Brendan Johnson v. United States
20-16927
| 9th Cir. | Jun 24, 2021Background
- Appellants sought refunds of federal income taxes for 2008–2010, claiming entitlement to pass-through and real-estate loss deductions.
- District court granted summary judgment for the United States; appellants appealed to the Ninth Circuit.
- Tax law requires material participation to deduct passive losses (I.R.C. § 469); taxpayers bear the burden to clearly show entitlement to claimed deductions.
- Appellants failed to cite specific evidence for claimed pass-through losses, instead pointing generally to a voluminous record; the district court did not have to scour the file for supporting evidence.
- For the real-estate-professional exemption, Mrs. Johnson needed >50% of personal services in real property trades and more than 750 qualifying hours; the court disallowed educational hours and work on personal property, leaving her below 750 hours for 2008–2010.
- Court affirmed summary judgment for the Government.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Entitlement to pass-through loss deductions | Johnsons were entitled to deduct pass-through/unreimbursed business losses | Appellants failed to identify or cite evidence showing material participation or specific deductible losses | Appellants failed to meet their burden; summary judgment for Government |
| Real-estate-professional exemption (material participation; 750-hour test) | Mrs. Johnson performed sufficient hours and materially participated in real-property businesses | Disallowed study time and work on personal residence/hangar; qualifying hours fall below 750 each year | Exemption not met for 2008–2010; losses remain passive |
| Court’s duty at summary judgment to search the record | Pointed broadly to the record to support deductions | District court not required to comb the record when opposing papers lack adequate references | Court properly declined to examine the entire file; citation duty on appellant affirmed |
Key Cases Cited
- INDOPCO, Inc. v. Comm’r, 503 U.S. 79 (1992) (burden on taxpayer to clearly show entitlement to claimed deduction)
- Interstate Transit Lines v. Comm’r, 319 U.S. 590 (1943) (taxpayer bears burden to prove deduction entitlement)
- Carmen v. S.F. Unified Sch. Dist., 237 F.3d 1026 (9th Cir. 2001) (district court not required to search entire file for evidence not cited by opposing party)
- Arakaki v. Hawaii, 314 F.3d 1091 (9th Cir. 2002) (de novo review of summary judgment)