                                                              United States Court of Appeals
                                                                       Fifth Circuit
                                                                    F I L E D
                IN THE UNITED STATES COURT OF APPEALS               August 18, 2003

                         FOR THE FIFTH CIRCUIT                  Charles R. Fulbruge III
                         _____________________                          Clerk

                              No. 02-61019
                         _____________________


TERRELL EQUIPMENT COMPANY INC.;
VERNON W. GRIFFIN,
                                                  Petitioners-Appellants,
versus

COMMISSIONER OF INTERNAL REVENUE,
                                                     Respondent-Appellee.

                         _____________________

                              No. 02-61043
                         _____________________


JANET M. GRIFFIN,
                                                    Petitioner-Appellant,
versus

COMMISSIONER OF INTERNAL REVENUE,
                                                     Respondent-Appellee.

                        ---------------------
               Appeal from the United States Tax Court
                        ---------------------

BEFORE WIENER, CLEMENT, and PRADO, Circuit Judges.

WIENER, Circuit Judge:

     After a jury acquitted Petitioner-Appellant Vernon Griffin on

all charges of criminal tax fraud (evasion), Respondent-Appellee

Commissioner    of   Internal     Revenue     ("Commissioner")       assessed

deficiencies,    additions   to    tax,     and   penalties    against      all

Petitioners-Appellants (“Petitioners” or “taxpayers”)) for the tax

years 1987, 1988, and 1989, the same years involved in the criminal
case.     The taxpayers challenged that determination in the United

States     Tax    Court     (“Tax       Court”)   and   ultimately   prevailed.

Petitioners then moved for an award of attorneys' fees and costs

pursuant to 26 U.S.C. § 7430 and Tax Court Rule of Practice and

Procedure 231.       The Tax Court denied that motion, and it is that

denial that the taxpayers appeal.              For the reasons that follow, we

affirm.

                           I. Facts and Proceedings

      The taxpayers in this case appeal a Tax Court order filed

August 27th, 2002, denying them an award of litigation fees and

costs.1    In that ruling, the Tax Court held that the government’s

litigation position in the underlying civil case was “substantially

justified,” which shields the Commissioner from liability for fees

and   costs      under    I.R.C.    §    7430(c)(4)(B)(i).     The   underlying

litigation related to taxes paid in 1987, 1988, and 1989 by Terrell

Equipment Company (“TECO”), Mr. Griffin, and Mrs. Griffin.2                 The

Commissioner had determined deficiencies, additions to tax, and

penalties for all Petitioners for the years in question.                In the

ensuing civil litigation, the Commissioner conceded that the period

of limitations had expired absent a finding of fraud.                  The Tax

      1
       See Terrell Equip. Co., Inc., et al. v. Comm’r of Internal
Revenue, 84 T.C.M. (CCH) 259 (2002).
      2
       Vernon and Janet Griffin were married to each other before
and during the years in question, and Mr. Griffin was President of
TECO during those years. Although the couple separated in 1990 and
later divorced, the Tax Court referred to Mrs. Griffin by her
married name in its opinions, and we will do the same.

                                           2
Court found that none of the taxpayers had acted fraudulently, and

therefore were not liable for any of the amounts determined by the

Commissioner.3    After that decision, the taxpayers made a motion

for award of fees and costs, and it is the denial of that award

that they appeal.

                            II. Analysis

A. Jurisdiction

     We have jurisdiction over this appeal pursuant to 26 U.S.C. §

7482(a)(1).   The Commissioner contends, however, that we have no

jurisdiction over Mrs. Griffin’s appeal because she filed notice of

that appeal 92 days after the Tax Court entered its decision in her

case.4   The Commissioner argues that TECO and Mr. Griffin’s timely

appeal does not function to give Mrs. Griffin an extra thirty days

in which to file her appeal, as the second sentence of 26 U.S.C. §

7483 seems to suggest.   This is so, according to the Commissioner,

because Mrs. Griffin was not a party to the decisions binding TECO

     3
       See Terrell Equip. Co., Inc., et al., v. Comm’r of Internal
Revenue, 83 T.C.M. (CCH) 1309 (2002).
     4
      26 U.S.C. § 7483 mandates a 90-day period for appeals of Tax
Court decisions:

     Review of a decision of the Tax Court shall be obtained
     by filing a notice of appeal with the clerk of the Tax
     Court within 90 days after the decision of the Tax Court
     is entered. If a timely notice of appeal is filed by one
     party, any other party may take an appeal by filing a
     notice of appeal within 120 days after the decision of
     the Tax Court is entered.

Federal Rule of Appellate Procedure 13 contains the same provisions
for the timing of appeals.

                                 3
and Mr. Griffin, even though her case was consolidated with theirs

for trial, briefing, and opinion.     The Commissioner cites Twenty

Mile Joint Venture, PND, Ltd., v. Commissioner,5 and Davies v.

Commissioner,6 to support his argument.

     In each of those cases, the situation was similar to the

instant situation: Several actions had been consolidated in the Tax

Court; one appellant timely appealed; and another appealed during

§ 7483's 90 to 120-day window following the decision.     In Twenty

Mile Joint Venture, the Tenth Circuit reasoned that the second

(untimely) filer could not take advantage of the extra thirty days

allowed by § 7483 because the second filer was not a party to the

decision that bound the timely filer, even though both appellants’

cases had been consolidated for purposes of trial and opinion.

Because “the two cases had not lost their individual identities,”

and the timely filing appellant was appealing a separate decision,

the Tenth Circuit held that the timely appeal did not extend the

time for filing under § 7483.7   The Davies court relied on similar

reasoning to reach the same result, explaining that the appropriate

inquiry is “solely whether the late filer was a party to the same

decision as the timely filer[,]...not to his participation in the




     5
         200 F. 3d 1268 (10th Cir. 1999).
     6
         715 F.2d 435 (9th Cir. 1983).
     7
         Twenty Mile Joint Venture, 200 F.3d at 1275.

                                  4
same proceeding or to his inclusion in the same opinion.”8       As the

cases currently before us were consolidated only for purposes of

trial, briefing, and opinion, and separate decisions were entered

in each case, reasons the Commissioner, TECO and Mr. Griffin’s

timely appeal does not garner Mrs. Griffin any additional time

within which to file her own appeal.

     In the instant case, however, none of the taxpayers appeal

decisions of the Tax Court, as its decisions discuss only the

merits of the underlying civil tax fraud case, and were favorable

to Petitioners.     Rather, Petitioners appeal only the Tax Court’s

Order dated August 27th, 2002, which denies all of them an award of

fees and costs.     In other words, as regards the denial of fees and

costs, there is no “decision” to appeal, only the lone August 27th

Order, which covers all Petitioners and was timely appealed by TECO

and Mr. Griffin.       This case is therefore distinguishable from

Twenty Mile Joint Venture and Davies.     As the Order being appealed

affected all Petitioners, and TECO and Mr. Griffin’s appeal was a

“timely notice of appeal ... filed by one party” as described by §

7483, Mrs. Griffin was entitled to 120 days within which to file

her own appeal.       She filed her notice of appeal within that

extended period, so we have jurisdiction over her appeal.

B. Standard of Review

     We    review   Tax   Court   decisions   concerning   “substantial


     8
         Davies, 715 F.2d at 437.

                                    5
justification” under § 7430 for an abuse of discretion.9

C. Substantial Justification

     Petitioners argue that the Commissioner’s litigation position

was not substantially justified because he allegedly attempted to

prove fraud based only on understatement of income, which is

contrary to established case law of this Circuit.10    Essentially,

Petitioners argue that the Commissioner was aware of this case law,

disagreed with it, tried to change it by pursuing the instant

litigation, failed, and should therefore be held liable for fees

and costs.11 The Commissioner responds that his litigation strategy

at trial was grounded on many more indicators or “badges” of fraud

than understatement of income alone, that the Tax Court’s findings

on this issue are amply supported, and that we should therefore

affirm the Tax Court’s denial of fees and costs.   We agree with the

Commissioner.


     9
       See, e.g., Hanson v. Commissioner, 975 F.2d 1150, 1152-53
(5th Cir. 1992).
     10
       See Loftin & Woodward, Inc. v. United States, 577 F.2d 1206,
1239 (5th Cir. 1978)(“[C]ase law does not indicate that consistent
and substantial understatement of income is sufficient, by itself,
to support a finding of fraud.”).
     11
        Petitioners also argue that the Commissioner’s pursuit of
this case was a result of unreasonable IRS settlement policies set
out in the IRS Manual. Petitioners failed to raise this argument
before the Tax Court, however, and we therefore decline to consider
it here. See, e.g., Martinez v. Texas Dept. of Criminal Justice,
300 F.3d 567, 573 (5th Cir. 2002) (explaining that the court will
entertain new issues raised for the first time on appeal only in
extraordinary circumstances); Stokes v. Emerson Elec. Co., 217 F.3d
353, 358 n.19 (5th Cir. 2000) (“Arguments not raised in the
district court cannot be asserted for the first time on appeal.”).

                                6
     The Tax Court found that the Commissioner “went to trial on

the basis of the theory that multiple badges of fraud existed, and

at trial he attempted to prove that multiple badges of fraud were

present.”12     Although the Commissioner concedes he argued that

understatement of income alone might be enough to prove fraud in

this Circuit, he asserts that this was a secondary, alternative

argument, an assessment with which the Tax Court agreed.                   More

importantly, the Tax Court listed thirty stipulations of fact that

it decided could have supported a finding of fraud.                Even though

all of these stipulations relate in some way to understatement of

income, many could have supported affirmative findings on other

“badges” of fraud.

     The government’s position is substantially justified if it is

“‘justified in substance or in the main’ —— that is, justified to

a degree that could satisfy a reasonable person.                   That is no

different     from   [a]   ‘reasonable   basis   both   in   law    and   fact’

formulation.”13      This case presents a close question: Even if, on

a plenary review, we would reach a result opposite the conclusion

of the Tax Court, we would —— and do —— affirm that court under the

deferential abuse of discretion standard that is applicable in this

appeal.    The Petitioners’ argument depends on the proposition that



     12
        Terrell Equip. Co., Inc., et al., v. Comm’r of Internal
Revenue, 84 T.C.M. (CCH) 259, 2002 Tax Ct. Memo LEXIS 225, at *14
(2002).
     13
          Pierce v. Underwood, 487 U.S. 552, 565 (1988).

                                     7
the Commissioner went to trial on a theory that fraud could be

proven based on nothing more than understatement of income.         In the

explication of its exercise of discretion, the Tax Court notes

numerous stipulated facts that it concludes could support its

determination that the government’s litigation position was based

on a theory of multiple badges of fraud, and that such a theory was

“justified to a degree that could satisfy a reasonable person.”

Given the stipulations that the Tax Court relied on and the

inferences that can be drawn from them, we cannot say that the Tax

Court’s denial of fees and costs under § 7430 was an abuse of

discretion.




                              III. Conclusion

     For    the   foregoing    reasons,   the   Tax   Court’s   denial   of

attorneys’ fees and costs is

AFFIRMED.




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