose from claims for refunds rather than tax

returns. We reject this argument because the relevant tax forms filed by Petitioners

were amended individual tax returns. An amended tax return is still a tax return


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even though it results in a refund. Cf. Zellerbach Paper Co. v. Helvering, 293 U.S.

172, 180 (1934) (stating that “a second return, reporting an additional tax, is an

amendment or supplement to a return already upon the files”).

      Third, Petitioners argue I.R.C. § 6676 is the proper statutory authority for

imposing penalties in this case. We disagree. Because Petitioners made

substantial tax understatements on their amended tax returns that resulted in tax

underpayments, the Commissioner properly assessed penalties under I.R.C. § 6662.

      Fourth, Petitioners argue they reasonably relied on the advice of their

attorney in amending their returns. Thus, Petitioners claim they are not liable for

penalties because they acted with reasonable cause and in good faith. See I.R.C. §

6664(c)(1); Treas. Reg. § 1.6664-4. We review for clear error the tax court’s

determination of whether a taxpayer acted with reasonable cause and in good faith.

Hansen v. Comm’r, 471 F.3d 1021, 1029-32 (9th Cir. 2006). Because Petitioners’

longtime tax preparer advised Petitioners against amending their returns and

because Petitioners introduced no evidence at trial to explain why they chose to

disregard their tax preparer’s advice, the tax court’s determination was not clearly

erroneous. Cf. Hansen, 471 F.3d at 1030 (“We have consistently held that given

similar warning signals, investors must undertake adequate investigations at the

time of investment to avoid [an accuracy-related] penalty.”).


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      Fifth, Petitioners argue they should not be subject to penalties because they

adequately disclosed their tax position. Under I.R.C. § 6662(d)(2)(B), no

accuracy-related penalty may be imposed for a substantial understatement when (1)

the taxpayer adequately discloses the relevant facts affecting the item’s tax

treatment; and (2) there is a reasonable basis for the tax treatment of that item.

Because Petitioners argue only that they made adequate disclosure and do not

challenge the tax court’s finding that there was no reasonable basis for their tax

position, Petitioners cannot prevail on this ground.

      Sixth, Petitioners argue the Commissioner’s notice of deficiency was invalid

and deprived the tax court of jurisdiction because the notice did not indicate the

basis for the tax due and for the assessed penalties. We hold the notice of

deficiency was jurisdictionally valid because it (1) indicated that the Commissioner

actually determined a deficiency; and (2) specified the amount and the year of the

deficiency. See Scar v. Comm’r, 814 F.2d 1363, 1367 (9th Cir. 1987).

      Seventh, Petitioners raise several issues related to the Tax Equity and Fiscal

Responsibility Act (“TEFRA”). Because these issues were merely listed in

Petitioners’ opening brief and were neither discussed nor supported by citations to

authority until Petitioners’ reply brief, they have been waived. See Rattlesnake




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Coal. v. EPA, 509 F.3d 1095, 1100 (9th Cir. 2007) (“Issues raised in an opening

brief but not supported by argument are considered abandoned.”).

      We have considered all other arguments raised by Petitioners in their briefs

and we find them to be without merit.

      AFFIRMED.




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