                   Case: 12-11337         Date Filed: 11/21/2012   Page: 1 of 10

                                                                       [DO NOT PUBLISH]

                      IN THE UNITED STATES COURT OF APPEALS

                                   FOR THE ELEVENTH CIRCUIT
                                    ________________________

                                            No. 12-11337
                                        Non-Argument Calendar
                                      ________________________

                                          Agency No. 5080-10


SYED A. AHMED,
RAFIUNNISA R. AHMED,

llllllllllllllllllllllllllllllllllllllllqqqqqq               Petitioners-Appellants,

                                                 versus

COMMISSIONER OF IRS,

lllllllllllllllllllllllllllllllllllllll                      lRespondent-Appellee.

                                     ________________________

                               Petition for Review of a Decision of the
                                            U.S.Tax Court
                                    ________________________

                                          (November 21, 2012)

Before CARNES, BARKETT and FAY, Circuit Judges.

PER CURIAM:
               Case: 12-11337      Date Filed: 11/21/2012      Page: 2 of 10

       Syed Ahmed1, proceeding pro se, appeals the tax court’s denial of his

petition for redetermination of his tax deficiency, imposed for his failure to pay

taxes on a settlement payment that he received related to an employment

discrimination lawsuit. On appeal, he argues that the settlement payment is

excludable from his taxable gross income, under 26 U.S.C. § 104(a)(2), as

compensation for physical injuries or physical sickness. For the reasons set forth

below, we affirm the tax court’s denial of Ahmed’s petition challenging his tax

deficiency.

                                              I.

       In 2010, Ahmed filed a petition with the tax court seeking a redetermination

of the Commissioner’s decision that he had a tax deficiency in 2007. He attached

the notice of deficiency, which indicated that he owed $22,185 in taxes on

$90,000 of income for 2007. The Commissioner also imposed a $4,437 penalty

based on Ahmed’s substantial understatement of tax, under 26 U.S.C. § 6662(a).

In his petition, Ahmed asserted that the $90,000 was “not income but [a]

settlement of legal expenses over a period of 16 years in [a] discrimination case.”

       The parties’ stipulation of the facts, along with their attached exhibits,



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         Although Syed and Rafiunnisa Ahmed are both parties on appeal, the factual background
and issues on appeal relate solely to Syed Ahmed, and accordingly, we refer only to him.

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established that, on October 23, 2006, Ahmed had filed a civil complaint against

Fulton County, his former employer, alleging numerous claims, including

constitutional violations, discrimination, and retaliation, based on his race,

religion, and national origin, in violation of Title VII of the Civil Rights Act of

1964 and 42 U.S.C. § 1981, and age discrimination, in violation of the Age

Discrimination and Employment Act (“ADEA”). Among other things, he alleged

that the harassment that he suffered during his employment contributed to a heart

attack that he suffered on August 24, 2005. As to relief, Ahmed requested back

pay, back benefits, compensatory and punitive damages for intentional

discrimination, litigation expenses, and reasonable attorney’s fees.

      On October 10, 2007, Ahmed entered into a settlement agreement with

Fulton County, pursuant to which he agreed to dismiss his employment lawsuit in

exchange for $150,000. Ahmed also agreed to retire from his employment with

the County. The agreement indicated that it encompassed all claims arising from

Ahmed’s civil action, including:

      any and all real or perceived claims, obligations, promises, demands,
      rights, damages, costs[,] losses, suits, actions, attorneys’ fees and
      expenses of any nature whatsoever which AHMED may have or have
      had, or may later claim to have had, against any of the FULTON
      COUNTY RELEASEES for personal injuries, contractual damages,
      losses and damage to personal property, or any other losses or
      expenses of any kind.

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Ahmed’s attorney in the case collected a 40% fee from the total settlement

payment, which was $60,000, and the remaining $90,000 was deposited to

Ahmed’s bank account.

      At the trial, Ahmed testified that he “settled the case because of physical

injuries.” Further, he testified that Fulton County had already given him back pay

for the time period of August 4 to January 20, 2005, and Ahmed paid taxes on

those earnings in his 2005 tax return. Further, he stated, “then what we got was

$90,000 for my heart attack and the sufferings of my whole family and myself.”

Ahmed did not include the settlement as taxable income in his 2007 tax return

because the Internal Revenue Service has instructed taxpayers to exclude

“compensatory damages for personal physical injury or physical sickness.”

      The court issued an opinion denying Ahmed’s petition. The court found

that, although the settlement agreement referenced “personal injuries” in a

“boilerplate list” of all the claims from which Ahmed agreed to release Fulton

County, the settlement did not allocate any portion of the payment to compensate

him for physical injuries. Further, as part of the settlement agreement, Ahmed

agreed to retire from his employment, which suggests that at least part of the

settlement payment should be considered as severance pay. Although the

complaint mentioned Ahmed’s physical injuries, the complaint did not specifically

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seek relief for those injuries. Moreover, the complaint never connected Ahmed’s

heart attack or other physical injuries to his claims for damages. Thus, the tax

court concluded that Ahmed failed to prove that Fulton County intended to

compensate him for physical injuries, given that the complaint “placed little

emphasis” on his physical injuries, the settlement agreement’s only mention of

“personal injuries” was in the boilerplate language, and the record contained no

other evidence showing that any part of the settlement was for physical injuries.

Accordingly, the tax court sustained the Commissioner’s determination that the

$90,000 that Ahmed received under the settlement agreement is taxable. The tax

court also sustained a tax penalty that Ahmed incurred for a substantial

understatement of income tax, as he failed to raise the issue at trial.

                                          II.

      As a preliminary matter, the Commissioner, in its response brief, argues that

the tax court properly sustained Ahmed’s tax penalty for a substantial

understatement of taxable income, and regardless, he waived any challenge to his

tax penalty because he failed to challenge the penalty in his petition before the tax

court. However, even if he had preserved such a challenge, Ahmed has abandoned

it on appeal because, although he makes two passing references to the penalty, he

provides no arguments related to the penalty issue in his appeal brief. See Timson

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v. Sampson, 518 F.3d 870, 874 (11th Cir. 2008) (holding that issues not briefed on

appeal by a pro se litigant are deemed abandoned). In his statement of the issues,

Ahmed states, “[I]n Tax Return of 2007[, he] clearly mentioned about the

settlement, NO pena[]lty be levied.” Additionally, in his statement of facts, he

indicates that, because the settlement was prominently noted on his tax returns,

“the question of pena[]lty does not arise.” These statements do not clearly

articulate a challenge to the tax court’s determination that Ahmed had waived the

tax penalty issue by failing to raise it at trial. Accordingly, he has abandoned a

challenge to the penalty on appeal. See Timson, 518 F.3d at 874.

                                          III.

      We review the tax court’s factual findings for clear error and its legal

conclusions de novo. Estate of Whitt v. Comm’r of Internal Revenue, 751 F.2d

1548, 1556 (11th Cir. 1985). The Commissioner’s determination of a deficiency is

presumed correct and the taxpayer has the burden of proving by a preponderance

of the evidence that it is incorrect. Id. We read briefs filed by pro se litigants

liberally. Timson, 518 F.3d at 874.

      The Sixteenth Amendment to the U.S. Constitution provides that “Congress

shall have power to lay and collect taxes on incomes, from whatever source

derived.” U.S. CONST. amend. XVI. The Internal Revenue Code (“IRC”) imposes

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a tax on the taxable income of every individual who is a citizen or resident of the

United States, with some exceptions not applicable here. 26 U.S.C. § 1(a)-(d); 26

C.F.R. § 1.1-1(a). Taxable income is gross income less deductions. 26 U.S.C.

§ 63(a). Section 61(a) of the IRC defines gross income broadly, stating that

“[e]xcept as otherwise provided in this subtitle, gross income means all income

from whatever source derived.” Comm’r of Internal Revenue v. Schleier, 515 U.S.

323, 327, 115 S.Ct. 2159, 2163, 132 L.Ed. 294(1995); 26 U.S.C. § 61(a). The

Supreme Court has “repeatedly emphasized the ‘sweeping scope’ of this section,”

and that “exclusions from income must be narrowly construed.” Id. at 327-28, 115

S.Ct. at 2163.

      Section 104(a)(2) of the IRC expressly provides that “gross income” does

not include:

      the amount of any damages (other than punitive damages) received
      (whether by suit or agreement and whether as lump sums or as
      periodic payments) on account of personal physical injuries or
      physical sickness.

26 U.S.C. § 104(a)(2). In Schleier, the Supreme Court rejected a taxpayer’s claim

that back pay that he received under an ADEA settlement was exlcudable from

gross income under § 104(a)(2), concluding that his recovery of the back pay was

not “on account of” any personal injury and no personal injury affected the amount



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of back pay recovered. Schleier, 515 U.S. at 327-31, 115 S.Ct. at 2163-64.

      Here, the tax court did not clearly err in concluding that Ahmed’s $90,000

settlement payment was not excludable from his taxable income under § 104(a)(2).

As noted by the tax court, the Commissioner’s determination of Ahmed’s tax

deficiency is presumed correct, and Ahmed had the burden to show that the

payment was received in compensation for physical injury or sickness. See Estate

of Whitt, 751 at 1556. A review of the record confirms that Ahmed failed to meet

this burden. Under the settlement agreement, no portion of the $150,000 payment

was specifically designated as compensation for a physical injury or sickness.

Instead, the agreement was intended to release Fulton County from a broad array

of potential future claims that might arise out of Ahmed’s employment

discrimination lawsuit. While the agreement referenced “personal injuries” in a

list of several types of these potential claims, the agreement did not reference any

specific physical injury or sickness or medical costs. The agreement specified

only that the settlement payment was in exchange for Ahmed’s agreement to

dismiss his employment discrimination lawsuit and to retire from employment.

Notably, although Ahmed’s complaint in his discrimination lawsuit asserted that

his heart attack was induced by Fulton County, he did not specifically seek

damages for any physical injuries or medical expenses.

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      Additionally, while the County, in 2005, proposed to pay Ahmed six weeks

of back pay for the time “surrounding his heart attack,” this proposal was made

before Ahmed initiated the 2006 discrimination lawsuit that resulted in the 2007

settlement payment. Moreover, Ahmed suffered his heart attack on August 24,

2005, and he testified that, in 2005, he had received back pay for the time between

August and January. Thus, Fulton County already compensated Ahmed in 2005

for the wages that he lost “on account of” his heart attack, and it does not appear

that his heart attack would have affected the amount of any back pay that he

received under the 2007 settlement agreement. See Schleier, 515 U.S. at 327-29,

115 S.Ct. at 2163-64.

      On appeal, Ahmed argues that the tax court erred in finding that the

settlement was intended as severance because he enjoyed full retirement benefits.

However, as noted by the tax court, the settlement agreement specified that the

$150,000 payment was contingent on Ahmed’s agreement to retire. Ahmed

provides no explanation for his suggestion that the payment cannot be considered

as severance because he received retirement benefits. Ahmed further argues that,

even if the $90,000 settlement payment was taxable, the taxable amount should be

reduced by the $50,000 of legal expenses that he incurred over a 12-year period.

However, the parties stipulated that, out of the $150,000 total settlement payment,

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the Commissioner excluded the $60,000 that Ahmed’s attorney received, and

imposed a tax deficiency only on the remaining $90,000 that Ahmed received.

Ahmed fails to explain how any other legal fees that he incurred related to the

2007 settlement. Finally, Ahmed asserts that the tax court ignored much of the

factual record and relied on incorrect facts. However, he failed to provide any

specific examples of evidence that the tax court ignored or any facts that it

improperly presumed to be correct. In sum, he failed to meet his burden to show

by a preponderance of the evidence that the settlement payment was intended to

compensate him for physical injury or sickness. See Estate of Whitt, 751 at 1556.

      For the foregoing reasons, we affirm the tax court’s denial of Ahmed’s

petition challenging his tax deficiency.

      AFFIRMED.




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