                               UNPUBLISHED

                  UNITED STATES COURT OF APPEALS
                      FOR THE FOURTH CIRCUIT


                               No. 11-1804


JOSEPH B. WILLIAMS, III,

                Petitioner - Appellant,

           v.

COMMISSIONER OF INTERNAL REVENUE,

                Respondent - Appellee.



 Appeal from the United States Tax Court.       (Tax Ct. No. 2202-08)


Argued:   September 19, 2012                 Decided:   December 4, 2012


Before WILKINSON and THACKER, Circuit Judges, and Michael F.
URBANSKI, United States District Judge for the Western District
of Virginia, sitting by designation.


Affirmed by unpublished opinion.      Judge Urbanski wrote          the
opinion, in which Judge Wilkinson and Judge Thacker joined.


ARGUED: David Harold Dickieson, SCHERTLER & ONORATO, LLP,
Washington, D.C., for Appellant.    Damon William Taaffe, UNITED
STATES DEPARTMENT OF JUSTICE, Washington, D.C., for Appellee.
ON BRIEF:       Pamela Satterfield, SCHERTLER & ONORATO, LLP,
Washington, D.C., for Appellant.    ON BRIEF: Tamara W. Ashford,
Deputy Assistant Attorney General, Robert W. Metzler, UNITED
STATES DEPARTMENT OF JUSTICE, Washington, D.C., for Appellee.


Unpublished opinions are not binding precedent in this circuit.
URBANSKI, District Judge:

       Joseph    B.   Williams,    III,       challenges    the   notice     of   tax

deficiency issued to him by the Commissioner of Internal Revenue

for tax years 1993 through 2000.                  The Tax Court upheld the

Commissioner’s notice of deficiency.              Williams now appeals.

       Williams argues that the Tax Court erred in three ways:

(1) by holding Williams’ guilty plea to criminal tax evasion

collaterally estops him from denying liability for civil fraud

penalties for tax years 1993 through 2000; (2) by attributing

income generated by Williams’ consulting services to Williams

individually instead of to the foreign corporation he formed;

and (3) by disallowing certain charitable deductions taken by

Williams for art donations made to two universities over the

course of three years.         Finding each of Williams’ arguments to

be without merit, we affirm.



                                        I.

                                        A.

       Williams worked for Mobil Oil Corporation from 1973 until

his    retirement     in   1998.   In   the     1990s,     he   was   tasked      with

developing strategic business relationships in Russia and former

Soviet republics.          In 1993, separate and apart from his work

with    Mobil,    Williams    began     providing        consulting    and     other

services    concerning       pipeline-related         contracts       to     foreign

                                          2
governments.          Alika Smekhova, a Russian actress and celebrity,

arranged introductions and provided interpretation services for

Williams     in     connection     with     his    consulting      work.           That    same

year, Williams formed ALQI Holdings, Inc. (“ALQI”), a British

Virgin    Islands       corporation.          Williams       was      the     sole    owner,

operational director, and officer of ALQI.                       Neither Williams nor

Smekhova had a written employment contract with ALQI.

       Two accounts were opened in ALQI’s name at a Swiss bank,

Banque Indosuez (“the ALQI accounts”).                       Williams had complete

authority over the ALQI accounts.                       The bank provided Williams

with   use     of     its   office     space,      as    well    as     a    Swiss     mobile

telephone      and     credit      card     that    were    issued      and        billed    in

Williams’ name.             All monies deposited into the ALQI accounts

between      1993     and   2000     were    received      for     Williams’         oil    and

pipeline-related consulting services.                      There are no consulting

agreements documenting the services rendered.                         Williams did not

use the ALQI name in his dealings with third parties and did not

maintain corporate accounting records.

       Smekhova was paid a stipend of $5,000 to $10,000 per month

from   the     ALQI    accounts,      but    Williams      did    not       pay    himself    a

salary    or   commission.           Funds    were      transferred         from    the     ALQI

accounts at Williams’ direction, however, and were used to pay

credit     cards      and    other    bills       reflecting       Williams’         personal

expenses, such as a $30,000 shopping spree in Paris and a family

                                              3
ski vacation.       Williams also made gifts to family and friends

from these accounts, including over $41,000 in payments to his

former secretary and a $15,000 gift to the wife of Williams’

deceased father.

      More than $7 million in consulting fees were deposited into

the   Swiss    accounts   during   the       relevant   period   and    over   $1.1

million in interest, dividends and capital gains was earned on

these deposits.      Williams did not report any of the consulting

fee or investment income on his individual tax returns for tax

years 1993 through 2000, nor did he disclose the existence of

ALQI or its Swiss accounts.

      In 2000, at the request of the United States government,

the Swiss government froze the ALQI accounts.                     Subsequently,

Williams      disclosed   his   ownership       interest   in    ALQI    and   the

existence of the ALQI accounts on his 2001 tax return. 1                 In 2003,

Williams amended his 1999 and 2000 tax returns 2 to report the

investment income earned on the funds in the ALQI accounts, and

he paid the additional tax due.                Williams did not include as



      1
       Earlier this year we determined that Williams willfully
violated 31 U.S.C. § 5314(a) by failing to file for tax year
2000 the form TD F 90-22.1 (“FBAR”), on which he was required to
disclose his interest in the ALQI accounts.     United States v.
Williams, No. 10-2230, 2012 WL 2948569 (4th Cir. July 20, 2012).
      2
       Amended returns for 1993 through 1998 were prepared but
were never filed.


                                         4
income on either his original or amended returns the corpus of

the accounts.

      In 2003, Williams was charged in a two-count superseding

criminal information with conspiracy to defraud the government,

in violation of 18 U.S.C. § 371, and tax evasion, in violation

of 18 U.S.C. § 7201.           On June 12, 2003, Williams entered a

guilty plea to both counts.       The court accepted the guilty plea,

sentenced Williams to 46 months’ incarceration, and ordered him

to pay $3,512,000 in restitution.           Williams was released from

federal custody on May 21, 2006.

                                    B.

      In 1996, Williams signed an Art Purchase Agreement in which

he purportedly committed to purchasing at a discount from Abbey

Art Consultants, Inc. (“Abbey Art”) certain works of art that,

at Williams’ direction, were to be donated at fair market value

to charitable institutions.       The Agreement recited that Williams

“desire[d]    to   purchase”    $72,000   worth   of   art,    but   did   not

identify specific pieces of art, and provided that the purchase

price would not exceed 24% of the appraised fair market value of

the art.      The Agreement required Williams to pay only $3,600

upon signing; the balance of the purchase price was to be paid

on or before such time as the art was donated to charity.

      Abbey Art was to facilitate all aspects of the art donation

and   incur     all   expense,     including      paperwork,     appraisal,

                                     5
packaging, shipping, and storage costs.                     The Agreement provided

that       Abbey   Art   would    arrange       for   the     donation       “after   the

required holding period of one (1) year.”                     While Williams could

request a donation be made to a certain charitable institution,

Abbey Art ultimately had the discretion to choose the donee.                          If

Abbey Art was unable to facilitate the art donation for any

reason, the Agreement required Abbey Art to refund Williams’

payments.          Additionally,    Abbey       Art’s    sole       remedy    under   the

Agreement       for   Williams’    non-payment          was    to    retain     payments

already received and retake possession of the art. 3                     In the event

of a reduction in the fair market value of the art, Abbey Art

agreed to pay Williams an amount equal to “the percentage of the

dollars paid for each dollar the fair market value of the Art

has been reduced.”         Finally, the Agreement provided that it was

the entire agreement between the parties and that it was to be

interpreted under New York law.

       In December 1997, Abbey Art, at Williams’ direction, donated

certain pieces of art with an appraised fair market value of

$425,625 to Drexel University.                   Williams received an invoice

from Abbey Art in the amount of $98,400, representing a purchase


       3
       A term of the Agreement requiring specific performance of
the unpaid portion of the purchase price was crossed out and
initialed by Williams and his wife who, while a signatory to
this Agreement, is not a party to this case.



                                            6
price    of     $102,000     (approximately              24%    of     the    appraised     fair

market       value    of    the    art)      less        Williams’           $3,600   deposit.

Williams paid Abbey Art $98,400 before the end of 1997 and on

his federal income tax return for that year, Williams claimed a

charitable contribution deduction of $425,625.

       In December 1999, Williams wrote Abbey Art requesting that a

gift    of     art   be    made   on   his     behalf          to    Florida    International

University for the current tax year.                                Williams enclosed with

this letter a check in the amount of $57,500.                            Certain pieces of

art     with    an    appraised        value        of    $250,525       were     donated     at

Williams’ request prior to the end of the year.                                  On his 1999

federal tax return, Williams claimed the full fair market value

of the art as a charitable contribution deduction.

       In 1999, Williams paid Abbey Art $4,600, and in October

2000, Abbey Art arranged a gift of additional artwork with an

appraised value of $98,900 to Drexel University.                                Williams paid

Abbey Art the balance due on this donation, $17,158, on December

8, 2000.        Williams again claimed the fair market value of the

donated art as a charitable contribution deduction on his 2000

federal income tax return.

                                               C.

       On October 29, 2007, the Commissioner of Internal Revenue

issued a notice of tax deficiency to Williams.                               The Commissioner

found    the     consulting       fees    deposited            into     the    ALQI   accounts

                                               7
between 1993 and 2000, as well as the investment income earned

on those funds, to be taxable income to Williams and assessed

civil fraud penalties for each of the eight years he failed to

report this income on his tax returns.                     The Commissioner also

determined        that   Williams   was       only    entitled      to   charitable

contribution deductions in the amount of his basis in the art

donated through Abbey Art, because Williams had not owned the

art   for    at    least   one   year     prior      to    the    donations.      The

Commissioner        assessed     accuracy-related            penalties       on   the

underpayments        resulting      from       the        disallowed     charitable

deductions.

      Williams challenged the notice of deficiency by filing a

petition    in     the   Tax   Court.      The    Tax     Court    granted     partial

summary judgment in favor of the Commissioner, holding Williams

was collaterally estopped from denying that he had committed

civil tax fraud during each of the years 1993 through 2000.

Williams v. Comm’r, No. 2202-08, 2009 WL 1033354 (U.S. Tax Ct.

Apr. 16, 2009).          Following a bench trial, the Tax Court found

that the consulting fee and investment income deposited into the

ALQI accounts between 1993 and 2000 was attributable to Williams

individually.        The Tax Court further held that Williams was not

entitled to a charitable contribution deduction in the amount of

the fair market value of the donated art because Williams did

not hold the art for more than one year before donating it.

                                          8
Accordingly, the Tax Court upheld the Commissioner’s notice of

deficiency    and       assessment       of     civil    tax    fraud   and     accuracy-

related penalties.             Williams v. Comm’r, No. 2202-08, 2011 WL

1518581 (U.S. Tax Ct. Apr. 21, 2011).                    This appeal followed.

      We   review       the    Tax     Court’s       decision    applying       the     same

standard of review as we would to a civil bench trial in the

United States district court.                 Waterman v. Comm’r, 176 F.3d 123,

126   (4th    Cir.        1999).         Questions        of    law     and     statutory

interpretation are reviewed de novo and findings of fact for

clear error.        Id.       The grant of the Commissioner’s motion for

partial summary judgment on the collateral estoppel issue is

reviewed de novo.             Henson v. Liggett Grp., Inc., 61 F.3d 270,

274 (4th Cir. 1995).            The Commissioner’s notice of deficiency is

presumed to be correct, and the taxpayer bears the burden of

proving it wrong.          McHan v. Comm’r, 558 F.3d 326, 332 (4th Cir.

2009); see also Welch v. Helvering, 290 U.S. 111, 115 (1933).



                                              II.

      Williams first argues on appeal that the Tax Court erred in

holding     that    his       guilty     plea       to   criminal     tax     evasion     in

violation    of    18     U.S.C.     §   7201       collaterally      estops    him     from




                                               9
denying his liability for civil tax fraud penalties under 26

U.S.C. § 6663 for the years 1993 through 2000. 4

       The doctrine of collateral estoppel applies “where (1) the

‘identical         issue’    (2)    was    actually    litigated       (3)     and    was

‘critical and necessary’ to a (4) ‘final and valid’ judgment (5)

resulting from a prior proceeding in which the party against

whom the doctrine is asserted had a full and fair opportunity to

litigate the issue.”           McHan, 558 F.3d at 331 (quoting Collins v.

Pond       Creek    Mining   Co.,    468    F.3d    213,   217    (4th      Cir.     2006)

(citation and quotation marks omitted)).                       “[O]nce an issue is

actually      and    necessarily      determined      by   a   court     of    competent

jurisdiction,         that   determination       is   conclusive       in     subsequent

suits based on a different cause of action involving a party to

the prior litigation.”              Montana v. United States, 440 U.S. 147,

153 (1979).

       A taxpayer is collaterally estopped from denying civil tax

fraud when convicted for criminal tax evasion under 18 U.S.C. §

7201 for the same taxable year.                    Moore v. United States, 360


       4
        Generally, the Commissioner must assess a deficiency
within three years of the filing of the tax return from which
the deficiency stems. 26 U.S.C. § 6501(a). If a deficiency is
determined in the case of a false or fraudulent return with the
intent to evade tax, however, the Commissioner can assess such a
deficiency at any time. Id. at § 6501(c)(1). The Commissioner
bears the burden of proving civil tax fraud.        26 U.S.C. §
7454(a).



                                            10
F.2d 353, 355 (4th Cir. 1966); DiLeo v. Comm’r, 96 T.C. 858,

885-86 (1991), aff’d, 959 F.2d 16 (2d Cir. 1992); see generally

United States v. Wight, 839 F.2d 193, 196 (4th Cir. 1988) (“The

doctrine of collateral estoppel may apply to issues litigated in

a   criminal     case   which    a   party      seeks    to   relitigate     in    a

subsequent civil proceeding.”).               “[W]hile the criminal evasion

statute   does    not   explicitly    require     a     finding    of   fraud,    the

case-by-case process of construction of the civil and criminal

tax provisions has demonstrated that their constituent elements

are identical.”     Moore, 360 F.2d at 356.

                                         A.

     Williams argues that the Tax Court misinterpreted the terms

of his guilty plea in barring him from denying civil tax fraud

liability for the years 1993 through 2000.                    Williams contends

that he did not plead guilty to tax evasion, but rather to

evasion   of   payment    of    taxes,    the   elements      of   which   are    not

dependent upon any specific tax year. 5               As such, Williams argues



     5
        Section § 7201 “includes the offense of willfully
attempting to evade or defeat the assessment of a tax as well as
the offense of willfully attempting to evade or defeat the
payment of a tax.” Sansone v. United States, 380 U.S. 343, 354
(1965).   As the Third Circuit in United States v. McGill, 964
F.2d 222, 230 (1992), explained, the willful filing of a false
return satisfies the elements of evasion of assessment.     Such
cases are far more common than evasion of payment cases, which
are rare and generally require an affirmative act that occurs
after any filing, such as placing assets in the name of others
(Continued)
                                         11
that   he    is    not    collaterally      estopped       from    denying     civil    tax

fraud for the entire eight year period set forth in the notice

of deficiency, or for any particular year therein.

       We reject this argument because, in addition to lacking

merit,      it    has    been   waived.         Williams    failed       to   raise    this

argument before the Tax Court.                 Ordinarily, we will not consider

an issue raised for the first time on appeal except in limited

circumstances, Nat’l Wildlife Fed’n v. Hanson, 859 F.2d 313, 318

(4th Cir. 1988), and this rule is applied equally by courts of

appeals reviewing Tax Court decisions, Karpa v. Comm’r, 909 F.2d

784, 788 (4th Cir. 1990) (citing Grauvogel v. Comm’r, 768 F.2d

1087, 1090 (9th Cir. 1985)).                    Williams has not suggested any

reason why we should depart from our ordinary rule in this case,

and we see no reason to do so.

                                            B.

       Williams also takes issue with the Tax Court’s finding that

his    conviction        for    tax    evasion    collaterally       estops     him    from

denying      civil      fraud    for    each     year   from      1993   through      2000.

Williams disputes that he pled guilty to tax evasion for each

and every one of these years.                  The record, however, proves fatal




or causing debts to be paid through and in the name of others.
Id.




                                            12
to this claim.     The plain language of the superseding criminal

information charges Williams with tax evasion for each year from

1993 through 2000:

       From in or about 1993, through in or about April 2001,
       . . . J. BRYAN WILLIAMS, the defendant, unlawfully,
       willfully and knowingly did attempt to evade and
       defeat a substantial part of the income tax due and
       owing by J. BRYAN WILLIAMS . . . for the calendar
       years 1993 through 2000, by various means, including,
       among others by (a) arranging for approximately $7.98
       million in payments which were income to Williams to
       be made into the secret Alqi accounts in Switzerland
       he controlled; and (b) preparing and causing to be
       prepared, signing and causing to be signed, and filing
       and causing to be filed, false and fraudulent U.S.
       Individual Income Tax Returns, Forms 1040, for the
       calendar years 1993 through 2000, on which he failed
       to disclose his interest in the secret Alqi bank
       accounts in Switzerland, and on which, in the years
       set forth below, he failed to report the approximate
       amounts of income set forth below, and upon which
       income there was a substantial additional tax due and
       owing to the United States of America:


            Calendar            Approximate
            Year                Amount of Income
            1993                $1,029,518.72
            1994                $752,479.52
            1995                $998,723.14
            1996                $3,917,762.57
            1997                $1,670,891.49
            1998                $133,371.90
            1999                $109,167.59
            2000                $256,234.64

       (Title 26, United States Code, Section 7201).

Williams pled guilty to this tax evasion count, as well as to

conspiracy to defraud the government in violation of 18 U.S.C. §

371.    Pursuant to a written plea agreement, Williams agreed to


                                 13
“file accurate amended personal tax returns for the calendar

years 1993 through 2000” and “pay past taxes due and owing to

the [IRS] by him for calendar years 1993 through 2000, including

any applicable penalties.”

     Additionally,        Williams   admitted      during   his   allocution   at

his guilty plea hearing that he knew the funds deposited into

the ALQI accounts were taxable to him.                 Williams acknowledged

that for “the calendar year tax returns for ‘93 through 2000,

[he] chose not to report the income to [the IRS] in order to

evade the substantial taxes owed thereon, until [he] filed [his]

2001 tax return.”          Williams continued:         “I therefore believe

that I am guilty of evading the payment of taxes for the tax

years 1993 through 2000.”            As the Tax Court observed, there is

no question that Williams pled guilty to and was convicted of

tax evasion for each of the eight calendar years 1993 through

2000.

     Williams insists he made clear to the district court that

he was pleading to a narrower statement of facts concerning tax

evasion    than   those    contained    in   the    superseding    information.

The record proves otherwise.             At the plea hearing, Williams’

counsel told the district judge:

        [W]e’re not adopting or accepting the facts as stated
        in the conspiracy count, which I think is the
        recitation of what was in the original indictment in
        this case.   What we have agreed is that Mr. Williams
        would plead guilty to conspiracy counts, but based

                                        14
       upon the factual allocution, which he has given to the
       Court.

This statement plainly refers to the conspiracy count, not to

the tax evasion count.              Williams pled guilty to both conspiracy

and tax evasion.            While he raised a concern at the plea hearing

about the factual allegations surrounding the conspiracy count,

Williams did         not    deny    any       fact    or   allegation        concerning     tax

evasion, nor raise any issue whatsoever with respect to that

count.        On the contrary, Williams expressly admitted to facts

that       demonstrate      his    tax    evasion       scheme   continued        from     1993

until the time he filed his 2001 tax return, as charged in the

information.

                                                C.

       Williams’       final       contention          with   respect        to   collateral

estoppel is that he did not have a full and fair opportunity to

litigate the issue previously, because at the time he entered

his    guilty       plea,    neither      the        Commissioner      nor    Williams      had

analyzed       the   actual       tax    implications         arising    from      the     ALQI

accounts      and    the    amount       of    deficiencies      for    each      tax    year. 6


       6
        Any suggestion that Williams’ conviction following a
guilty plea, rather than a trial, renders collateral estoppel
inapplicable misses the mark. “[T]here is no difference between
a judgment of conviction based upon a guilty plea and a judgment
rendered after a trial on the merits,” for purposes of applying
the doctrine of collateral estoppel, as the conclusive effect is
the same.    Blohm v. Comm’r, 994 F.2d 1542, 1554 (11th Cir.
1993).
(Continued)
                                                15
Thus, argues Williams, the fraud penalties were not actually and

necessarily decided by the court in his criminal case.

     Williams confuses the issues.    It matters not whether civil

fraud penalties and interest had been calculated as of the date

of his guilty plea or sentencing. 7   These determinations are not




     Moreover,    Williams’  reliance   on   United   States   v.
International Building Co., 345 U.S. 502, 505-06 (1953), is
misplaced.    Williams claims International Building stands for
the proposition that collateral estoppel is not appropriate when
the decision of a prior court is the result of compromise or
negotiation rather than a full review of the facts.           But
International Building involved “a pro forma acceptance by the
Tax Court of an agreement between the parties to settle their
controversy for reasons undisclosed.”    Id. at 505.   Indeed, in
International Building, the Commissioner agreed to withdraw his
proofs of claim for tax deficiencies filed in International
Building’s bankruptcy proceeding, upon a stipulation that the
withdrawal was “‘without prejudice’ and did not constitute a
determination of or prejudice the rights of the United States to
any taxes with respect to any year other than those involved in
the claim.” Id. at 503. The parties filed stipulations in the
pending Tax Court proceedings that there was no tax liability
for the years 1933, 1938, and 1939, and the Tax Court entered
formal decisions to that effect. No factual findings were made,
no briefs were filed, and no hearings were held.     The Supreme
Court held that while the Tax Court’s decisions were res
judicata with respect to tax claims for 1933, 1938, and 1939,
they did not collaterally estop the Commissioner from assessing
deficiencies for the years 1943, 1944, and 1945.     Id. at 505.
International Building is plainly distinguishable from the
instant case.
     7
       Moreover, the record makes clear it was Williams’ counsel
who advocated for proceeding with the guilty plea and sentencing
hearings before a sum certain in penalties and interest had been
calculated.   Williams cannot now argue that he was rushed into
pleading guilty before a final figure had been determined.



                                16
required to secure a criminal conviction for tax evasion.                       What

matters for purposes of collateral estoppel is that Williams was

indeed convicted of evasion for the years in question.                         As we

held in Moore, that conviction “supplies the basis for a finding

of fraud in [a] civil proceeding to determine tax liability.”

360 F.2d at 355 (citing Tomlinson v. Lefkowitz, 334 F.2d 262

(5th Cir. 1964)).

      Williams pled guilty to a tax evasion scheme that continued

from 1993 until 2000.            In so doing, Williams admitted that he

committed tax fraud in each of those eight years.                    In light of

his   guilty    plea     and    allocution,      Williams    cannot      now    deny

liability   for       civil    tax    fraud    penalties    for   the    years    in

question. We find the Tax Court correctly applied the doctrine

of collateral estoppel in this case.



                                        III.

      Williams next argues that the Tax Court erred in finding

him individually liable for tax on the consulting fee income

deposited      into    the     ALQI   accounts     between    1993      and    2000.

Williams asserts that ALQI was a legitimate business for which

he performed consulting work and contends that he acted on the

company’s behalf when he earned the consulting fees at issue.

We are not persuaded.



                                         17
       “The principle that income is taxed to the one who earns it

is basic to our system of income taxation.”                                Haag v. Comm’r, 88

T.C.    604,     610      (1987),      aff’d,      855        F.2d    855   (8th    Cir.     1988)

(unpublished table decision); see also Lucas v. Earl, 281 U.S.

111 (1930).       For income to be taxable to a corporation:                             (1) the

service-performer must be an employee of the corporation whom

the    corporation        has    the    right       to    direct       or    control    in    some

meaningful       sense;         and    (2)      there          must    exist       between    the

corporation       and      the    person       a     contract         or    similar     indicium

recognizing the corporation’s controlling position.                                    Haag, 88

T.C. at 611 (citing Johnson v. Comm’r, 78 T.C. 882, 891 (1982)).

No such employer-employee relationship exists here.

       Williams        testified        that       he    had     no     written       employment

agreement and received no regular salary or commission payments

from    ALQI.        He    stipulated        that       he     was    the   sole    operational

director and officer of ALQI and the only person with authority

to    act   on   the      company’s      behalf          in    its    business      activities.

Williams       had     exclusive        signature             authority      over      the   ALQI

accounts from 1993 through 2000 and was the sole person from

whom Banque Indosuez would accept instructions with respect to

those accounts.           There is simply no indication that ALQI wielded

any form of control over Williams as an employee.

       Beyond that, the evidence strongly suggests that Williams

did not act on behalf of ALQI when he earned the income in

                                                18
question and merely used ALQI as a bank account.                                      Apart from

Williams’       testimony,         there       is     no     evidence          that    Williams’

consulting      clients       even       knew       ALQI    existed.            There    are     no

consulting      agreements,          notes      or     other      records        that    reflect

ALQI’s business dealings.                 In fact, there are no ALQI business

records at all for the period at issue, except for bank records

maintained by Banque Indosuez and a single balance sheet and

profit    and    loss    statement         dated       June       30,    2000.          Williams’

accountant, Donald Williamson, testified that while he reviewed

voluminous      bank     records         and    incorporation            documents       in     the

course of his work, he did not see any general ledgers, profit

and loss statements or balance sheets for ALQI, nor did he see

any consulting contracts.                 Williamson testified that he relied

on the representations of Williams and Williams’ counsel that

ALQI earned the consulting fees in question, and he took those

representations at face value.

     In    an    effort       to    legitimize         ALQI’s      operations,          Williams

points    to    ALQI’s    use       of   Banque       Indosuez’s         office       space,    its

Swiss cell phone and credit card, as well as the fact that

clients     deposited         consulting         fees       directly       into        the     ALQI

accounts.        Williams          insists      that       ALQI   employed        Smekhova       to

arrange, attend and translate at meetings conducted for ALQI

business,       and    that     ALQI,      not        Williams,         paid     her    for     her

services.         But     Smekhova,            like     Williams,         had     no     written

                                                19
employment agreement with ALQI.                 As the Tax Court noted, “[t]he

fact that Mr. Williams’ business and personal expenses were paid

out of these same Swiss bank accounts does not prove that his

clients contracted with ALQI or that ALQI was anything other

than       the   receptacle   into     which      Mr.   Williams    diverted      his

consulting income.”        Williams, 2011 WL 1518581, at *14.

       Williams      argues   that     because       ALQI   is     not   a   “sham”

corporation - and the Tax Court assumed that it is not - it must

follow that the consulting fee income is taxable to ALQI.                         But

Williams’ reasoning is flawed.                  As the Tax Court persuasively

explained,       whether   ALQI   is   a    legitimate      business     entity    is

irrelevant; ALQI simply did not earn the income at issue. 8                    Id.;

see Haag, 88 T.C. at 611 (“A finding that the [corporation] is


       8
        Williams argues Moline Properties, Inc. v. Comm’r, 319
U.S. 436 (1943), supports his position, but his argument falls
short. In that case, petitioner Moline Properties claimed that
gain on sales of its real property should be treated, and
therefore taxed, as the gain of its sole stockholder, and that
its corporate existence should be ignored as fictitious.
Notwithstanding the fact that Moline “kept no books and
maintained no bank account during its existence,” the Supreme
Court held that it was a separate entity with a tax identity
distinct from its stockholder. In reaching this conclusion, the
Court noted the fact that the stockholder exercised negligible
control over the entity, that Moline mortgaged and sold portions
of its property, and that Moline entered into its own business
venture by leasing part of its property and collecting rental
income.    Id. at 440.   On the contrary, in the instant case,
Williams exercised exclusive and complete control over ALQI, and
there is no evidence that ALQI carried on any business activity
apart from serving as Williams’ bank account.



                                           20
not a sham does not preclude application of the assignment of

income   doctrine   because    a    taxpayer   can    assign   income    to   a

corporation with real and substantial businesses to avoid tax

liability.”).

     Moreover, Williams cannot rise above his own admissions at

his guilty plea hearing that the “purpose of the [ALQI] accounts

was to hold funds and income [he] received from foreign sources

during the years 1993 to 2000.”            Williams further acknowledged

that he “knew that most of the funds deposited into the A[LQI]

accounts, and all of the interest income were taxable income to

[him],” but admitted he “chose not to report the income to the

Internal Revenue Service in order to evade the substantial taxes

owed thereon.”

     The Commissioner’s determinations of income are entitled to

a presumption of correctness, and the taxpayer bears the burden

of proving them wrong.        McHan v. Comm’r, 558 F.3d 326, 332 (4th

Cir. 2009).      “The IRS is not given free rein, however:                 the

taxpayer can rebut the presumption of correctness by proving, by

a   preponderance   of   the       evidence,   that     the    IRS’s    income

determination is arbitrary or erroneous.”            Id.   Williams has not

rebutted the presumption in this case.               For these reasons, we

find that Williams is liable for tax on the corpus of the ALQI




                                      21
accounts,        in   addition   to   the    passive    income    earned    on   those

funds. 9



                                            IV.

       Williams’ final argument on appeal is that the Tax Court

erred in limiting his charitable contribution deductions to his

basis in the art donated through Abbey Art, rather than allowing

deduction of the art’s fair market value.                        Williams contends

that the Tax Court erroneously found the Art Purchase Agreement

to be an option contract, ignoring both the mutual understanding

of the parties and the plain language of the Agreement.                      For the

reasons that follow, we find Williams’ arguments unavailing.

                                            A.

       Generally,       a   deduction       is    allowed   for    any     charitable

contribution for which payment is made within the taxable year.

26 U.S.C. § 170(a)(1).                The deduction is allowable, however,

only       if   the   contribution     is   “verified    under    the    regulations

prescribed by the Secretary.”               Id.    When a contribution involves

property        other    than    money,     the    amount   of     the     charitable

contribution is the fair market value of the property at the


       9
       Given this holding, we see no reason to address Williams’
challenge to the validity of the Controlled Foreign Corporation
regulations, as this argument only becomes relevant if the
consulting fee income were attributable to ALQI.



                                            22
time the donation is made.               26 C.F.R. § 1.170A-1(c)(1).               This

rule        is    modified    in      situations        involving    donations      of

appreciated property.          In those circumstances, the amount of any

charitable contribution is reduced by the amount of gain that

would       not    have   qualified    as    long-term     capital     gain   if   the

property had been sold by the taxpayer at its fair market value,

determined as of the time of the contribution.                         26 U.S.C. §

170(e)(1)(A).           In other words, section 170(e)(1)(A) permits the

deduction         of   long-term   capital       gain   appreciation    but   if   the

property is not long-term capital gain property, the charitable

contribution deduction is limited to the taxpayer’s basis at the

time of the contribution.              Long-term capital gain is defined as

gain from the sale or exchange of a capital asset 10 held for more

than one year.            26 U.S.C. § 1222(3).            The taxpayer bears the

burden of proving he is entitled to a charitable deduction in

the amount of the fair market value of the donated property.

See INDOPCO, Inc. v. Comm’r, 503 U.S. 79, 84 (1992).

                                            B.

       The issue to be resolved is whether Williams held the art

in question for more than one year before donating it.                              “In

common understanding to hold property is to own it.                     In order to


       10
       The art in question qualifies as a capital asset pursuant
to 26 U.S.C. § 1221(a).



                                            23
own or hold one must acquire.             The date of acquisition is, then,

that from which to compute the duration of ownership or the

length    of    holding.”       McFeely      v.      Comm’r,   296   U.S.      102,    107

(1935).        Williams    argues     that     he     acquired   the     art    when    he

executed      the   Art   Purchase    Agreement         in    December     1996.       The

Commissioner asserts that Williams did not acquire the art until

he paid for it, which in each case was within a year of the

donation.

    In determining the date of acquisition of property:

    [N]o hard-and-fast rules of thumb can be used, and no
    single factor is controlling.   “Ownership of property
    is not a single indivisible concept but a collection
    or bundle of rights with respect to the property;”
    consequently, we must examine the transaction in its
    entirety.   The date of the passage of legal title is
    not the sole criteria; the date on which “the benefits
    and burdens or the incidents of ownership of the
    property” were passed must also be considered, and the
    legal consequence of particular contract provisions
    must be examined in the light of the applicable State
    law.

Hoven    v.    Comm’r,    56   T.C.   50,      55    (1971)    (internal       citations

omitted).

    The Tax Court did not look to state law in resolving this

issue, however, and the Commissioner insists that state law has

no applicability here.          Both the Commissioner and the Tax Court

cite United States v. Heller, 866 F.2d 1336, 1341 (11th Cir.

1989),    for   the   proposition      that         “federal   tax   law    disregards

transactions lacking an economic purpose which are undertaken


                                          24
only to generate a tax savings.                   Federal tax law is concerned

with the economic substance of the transaction under scrutiny

and not the form by which it is masked.”                           Indeed, the Fifth

Circuit       has         recognized       that     “[t]he         application          and

interpretation        of    the    Internal      Revenue    Code    is   a    matter      of

federal law.         The form of a document and its effect under state

law     are        therefore       not     controlling        in     these         federal

determinations.”           Deshotels v. United States, 450 F.2d 961, 964

(5th Cir. 1972).           The Fifth Circuit found it appropriate to look

to Louisiana law in Deshotels, however, in order to understand

the   agreement       at    the    heart    of    the    parties’     dispute.           Id.

Williams argues we should do the same here and look to New York

law 11 in interpreting the Art Purchase Agreement, and he cites to

our   decision       in    Volvo   Cars    of    North   America,     LLC     v.   United

States,      571    F.3d    373    (4th    Cir.    2009),    in     support      of     that

contention.

      In that case, Volvo had written-off excess inventory that

it purportedly sold to a warehouser pursuant to the terms of a

1983 contract, thereby reducing its taxable income for the 1983

tax year.      The IRS found these were not bona fide sales because

Volvo      retained    control     over    the    inventory    even      after     it   was

      11
        The parties do not dispute that if state law is to be
invoked in the context of this analysis, New York law applies
per the terms of the Agreement.



                                            25
transferred.          Volvo brought suit seeking a refund of the tax

paid due to the disallowed write-offs, and the jury returned a

verdict in Volvo’s favor.                   The district court entered judgment

notwithstanding the verdict as to transfers of inventory made

prior to execution of the 1983 contract, finding as a matter of

law   that     the     contract       did    not   address    inventory     previously

transferred to the warehouser.                  Volvo appealed.         In determining

whether        the     1983     contract        covered      inventory      previously

transferred, we looked to state law “because ‘in the application

of a federal revenue act, state law controls in determining the

nature    of    the    legal    interest       which   the    taxpayer    had   in   the

property.’”          Id. at 378 (citing United States v. Nat’l Bank of

Commerce,      472    U.S.     713,    722    (1985)).       As   the   Supreme   Court

stated in National Bank, “[t]his follows from the fact that the

federal statute ‘creates no property rights but merely attaches

consequences, federally defined, to rights created under state

law.’”    472 U.S. at 722 (quoting United States v. Bess, 357 U.S.

51, 55 (1958)).

      To be sure, the economic substance of the transaction is

the primary concern in the instant case.                          We need not accept

that the parties contracted for the sale of art simply because

their signatures appear on a document entitled “Art Purchase

Agreement.”          Even if we look to state law to help determine the

nature    of    the    legal     interest       conveyed     by   the   Agreement,    as

                                              26
Williams urges us to do, we remain convinced that the Tax Court

correctly       determined      that       Williams’     charitable        contribution

deduction is limited to his basis in the donated art.

                                            C.

      The Tax Court examined the rights, duties and obligations

the     parties    assumed      when       they    executed       the     Art   Purchase

Agreement and concluded that by signing the Agreement and paying

$3,600 up front, Williams purchased an option to buy art.                         Under

New York law, “whether an agreement is a binding contract or an

option is to be determined like any other issue of contract

interpretation          from    all    four       corners    of     the     agreement.”

Interactive       Prop.    Corp.      v.    Blue    Cross    &    Blue     Shield,    450

N.Y.S.2d 1001, 1002 (1982).                Although a “contract for sale” can

encompass both a present sale of goods and a contract to sell

goods at a future time, a “sale” requires the passing of title

from the seller to the buyer for a price, N.Y. U.C.C. Law § 2-

106, and “[t]itle to goods cannot pass under a contract for sale

prior to their identification to the contract,” id. at § 2-

401(1).        Indeed, “title passes to the buyer at the time and

place     at    which     the   seller       completes      his    performance       with

reference to the physical delivery of the goods . . . even

though a document of title is to be delivered at a different

time or place. . . .”           Id. at § 2-401(2).



                                            27
       An option contract, on the other hand, “is an agreement to

hold     an     offer     open;      it     confers       upon     the         optionee,      for

consideration         paid,    the    right    to    purchase        at    a    later       date.”

Kaplan v. Lippman, 75 N.Y.2d 320, 324 (1990).                                   “[U]ntil the

optionee gives notice of his intent to exercise the option, the

optionee is free to accept or reject the terms of the option.”

Id.    at     325.      The    contract      ripens       into   a    fully       enforceable

bilateral contract once the optionee gives notice of his intent

to exercise the option in accordance with the agreement.                                      Id.

       The following leads us to believe the Tax Court correctly

concluded that the Art Purchase Agreement is not a contract for

sale that triggered the holding period required for long-term

capital gain. 12

                                              1.

       Title     to     the    art    did   not     pass    upon      execution         of     the

Agreement in 1996, and delivery was not made.                             In fact, the art

in question was not even identified in the Agreement.                                   Rather,

“[t]he      specific     items       purchased      by    the    Client        [were    to]       be

described in written appraisals” and given to Williams once he

received       physical       possession      of    the    art   or   donated          it    to   a


       12
        We note that paragraph 12 of the Agreement provides that
it is “the entire agreement between the respective parties
hereto   and  there   are  no   other  provisions,   obligations,
representations, oral or otherwise, of any nature whatsoever.”



                                              28
charitable institution.        This could not occur, pursuant to the

Agreement’s    terms,      until   Williams    paid   the    balance   of    the

purchase price.      While he asserts art was segregated for him in

Abbey Art’s warehouse, Williams does not have an inventory of

this segregated art, nor did he ever visit the warehouse to view

it.

                                      2.

      The Agreement provides that $3,600, five percent of the

total agreed purchase price of the art ($72,000), was to be paid

up front and would be held in escrow pending satisfaction of the

Agreement’s provisions.        The balance of the purchase price was

due at the time Williams received physical possession of the art

or when it was donated, an act which was to occur in the future

but at no specified time.

      Aside   from   the    initial   $3,600   payment,     Williams   had    no

obligation    to   perform   under    the   contract.       Williams   was   not

required to follow through with the purchase, and Abbey Art had

no right to require specific performance of the full balance of

the purchase price.         Its sole remedy for Williams’ non-payment

was to retain as liquidated damages any monies that Williams had

paid towards the purchase of the art and to reclaim ownership

over it.

      Indeed, Abbey Art bore all of the expense and all of the

risk in this transaction.          It was responsible for selecting and

                                      29
paying       the    appraiser,     packaging      and    shipping      the   art,   and

completing all the necessary paperwork.                       Even in storing the

art, Abbey Art bore the risk of loss.                    See N.Y. U.C.C. Law § 2-

509.        Moreover, if the fair market value of the art fell below

what was reflected in the appraisal, reducing the tax benefit to

Williams,          Abbey   Art    was   required        to    refund   Williams     the

percentage of his dollars paid for each dollar in reduction of

the fair market value.

                                           3.

       The Agreement provides that the total purchase price of the

art would not exceed 24% of the cumulative appraised fair market

value of the art purchased. 13              The purchase price set forth in

the agreement is $72,000, which is 24% of $300,000.                          Thus, the

Agreement contemplates $300,000 worth of art would be purchased.

Yet the fair market value of the first art donation Williams

made ($425,625) far exceeded that amount.                        Arguably, even if

title did pass for $300,000 worth of art upon execution of the

Agreement in 1996, it still would not account for the extra

$125,000 worth of art donated to Drexel University in 1997, the

$250,525       worth       of    art    donated    to        Florida    International


       13
        It goes without saying that the appreciation guaranteed
to Williams by virtue of this Agreement is suspect, to say the
least. The Commissioner has not challenged the valuation of the
art, however, and that issue is not before us.



                                           30
University in 1999, and the $98,900 worth of art donated to

Drexel in 2000.

                                           D.

        In sum, the 1996 Art Purchase Agreement was not a contract

for sale.       Therefore, Williams’ holding period for purposes of

the long-term gain calculation did not begin until he paid for

and acquired a present interest in the art.                   In each instance,

this occurred less than one year from the date of his donation.

Williams       paid   for    the    December      1997     donation     to    Drexel

University in December 1997.                He paid for the December 1999

donation to Florida International University in December 1999.

And he paid for the October 2000 donation to Drexel in full in

December of that same year.           For these reasons, we find the Tax

Court    did    not   err    in    concluding     that     Williams’    charitable

contribution deduction is limited to his basis in the art.



                                           V.

     Because      Williams    has    not    met   his    burden   of   proving   the

Commissioner’s notice of deficiency is erroneous, we affirm.



                                                                             AFFIRMED




                                           31
