                           NOT FOR PUBLICATION                           FILED
                    UNITED STATES COURT OF APPEALS                        DEC 1 2017
                                                                      MOLLY C. DWYER, CLERK
                                                                       U.S. COURT OF APPEALS
                           FOR THE NINTH CIRCUIT

FREDRIC A. GARDNER and
                                              Nos. 15-72851 & 15-72852
ELIZABETH A. GARDNER,
                                              Tax Ct. Nos. 14877-13 & 2940-14
          Petitioners-Appellants,

                                              MEMORANDUM*

v.

COMMISSIONER OF INTERNAL

REVENUE,

          Respondent-Appellee.


                                 Petition from the
                              United States Tax Court

                         Submitted November 17, 2017**
                            San Francisco, California




      *
             This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
      **
              The panel unanimously concludes this case is suitable for decision
without oral argument. See Fed. R. App. P. 34(a)(2).
                                          1
Before: GOULD and MURGUIA, Circuit Judges, and FREUDENTHAL,*** Chief
District Judge

      Fredric A. Gardner and Elizabeth A. Gardner (the “Gardners”) petition for

review of a Tax Court order concluding the District Court proceedings and findings

in United States v. Gardner, No. CV05-3073-PCT-EHC, 2008 WL 906696 (D.Ariz.

Mar. 21, 2008) collaterally estopped the Gardners from disputing that they promoted

an abusive tax shelter in violation of 26 U.S.C. § 6700, and finding that the IRS

established the Gardners sold the corporation sole promotion1 to no fewer than 47

individuals, subjecting each of the Gardners to a penalty in the amount of

$47,000.00. We have jurisdiction under 26 U.S.C. § 7482(a)(1). We affirm.

      Collateral estoppel applies if “(1) the issue at stake [is] identical to the one

alleged in the prior litigation; (2) the issue [was] actually litigated by the party

against whom preclusion is asserted in the prior litigation; and (3) the determination

of the issue in the prior litigation [was] a critical and necessary part of the judgment.”



      ***
             The Honorable Nancy D. Freudenthal, Chief United States District
Judge for the District of Wyoming, sitting by designation.
      1
             The Gardners’ tax shelter promotion involved the use of trusts, limited
liability companies and, primarily, an entity known as a “corporation sole.” United
States v. Gardner, No. CV05-3073-PCT-EHC, 2008 WL 906696 (D.Ariz. Mar. 21,
2008), aff’d 457 F. App’x 611 (9th Cir. 2011). A “corporation sole” is “a corporate
form authorized under certain state laws to enable bona fide religious leaders to hold
property and conduct business for the benefit of the religious entity.” Gardner v.
Comm’r, 845 F.3d 971, 973 n.1 (9th Cir. 2016) (quoting Rev. Rul. 2004-27, 2004-1
C.B. 625, 626, 2004 WL 389673, at *1).
                                            2
McQuillion v. Schwarzenegger, 369 F.3d 1091, 1096 (9th Cir. 2004) (internal

citation and quotation marks omitted). In this case, all elements of collateral estoppel

are present – the parties are identical, the section 6700 penalty issue is identical and

was actually, although unsuccessfully, litigated by the Gardners. The district court

issued its injunction based on its findings that the Gardners’ corporation sole

promotions violated 26 U.S.C. § 6700, which penalizes abusive tax shelter

promotions. Therefore, the Tax Court did not err in concluding the Gardners are

collaterally estopped from disputing this issue.

      Further, the Tax Court’s factual findings on the amount of the penalty are

supported by the record and are not clearly erroneous. An IRS agent testified as to

his examination of the Gardners’ bank accounts, his selection of 47 corporations sole

organized by the Gardners, and the payments made to the Gardners for these 47

corporations sole. As part of the corporation sole promotions, each recipient

obtained a copy of the Gardners’ manual which contained the false/fraudulent

statements.   The Tax Court’s legal conclusion is correct that the focus when

imposing the penalty is on the actions of the promoter, not the recipient or whether

the recipient makes use of the abusive tax shelter. United States v. Estate Pres.

Servs., 202 F.3d 1093, 1099 (9th Cir. 2000).




                                           3
      Finally, the Gardners argue the Chenery doctrine2 bars or denies the Notices

of Determinations because the Gardners never had the opportunity to challenge the

mistake by the revenue agent in arriving at the $47,000 penalty. This argument lacks

merit. The Tax Court affirmed the penalty on the grounds articulated by the revenue

agent who was available for examination by the Gardners at the hearing.

AFFIRMED.




2
  In SEC v. Chenery Corp., 332 U.S. 194, 196 (1947), the Supreme Court held “a
reviewing court, in dealing with a determination or judgment which an
administrative agency alone is authorized to make, must judge the propriety of such
action solely by the grounds invoked by the agency.”
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