                                                                            FILED
                                                                United States Court of Appeals
                                     PUBLISH                            Tenth Circuit

                    UNITED STATES COURT OF APPEALS                    March 28, 2013

                                                                   Elisabeth A. Shumaker
                            FOR THE TENTH CIRCUIT                      Clerk of Court


JOHN H. SCHOPPE,

             Petitioner-Appellant,

v.                                                        No. 12-9010

COMMISSIONER OF INTERNAL
REVENUE,

             Respondent-Appellee.


             APPEAL FROM THE UNITED STATES TAX COURT
                       (Tax Court No. 9867-10)


Submitted on the briefs:*

John H. Schoppe, Pro se.

Kathryn Keneally, Assistant Attorney General, Bruce R. Ellisen, Attorney, and John
Schumann, Attorney, Tax Division, U.S. Department of Justice, Washington, D.C.,
for Respondent-Appellee.


Before O’BRIEN, McKAY, and BALDOCK, Circuit Judges.




*
      After examining the briefs and appellate record, this panel has determined
unanimously that oral argument would not materially assist the determination of this
appeal. See Fed. R. App. P. 34(a)(2); 10th Cir. R. 34.1(G). The case is therefore
ordered submitted without oral argument.
McKAY, Circuit Judge.


      John H. Schoppe petitions for review of a Tax Court decision finding him

liable for tax deficiencies for the years 2002 through 2007. While the case was

proceeding in this court, Mr. Schoppe filed a voluntary bankruptcy petition. That

filing prompted this court to request supplemental briefing from the parties on

whether the automatic bankruptcy stay in 11 U.S.C. § 362(a)(1) would apply to this

appeal. As a threshold matter, we hold that § 362(a)(1) does not stay this appeal.

On the merits, we affirm the Tax Court’s decision.

                                            I.

      The automatic stay provision provides that the filing of a bankruptcy petition

operates as a stay of:

      the commencement or continuation, including the issuance or
      employment of process, of a judicial, administrative, or other action or
      proceeding against the debtor that was or could have been commenced
      before the commencement of the case under this title, or to recover a
      claim against the debtor that arose before the commencement of the case
      under this title.

11 U.S.C. § 362(a)(1) (emphasis added). Recently, we explained that § 362 should

be read “to stay all appeals in proceedings that were originally brought against the

debtor, regardless of whether the debtor is the appellant or appellee. Thus, whether

a case is subject to the automatic stay must be determined at its inception.”

TW Telecom Holdings Inc. v. Carolina Internet, Ltd., 661 F.3d 495, 497 (10th Cir.

2011) (internal quotation marks omitted).


                                         -2-
       In this case, the Commissioner issued a Notice of Deficiency determining

federal tax deficiencies for the years 2002 through 2007. Mr. Schoppe then filed a

petition in Tax Court seeking redetermination of the deficiencies. The Tax Court

found him liable for the tax deficiencies and Mr. Schoppe filed a petition for review

in this court.

       It is an open question in this circuit whether a proceeding is initiated by the

debtor when he files a petition in Tax Court or whether the Tax Court proceeding is a

continuation of the proceeding initiated against the debtor when the Commissioner

begins the administrative process of determining that there is a deficiency. The Fifth

Circuit in Freeman v. Commissioner, 799 F.2d 1091 (5th Cir. 1986), and the Ninth

Circuit in Delpit v. Commissioner, 18 F.3d 768 (9th Cir. 1994), have taken opposing

views on this question.

       In discussing the split, the Eleventh Circuit explained that in Freeman, the

court “found that the appellants had initiated the judicial proceeding by filing their

petition with the Tax Court. Accordingly, neither the Tax Court proceeding nor the

petitioners’ appeal therefrom was a proceeding against the debtor and § 362(a)(1) did

not apply.” Roberts v. Comm’r, 175 F.3d 889, 894 (11th Cir. 1999). In contrast, in

Delpit, “the Ninth Circuit concluded that a proceeding before the Tax Court and an

appeal therefrom constituted continuations of the comprehensive income tax

assessment procedure . . . which is initiated by IRS administrative proceedings




                                          -3-
against the taxpayer. It therefore held that section 362(a)(1) stayed the petitioners’

appeal.” Roberts, 175 F.3d at 894 (internal quotation marks and citation omitted).

      The Eleventh Circuit “reject[ed] the Ninth Circuit’s characterization of a Tax

Court proceeding as a mere continuation of IRS administrative proceedings against

the taxpayer,” explaining “[i]n light of Supreme Court and Eleventh Circuit

precedent, it is clear that a Tax Court case is properly to be characterized as an

independent judicial proceeding.” Id.; see also Freytag v. Comm’r, 501 U.S. 868,

890-91 (1991) (“The Tax Court exercises judicial, rather than executive, legislative,

or administrative, power.”); Gatlin v. Comm’r, 754 F.2d 921, 923 (11th Cir. 1985)

(“[A] trial before the Tax Court is a proceeding de novo; our determination of a

petitioner’s tax liability must be based on the merits of the case and not any previous

record developed at the administrative level.” (internal quotation marks omitted)).

The court concluded that the filing of a petition for redetermination commenced a

judicial proceeding in Tax Court that was initiated by the debtor, not against the

debtor and, therefore, the automatic stay in § 362(a)(1) did not apply. See Roberts,

175 F.3d at 895.

      Two other circuits have adopted the reasoning of the Fifth and Eleventh

Circuits and rejected the reasoning of the Ninth Circuit. In Rhone-Poulenc

Surfactants and Specialties, L.P. v. Commissioner, 249 F.3d 175, 177-178 (3d Cir.

2001), the IRS issued a notice of administrative adjustment of partnership items and

the debtor filed a petition in Tax Court seeking to challenge the assessment. The


                                          -4-
Third Circuit determined that § 362 did not apply to stay the appeal because the

proceeding before the Tax Court was brought by the debtor. Id. at 180. In Haag v.

United States, 485 F.3d 1, 2 (1st Cir. 2007), the United States initially filed a tax

collection action against the Haags in district court. While that case was pending, the

Haags filed a separate action in district court against the United States, alleging

violations of their statutory due process rights with respect to the federal tax liens

filed against them. Id. The district court granted summary judgment in favor of the

government. On appeal, the court determined that the stay in § 362(a)(1) did not

apply because the Haags brought the suit themselves. Id. at 4. The First Circuit

acknowledged that, “[o]ccasionally, a court has held that an action brought by a

debtor should be re-characterized as a further phase of a suit against the debtor,”

citing to the Ninth Circuit’s decision in Delpit, but noting the disagreement of three

other circuits with that decision. Id. The court ultimately concluded, however, that:

      There is much to be said for the mechanical rule followed by the
      plurality of circuits; Congress chose to stay only actions against the
      debtor and not those by him even though each can have adverse effects
      on the estate and other third party interests. This case . . . is no occasion
      for a departure from the statutory terms.

Id.

      We agree with the four circuits that have applied a bright-line rule that a

petition filed in Tax Court is an independent judicial proceeding initiated by the

debtor, not the continuation of an administrative proceeding against the debtor.

Because the underlying case in this appeal originated with Mr. Schoppe commencing


                                           -5-
a judicial proceeding in Tax Court for a redetermination of his tax deficiencies, we

conclude the automatic stay in § 362(a)(1) does not apply.

                                           II.

      We now turn to the merits of Mr. Schoppe’s petition. Mr. Schoppe was a

licensed real estate agent and broker during the relevant time period in this case. He

engaged in several types of activities, including real estate sales and appraisals,

teaching, financial planning, business consulting, and insurance. Although he had

multiple sources of income, he did not file timely federal tax returns for the years

2002 through 2007. Except for small amounts of tax withheld from wages in two of

the years at issue, Mr. Schoppe paid no federal income taxes for any of these years,

nor did he make any estimated tax payments for any of these years.

      Mr. Schoppe maintained a checking account and a savings account at America

First Credit Union (AFCU). He kept handwritten records of the deposits to and

deductions from his AFCU checking account using a check register that recorded

both personal and business expenses, mixed together. The IRS conducted an audit

and reviewed the AFCU accounts. The IRS then prepared substitute returns for

Mr. Schoppe for each of the years at issue, allowing the standard deduction and a

personal exemption for each year. Mr. Schoppe subsequently submitted federal

income tax returns, claiming substantial business deductions that offset the reported

income and reflected net business losses. The IRS did not process Mr. Schoppe’s

untimely returns.


                                          -6-
      The IRS sent Mr. Schoppe a notice of deficiency for the years 2002 through

2007, determining income tax deficiencies, as well as additional amounts for failing

to file returns, failing to pay tax when due, and failing to pay estimated tax.

Proceeding pro se, Mr. Schoppe filed a petition in Tax Court, challenging the IRS’s

determinations.

      Mr. Schoppe was the only witness at trial. He testified that his business

expenses were high because he was a sole proprietor. He further testified that he kept

records of his expenses on “dayplanners,” showing “exactly where I was, what I was

doing, and what money was spent.” R. Doc. 12 at 15. Although he referred to his

dayplanners at several points during his testimony, he did not offer any of them into

evidence. The Tax Court questioned Mr. Schoppe about examples of expenses from

his dayplanners, pointing out the lack of evidence of the specific business purpose of

the expenses. During cross-examination, Mr. Schoppe was unable to demonstrate

how anyone else could determine from his records which of his expenses were

personal and which were business-related.

      The Tax Court sustained the IRS’s determination of the deficiencies,

concluding that Mr. Schoppe failed to adequately substantiate deductions he claimed

for business expenses. We review this finding for clear error. See Rosenberg v.

Comm’r, 450 F.2d 529, 533 (10th Cir. 1971).

      On appeal, Mr. Schoppe argues that he “presented thorough documented

evidence in the form [of] daily accounting, checks, receipts, and statements of


                                          -7-
purpose of business expenses,” but he fails to cite to any specific evidence supporting

this assertion. Aplt. Br. at 1. We note that he did not introduce any of his

“dayplanners” into evidence at trial, and his testimony related to his dayplanners did

not demonstrate that he could identify with specificity what were personal and what

were business expenses. Overall, he made little effort to classify or categorize his

expenses, asserting that he spent “all of [his] time working, lunches, traveling,

teaching.” R. Doc. 12 at 30. This type of unsubstantiated testimony is insufficient to

meet his burden of proof. See Zell v. Comm’r, 763 F.2d 1139, 1142 (10th Cir. 1985)

(noting that the taxpayer has the burden of proving the claimed deductions and

concluding that taxpayer “ha[d] failed to substantiate that the claimed deductions

were expenses incurred in pursuit of his alleged trade or business activities, rather

than non-deductible personal expenses”).

      The Tax Court found that there was no reasonable basis to estimate

Mr. Schoppe’s business expenses “because of the difficulty on the record before us of

knowing with any confidence the correct nature of [Mr. Schoppe’s] expenses.”

R. Doc. 17 at 10. The court also found that a significant portion of Mr. Schoppe’s

claimed expenses appeared to be entertainment and away-from-home meal and

lodging expenses, which were required to be specifically documented, rather than

estimated. Having reviewed the record, the parties’ submissions, and the Tax Court

decision, we see no error in the Tax Court’s determination that Mr. Schoppe failed to

substantiate his claimed business expenses.


                                          -8-
      Mr. Schoppe also argues on appeal that his rights to “‘due process’ and other

rights and protections were breached and violated in the entire process from first

notice to final court hearing.” Aplt. Br. at 2. Mr. Schoppe had a full and fair hearing

in the Tax Court in which he was permitted to testify and offer evidence in support of

his claimed deductions. See Rosenberg, 450 F.2d at 533 (noting that “taxpayer had a

full hearing and determination de novo in the Tax Court” before concluding that there

was no denial of due process). His conclusory assertion fails to demonstrate that his

constitutional rights were violated.

      For the foregoing reasons, we affirm the judgment of the Tax Court. We deny

Mr. Schoppe’s motion to proceed in forma pauperis on appeal.




                                         -9-
