                        T.C. Memo. 2006-83

                      UNITED STATES TAX COURT

         LARRY G. BANGS AND MARY L. BANGS, Petitioners v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent

     Docket No. 17415-04.            Filed April 24, 2006.

     W. Alan Lautanen, for petitioners.

     Erin K. Huss, for respondent.

              MEMORANDUM FINDINGS OF FACT AND OPINION

     KROUPA, Judge:   Respondent determined deficiencies in

petitioners’ Federal income taxes and accuracy-related penalties

under section 6662(a)1 for 1999, 2000, 2001, and 2002 (the years

at issue).   For 1999, respondent determined a $14,335 deficiency

and determined that petitioners were liable for a $2,867

     1
      All section references are to the Internal Revenue Code for
the years at issue, and all Rule references are to the Tax Court
Rules of Practice and Procedure, unless otherwise indicated.
                                -2-

accuracy-related penalty.   For 2000, respondent determined an

$11,159 deficiency and determined that petitioners were liable

for a $2,231 accuracy-related penalty.   For 2001, respondent

determined a $7,605 deficiency and determined that petitioners

were liable for a $1,521 accuracy-related penalty.   For 2002,

respondent determined an $11,413 deficiency and determined that

petitioners were liable for a $2,282 accuracy-related penalty.

     After concessions, there are three issues for decision.     The

first issue is whether petitioners engaged in their lemon farming

activity for profit.   We hold they did not.2

     The second issue is whether petitioners are liable for taxes

on interest and capital gains they admit they earned during the

years at issue but which were erroneously omitted on the Form

4549A, Income Tax Examination Changes, petitioners signed.      We

hold petitioners are liable for the taxes on the interest and

capital gains.

     The third issue is whether petitioners are liable for the

accuracy-related penalty.   We hold they are liable for the

accuracy-related penalty except with respect to the portion of

the understatement attributable to the lemon farming activity.

     2
      If we had found petitioners engaged in their lemon farming
activity for profit, we would have then been asked to consider
whether petitioners should have capitalized, rather than
deducted, their expenses relating to their lemon farming
activity. Because of our holding on the for profit issue, we
need not address the capitalization issue under sec. 263A.
                                 -3-

                           FINDINGS OF FACT

     Some of the facts have been stipulated and are so found.

The stipulation of facts, the supplemental stipulation of facts,

and the accompanying exhibits are incorporated by this reference.

Petitioners resided in California at the time they filed the

petition in this case.

Petitioners

     Petitioner Larry Bangs (Mr. Bangs) was raised and met his

future wife in a small farming town in Kansas.    Mr. Bangs and his

future wife decided to move to California in 1964 to seek warmer

weather after Mr. Bangs spent some time in college and worked in

the salt mines.    They were then married.3

     Mr. Bangs accepted a job at Standard Oil in California.    He

started in a plant and then moved to the sales department, where

he sold polyester resin for 6 years.    His sales experience and

entrepreneurial drive convinced him to start a new business with

his wife.    They began their own business distributing fiberglass

products.    The business was successful and grew into fiberglass

manufacturing as well.    Petitioners explored several different

business opportunities, some of which were successful.

Petitioners found success in manufacturing plastic lettering,

manufacturing chemical tanks, and designing the curled tail on

the back of skateboards.    Petitioners lost money in jet ski

manufacturing, however, and they discontinued it when it was not

     3
         We refer to petitioner Mary Bangs as Mrs. Bangs.
                                  -4-

profitable.    Petitioners eventually sold the fiberglass business

for several million dollars in the early 1980s.

     Petitioners considered themselves retired after they sold

their fiberglass business, when Mr. Bangs was approximately 40

years old.    Petitioners owned several rental properties during

the years at issue that generated between $400,000 and $500,000

annually in gross income.

The Farming Activity

     Petitioners purchased 40 acres of land in California’s

Valley Center area in 1971.    They had been looking for property

for some time and were able to obtain this property at a good

price.   When petitioners sold their fiberglass business in the

early 1980s, they decided to build a 6,000 square foot house on

the Valley Center property.    Mr. Bangs hoped to get back to

farming and was looking for something he could do in his backyard

when he was 70 and retired.    Petitioners had fond memories of

farming from their youth and were interested in learning whether

it was possible to replicate their experiences in California.

     Petitioners spoke to an agricultural adviser and asked what

type of crop could be grown on the land.    This expert advised

petitioners to grow lemons because they were fairly hardy and

could thrive with little water.    Mr. Bangs also learned that

lemon trees had a long life.

     Petitioners planted some lemon trees on their property in

the early 1990s.    The record is unclear, however, how many trees

were planted.    Petitioners also made some improvements to their
                                 -5-

property.    They built a warehouse, a ripening room, and added

water pumps.    Petitioners also had a large well on the property

that was producing more water than necessary for the lemon trees,

so petitioners also decided to raise catfish.    They watered the

lemon trees with refuse or runoff water from the catfish tanks,

but when the catfish venture was unsuccessful, petitioners

abandoned it.

     Mr. Bangs decided in 1994 to harvest some lemons.    He

decided to harvest less than 4 years after planting the trees

even though he was aware that it would take 10 years before the

trees would fully produce.    He also knew that it might stunt the

growth of the trees but he was anxious to see how the lemon

market worked.    Petitioners sold these lemons to a packing house

in Rancho Santa Fe and reported $469 of income from lemon sales

in 1994.

      Mr. Bangs claimed that he spent 60 to 80 hours per week on

the lemon farming activity, and claimed that petitioners together

spent between 80 to 90 hours per week on the activity.    Mr. Bangs

pruned and weeded the tree area, repaired equipment, and did

other activities.    Mrs. Bangs did both physical work and kept the

financial records.    Petitioners did not employ any outside

employees.

     Mrs. Bangs was responsible for the financial records of the

farming activity.    The only financial records for the activity,

however, consisted of stacks of receipts.    Petitioners did not
                                 -6-

have a business plan, a separate bank account, nor any books and

records in which income and expenses were recorded.

     Petitioners reported income, expenses, and gain or loss on

Schedule F, Profit or Loss from Farming, to their income tax

returns for 1993 through 2002 as follows:

         Year        Income            Expenses       Gain (Loss)
         1993          --              $47,687        $(47,687)
         1994         $469              63,699         (63,230)
         1995        1,343              43,952         (42,609)
         1996        1,341              37,484         (36,143)
         1997        2,728              39,922         (37,194)
                       1
         1998              556          35,278         (34,722)
         19992         --               28,935          (28,935)
         20003         --               37,853          (37,853)
         2001          --               16,591          (16,591)
         2002          --               33,535          (33,535)
     1
       While the Schedules F for 1995 through 1998 indicate that
petitioners earned some income from farming during these years,
there is no indication that this income was from lemon sales, nor
did petitioners introduce receipts from lemon purchasers as they
did for the 1994 income.
     2
       The amounts reported here for 1999, 2000, and 2001 are
from petitioners’ pro forma returns, not petitioners’ original
individual income tax returns. Petitioners’ original 1999 return
reported a portion of this loss, and the record reflects that the
remainder of this loss was reported on a trust return. See
infra, pp. 7-8.
     3
       Petitioners' original returns for 2000 and 2001 did not
reflect any lemon farming activity because petitioners included
it on a trust return for those years. The income, expenses, and
losses for 2000 and 2001 were included on the pro forma returns.

The income petitioners reported in 1994 through 1998 was

insufficient to cover the property taxes.
                                -7-

     Respondent audited petitioners’ return for 1995.    In that

audit, respondent did not disallow the deductions petitioners

claimed in connection with their farming activity for that year.

     Several natural events occurred during the years at issue

that impacted the lemon farming activity.    A 1993 wildfire

destroyed some of the lemon trees.    Poor soil conditions led

petitioners to consult a supervising plant pathologist in 1997

out of concern for their trees’ health.    The pathologist examined

the trees and noted that they looked unhealthy and had curled

yellow leaves.   The pathologist reported that these problems

could be due to the soil staying wet too long or to a mineral

deficiency.   Petitioners also claim they experienced a water

shortage during the years at issue.    Petitioners drilled

additional wells in 2000 and 2002, but their efforts did not

produce any additional water.   Mr. Bangs indicated at trial that

he would await the outcome of this case before he decided whether

to drill more wells on the property.

The Trust Scheme

     Petitioners became involved in a trust scheme in 1999.

They did not consult an attorney or CPA before they bought into

the scheme.   Petitioners transferred title to most of their

assets to trusts to avoid paying taxes on the income from these

assets.   Petitioners, in contrast to the lack of records for

lemon farming, kept detailed books and records relating to their

trusts.   The trust-related financial records included balance

sheets, capital gain reports, and transaction reports by
                                 -8-

category.   There was no record of the lemon farming activity in

any of the trust records, but detailed records of petitioners’

investment and rental activities were included in the trust

records.    Losses from the lemon farming activity were deducted on

a trust return for at least 1999 and 2000, however.

     On audit, the revenue agent informed petitioners that the

trusts would be collapsed.    Petitioners decided to hire a CPA to

prepare pro forma returns so petitioners would be better prepared

to settle with respondent.    The pro forma returns aggregated the

amounts reported on the trust returns and the amounts reported on

individual returns for the years at issue.   Petitioners and the

revenue agent were unable, however, to resolve the lemon farming

activity issues.

     During the course of the audit, respondent’s revenue agent

asked to tour the property.   Petitioners would not permit the

revenue agent to tour the property and would not answer questions

about their farming activity.   Respondent issued a summons to

petitioners to permit the revenue agent to tour petitioners’

property.   When the revenue agent was finally permitted to visit

the property, she noted that the trees did not look healthy and

that some were dead.   She also noted that the trees on the

property across from petitioners’ property, on the other hand,

were healthy and thriving.    The revenue agent also noticed that

petitioners were storing yard items in the ripening room and the

warehouse storage held several classic cars in various stages of

repair.
                                  -9-

     Respondent’s revenue agent sent petitioners a number of

documents in September 2003 to resolve all non-farming activity

issues after she reviewed petitioners’ pro forma returns.   These

documents included Form 4549A, Form 870, Waiver of Restrictions

on Assessment, Form 906, Closing Agreement Covering Specific

Matters (the closing agreement), and Form 872, Consent to Extend

the Time to Assess Tax.   Petitioners needed to extend the period

of limitations because the period for 1999 would soon expire.

     The closing agreement resolved the dispute relating to the

proper treatment of the trusts.    In it, the parties agreed that

the trusts would be disregarded and the trusts were petitioners’

alter egos.   Petitioners also agreed that they would report on

individual returns for 1999 and subsequent years all income,

expenses, and deductions, as allowed by the Code.   In addition,

the parties agreed that petitioners would be liable for

additional taxes, penalties, and interest on their individual

returns due to collapsing the trusts.

     Petitioners signed each document and returned them to the

revenue agent.   Respondent also executed the closing agreement.

Shortly after petitioners signed these documents, the revenue

agent discovered that she had made errors in the Form 4549A

petitioners signed.   The revenue agent had inadvertently omitted

interest income that petitioners had shown on their pro forma

returns, and she miscalculated the amount of capital gains.

Petitioners apparently did not notice these mistakes when they
                                 -10-

executed the documents.     The revenue agent sent petitioners a

corrected Form 4549A, which petitioners refused to sign.

     Respondent mailed a deficiency notice to petitioners on June

18, 2004, in which respondent computed the deficiency amounts

from the original returns petitioners filed for the years at

issue.   Petitioners timely filed a petition with this Court

contesting respondent’s disallowance of the lemon farming

expenses for 1999 and 20024 and asserting that petitioners were

entitled to additional deductions for lemon farming expenses in

2000 and 2001.5   Petitioners are also contesting the treatment of

the interest and capital gains and the imposition of the

accuracy-related penalty.

     4
      It appears from the record that a portion of the losses
from the lemon farming activity was reported on petitioners’
individual returns for 1999 and a portion of the losses were
reported on a trust return for that year.
     5
      Respondent disallowed the lemon farming expenses for 1999
and 2002 in the deficiency notice, but the lemon farming expenses
for 2000 and 2001 were not reported on petitioners’ original
returns. Respondent did not disallow the lemon farming expenses
for 2000 and 2001 in the deficiency notice because respondent
computed the deficiencies from the original returns petitioners
filed. Petitioners deducted the lemon farming expenses on a
trust return for 2000, and we assume petitioners also deducted
them on a trust return for 2001, although the record is not
clear. Petitioners assert in their petition that they are
entitled to additional deductions for 2000 and 2001 for their
lemon farming activity that were unreported on their original
returns. Petitioners’ assertion in their petition is consistent
with petitioners’ position on their pro forma returns, which do
include deductions for lemon farming expenses for all years.
                               -11-

                              OPINION

     There are several issues for decision.   We are asked to

decide, first, whether petitioners engaged in their lemon farming

activity for profit.   We are also asked to decide whether

petitioners are liable for taxes on interest income and capital

gains that petitioners admit they earned for the years at issue,

but were excluded from the initial Form 4549A petitioners signed.

Finally, we must decide whether petitioners are liable for the

accuracy-related penalty for each of the years at issue.     We

address each of these issues in turn, after first considering the

burden of proof.

I.   Burden of Proof

     In general, the Commissioner’s determinations in the

deficiency notice are presumed correct, and the taxpayer bears

the burden of proving that the Commissioner’s determinations are

in error.   See Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115

(1933).   Section 7491(a) shifts the burden of proof to the

Commissioner with respect to a factual issue relevant to a

taxpayer’s liability for tax, however, under certain

circumstances.   The burden shifts to the Commissioner if the

taxpayer introduces credible evidence with respect to the issue,

complies with substantiation requirements, maintains all required

records, and cooperates with the Commissioner’s reasonable
                                -12-

requests for witnesses, information, documents, meetings, and

interviews.   Sec. 7491(a)(2)(A) and (B).6

      We find that petitioners failed to comply with respondent’s

reasonable requests.   Id.   Although petitioners produced

documents respondent requested, petitioners refused to answer

respondent’s questions about their farming activity.    Respondent

was forced to issue petitioners a summons to obtain necessary

information to complete the audit.     Accordingly, we find that the

burden of proof remains with petitioners.

II.   Whether Petitioners Engaged in Their Lemon Farming Activity
      for Profit

      A.   Section 183 Generally

      We now address whether petitioners engaged in their lemon

farming activity for profit within the meaning of section 183

during the years at issue.   Section 183(a) provides generally

that if an individual engages in an activity and “if such

activity is not engaged in for profit, no deduction attributable

to such activity shall be allowed under this chapter except as

provided in this section.”   Deductions that would be allowable

without regard to whether the activity is engaged in for profit

are allowed under section 183(b)(1).    Deductions that would be

allowable only if the activity were engaged in for profit are

allowed under section 183(b)(2), but only to the extent that the

      6
      Sec. 7491 is effective with respect to court proceedings
arising in connection with examinations by the Commissioner
commencing after July 22, 1998, the date of enactment of the
Internal Revenue Service Restructuring and Reform Act of 1998,
Pub. L. 105-206, sec. 3001(a), 112 Stat. 726.
                                -13-

gross income from the activity exceeds the deductions allowable

under section 183(b)(1).

     We follow the Court of Appeals opinion squarely in point

when appeal from our decision would lie to that court absent

stipulation by the parties to the contrary.    Golsen v.

Commissioner, 54 T.C. 742 (1970), affd. 445 F.2d 985 (10th Cir.

1971).    Taxpayers residing in the Ninth Circuit, such as

petitioners, must prove they conducted their activities with the

primary, predominant, or principal purpose of realizing an

economic profit independent of tax savings.    See Wolf v.

Commissioner, 4 F.3d 709, 713 (9th Cir. 1993), affg T.C. Memo.

1991-212; Polakof v. Commissioner, 820 F.2d 321, 323 (9th Cir.

1987), affg. T.C. Memo. 1985-197; Indep. Elec. Supply, Inc. v.

Commissioner, 781 F.2d 724, 726 (9th Cir. 1986), affg. Lahr v.

Commissioner, T.C. Memo. 1984-472.

     Whether a taxpayer has the primary, predominant, or

principal purpose of realizing an economic profit independent of

tax savings is determined on the basis of all surrounding facts

and circumstances.    Polakof v. Commissioner, supra at 324; Indep.
Elec. Supply, Inc. v. Commissioner, supra at 727; Dreicer v.

Commissioner, 78 T.C. 642, 645 (1982), affd. without published

opinion 702 F.2d 1205 (D.C. Cir. 1983); sec. 1.183-2(b), Income

Tax Regs.    While a taxpayer’s expectation of profit need not be

reasonable, there must be a good faith objective of making a

profit.    Allen v. Commissioner, 72 T.C. 28, 33 (1979); sec.

1.183-2(a), Income Tax Regs.
                                 -14-

     B.      Nine Factors

     We structure our analysis around nine nonexclusive factors.

Sec. 1.183-2(b), Income Tax Regs.       The nine factors are:   (1) The

manner in which the taxpayer carried on the activity; (2) the

expertise of the taxpayer or his or her advisers; (3) the time

and effort expended by the taxpayer in carrying on the activity;

(4) the expectation that the assets used in the activity may

appreciate in value; (5) the success of the taxpayer in carrying

on other similar or dissimilar activities; (6) the taxpayer’s

history of income or loss with respect to the activity; (7) the

amount of occasional profits, if any, which are earned; (8) the

financial status of the taxpayer; and (9) whether elements of

personal pleasure or recreation are involved.       Id.

     No factor or set of factors is controlling, nor is the

existence of a majority of factors favoring or disfavoring a

profit objective necessarily controlling.       Hendricks v.

Commissioner, 32 F.3d 94, 98 (4th Cir. 1994), affg. T.C. Memo.

1993-396; Brannen v. Commissioner, 722 F.2d 695, 704 (11th Cir.

1984), affg. 78 T.C. 471 (1982); sec. 1.183-2(b), Income Tax

Regs.     The individual facts and circumstances of each case are

the primary test.     Keanini v. Commissioner, 94 T.C. 41, 46
(1990); Allen v. Commissioner, supra at 34; sec. 1.183-2(b),

Income Tax Regs.
                                -15-

     C.     Applying Factors to Facts

     Nearly all of the factors in this case indicate that

petitioners did not engage in their lemon farming activity for

profit.

     Petitioners did not conduct their activity in a businesslike

manner.    Engdahl v. Commissioner, 72 T.C. 659, 666-667 (1979);

sec. 1.183-2(b)(1), Income Tax Regs.    For example, they did not

have a written business plan, any financial statements, or any

financial data pertaining to their lemon farming activity other

than a stack of receipts.   This dearth of financial records is in

stark contrast to their financial records for their abusive

trusts.    Petitioners had copious records for the trusts including

transaction reports by category, balance sheets, and capital gain

reports.   Moreover, petitioners were unable to articulate how

they intended to earn a profit, and it is unclear from the record

how many trees they had on the property at any given time.

Petitioners also claim that they attempted changes to their lemon

farming activity when they experienced a water shortage.     While

they introduced evidence that they drilled additional wells,

petitioners did not indicate any other methods they attempted to

supply water to their land.

     Petitioners also have not shown that they studied the

accepted business, economic, and scientific practices involved in

lemon farming.   See sec. 1.183-2(b)(2), Income Tax Regs.    While

Mr. Bangs likely had some general farming experience from his

youth and he consulted an adviser regarding which crop to raise,
                               -16-

petitioners failed to introduce any evidence that they consulted

any other sources before beginning the lemon farming activity.

After they began the lemon farming activity, petitioners

consulted an expert, a supervising plant pathologist, only once.

     Petitioners also intentionally took measures that they knew

would harm their trees, such as harvesting lemons too early.      Mr.

Bangs was impatient and wanted to test how the market worked,

although he knew it could harm the trees.    There is also no

evidence that petitioners took any action to correct the poor

soil quality or did anything to overcome the water retention

problem noted by the supervising plant pathologist in 1997.

     We also found petitioners’ testimony regarding the time and

effort they spent on the lemon farming activity not credible.

See sec. 1.183-2(b)(3), Income Tax Regs.    Mr. Bangs testified

that he spent 60 to 80 hours per week, and petitioners together

spent 80 to 90 hours per week on the lemon farming activity.

Petitioners were engaged in many pursuits during the years at

issue, not the least of which was a profitable rental real estate

and investment activity.   It is difficult to imagine how anyone

would spend 80 to 90 hours per week caring for an undetermined

number of lemon trees, some of which had died, and give only

secondary attention to the rental real estate and investment

activity that generated significant gross income of approximately

$450,000 annually.   Moreover, despite claiming that they spent so

much time and effort on their lemon farming activity during the
                                 -17-

years at issue, petitioners failed to document the activity in

their trust-related financial records.

     Petitioners do not contend that they were relying upon the

property’s value increasing for them to generate profit from the

lemon farming activity.     See Bessenyey v. Commissioner, 45 T.C.

261, 274 (1965), affd. 379 F.2d 252 (2d Cir. 1967); sec. 1.183-

2(b)(4), Income Tax Regs.    They do assert, however, that they

expected the lemon trees to appreciate as fruit production

increased.   Selling the trees to realize this appreciation is

counter to their argument that they were selling lemons for

profit.

     Petitioners succeeded in other pursuits.    None was similar

to the lemon farming activity.    See Haladay v. Commissioner, T.C.

Memo. 1990-45; Daugherty v. Commissioner, T.C. Memo. 1983-188.

Petitioners grew their fiberglass business into a successful

enterprise that they sold for several million dollars.

Petitioners also have a successful rental real estate and

investment operation.   These activities, however, are quite

dissimilar to lemon farming.    Petitioners’ success in these

dissimilar activities does not lead us to conclude that the lemon

farming activity will eventually become profitable as well.      See

Haladay v. Commissioner, supra.
     We find just as telling that petitioners were involved in

unprofitable businesses, all of which they abandoned.    These

included jet ski manufacturing and catfish farming.    Yet, unlike

the other unprofitable enterprises, petitioners have not
                               -18-

abandoned the lemon farming activity.    In fact, Mr. Bangs

indicated at trial that he would await the outcome of this case

before he decided whether to drill more wells on the property.

Such conduct is inconsistent with a predominant, principal, or

primary purpose of making a profit from the activity.

     Moreover, petitioners sustained large losses from the lemon

farming activity from the start and continuing through the years

at issue.   See Golanty v. Commissioner, 72 T.C. 411, 427 (1979),

affd. without published opinion 647 F.2d 170 (9th Cir. 1981);

sec. 1.183-2(b)(6), Income Tax Regs.    The initial losses

contained an element of startup costs and involved factors unique

to lemon growing.   Petitioners were aware that it would take 10

years before the lemon trees reached full production.    The losses

continued, consistent with this forecast, for at least 9 years

after petitioners began the lemon farming activity.

     The losses continued for all of the years at issue, well

beyond the startup phase of the activity.    See Engdahl v.

Commissioner, supra; sec. 1.183-2(b)(6), Income Tax Regs.

Petitioners contend that these continued losses were due to

unforeseen events beyond their control, such as the wildfire and

the water shortage.   See sec. 1.183-2(b)(6), Income Tax Regs.   We

find petitioners’ testimony regarding the water shortage lacks

credibility.   For example, the pathologist who examined

petitioners’ trees in 1997 noted that the problems with their

trees might be due to the soil staying wet for too long.
                                -19-

Moreover, the trees on the property across from petitioners’ land

looked healthy.

     Petitioners sold their fiberglass business in the early

1980s for several million dollars and currently have a profitable

rental real estate activity.    Petitioners consider themselves

retired.   The large losses they claim from their lemon farming

activity partially offset petitioners’ substantial income from

their non-farming activities.    Petitioners therefore had an

incentive to incur losses in the farming activity.    See Jackson

v. Commissioner, 59 T.C. 312, 317 (1972).

     Petitioners have a 6,000 square foot home on the Valley

Center property where they conduct their farming activity.      Mr.

Bangs wanted to have something to do in his backyard when he

retired.   Petitioners have fond memories of farming from their

youth and had always hoped to get back to farming.   They were

pleased that they could do so raising citrus trees in California,

a warm climate.   See id.; sec. 1.183-2(b)(9), Income Tax Regs.

We find that petitioners derived personal pleasure from their

farming activity, which is an indication that petitioners did not

engage in the activity for profit.

     Based on all of the facts and circumstances, we find that

petitioners have not shown they conducted their lemon farming

activity with the primary, predominant, or principal purpose of

realizing an economic profit independent of tax savings.   See

Wolf v. Commissioner, 4 F.3d at 713; Polakof v. Commissioner, 820
                                -20-

F.2d at 323; Indep. Elec. Supply, Inc. v. Commissioner, 781 F.2d

at 726.

III. Petitioners’ Liability for Taxes on Interest Income and
     Capital Gain

     We next consider whether petitioners are liable for taxes on

interest income and capital gains they reported on their pro

forma returns, but that respondent erroneously omitted on

respondent’s initial Form 4549A.   Petitioners argue that they had

a “deal” with respondent when they signed the Form 4549A and

executed a closing agreement.   Petitioners further argue that

respondent should be prevented from asserting that petitioners

owe any amounts beyond those shown on the Form 4549A they signed.

Respondent, on the other hand, asserts that a Form 4549A is not

final and conclusive as to all issues.   Moreover, respondent

argues that the closing agreement did not determine petitioners’

total tax liability for the years at issue.   We agree with

respondent.

     It is well settled that Forms 4549A do not bind the

Commissioner.    Urbano v. Commissioner, 122 T.C. 384 (2004);

Hudock v. Commissioner, 65 T.C. 351, 362 (1975).   Only closing

agreements entered into pursuant to section 7121 are binding on

the Commissioner as to a determination of the taxpayer’s final

tax liability.   See Urbano v. Commissioner, supra at 393.

     Petitioners executed a closing agreement on Form 906 with

respect to the abusive trust scheme.   We found as a fact at trial

that the closing agreement was binding as to the matters

addressed in the agreement.   This closing agreement, however,
                                 -21-

covers only specific matters; in this case, the treatment of the

trusts.   The closing agreement does not cover other issues or

determine petitioners’ tax liability for the years at issue.

Urbano v. Commissioner, supra.    Accordingly, the closing

agreement does not prevent respondent from determining

deficiencies or penalties for the years at issue.      In fact, the

parties agreed in the closing agreement that petitioners would

report all income, expenses, and deductions on their individual

returns for the years at issue.    The closing agreement also

provides that petitioners will be liable for additional taxes,

penalties, and interest that may arise on their individual

returns by collapsing the trusts.       Accordingly, the terms of the

closing agreement provide that petitioners shall be liable for

taxes on their income for the years at issue.

      Respondent was therefore not prevented from determining that

petitioners owe taxes on interest income and capital gains they

admitted they received during the years at issue.      We find that

petitioners are liable for these taxes.

IV.   Whether Petitioners Are Liable for the Accuracy-Related
      Penalty
      The next issue is whether petitioners are liable for the

accuracy-related penalty under section 6662(a).      Respondent

determined that petitioners were negligent and therefore liable

for the penalty.7

      7
      Respondent also asserts that petitioners substantially
understated their tax and are therefore liable. Because we find
that petitioners were negligent, we need not consider whether
                                                   (continued...)
                               -22-

     Section 6662(a) and (b)(1) imposes a penalty equal to 20

percent of the portion of an underpayment of income tax

attributable to negligence.   Negligence is defined as “any

failure to make a reasonable attempt to comply with the

provisions of * * * [the Code]”.   Sec. 6662(c).   Negligence is

the lack of due care or the failure to do what a reasonable and

prudent person would do under the circumstances.     Neely v.

Commissioner, 85 T.C. 934, 947 (1985).   Respondent has the burden

of production regarding penalties and must come forward with

sufficient evidence that it is appropriate to impose the penalty.

See sec. 7491(c); Higbee v. Commissioner, 116 T.C. 438, 446-447

(2001).

     Petitioners’ adjustments were due in part to their abusive

trusts.   We have found taxpayers negligent who use trusts in

flagrant tax avoidance schemes.    See, e.g., Wesenberg v.

Commissioner, 69 T.C. 1005, 1015 (1978); Castro v. Commissioner,

T.C. Memo. 2001-115; Hanson v. Commissioner, T.C. Memo. 1981-675,

affd. per curiam 696 F.2d 1232 (9th Cir. 1983).    We conclude that

respondent has satisfied his burden of production and has shown

that petitioners’ underpayment of tax was due to negligence.

     The accuracy-related penalty under section 6662(a) does not

apply to any portion of an underpayment, however, if a taxpayer

shows that there was reasonable cause for, and that the taxpayer

acted in good faith with respect to, that portion.    Sec.

     7
      (...continued)
petitioners substantially understated their tax.
                                 -23-

6664(c)(1); sec. 1.6664-4(b), Income Tax Regs.     Petitioners have

the burden of proving that the accuracy-related penalty does not

apply.   See Higbee v. Commissioner, supra at 446.     The

determination of whether the taxpayers acted with reasonable

cause and in good faith depends on the pertinent facts and

circumstances, including the taxpayer’s efforts to assess his or

her proper tax liability, the knowledge and experience of the

taxpayers, and the reliance on the advice of a professional.

Sec. 1.6664-4(b)(1), Income Tax Regs.

     Petitioners argue that they acted with reasonable cause

regarding the lemon farming activity.     Petitioners deducted the

same expenses on previous returns, and the Commissioner did not

disallow those deductions in an earlier audit.      Sheehy v.

Commissioner, T.C. Memo. 1996-334.      A similar deduction allowed

on audit for an earlier year may be one factor to be considered

in determining whether the accuracy-related penalty applies.          See

Stewart v. Commissioner, T.C. Memo. 2002-199; Sheehy v.

Commissioner, supra.

     We note that the inquiry into whether an activity was

engaged in for profit is a facts and circumstances test.        We find

it was reasonable for petitioners to believe the deductions were

permitted when a previous audit did not require changes.        See

Sheehy v. Commissioner, supra.    Based on all of the facts and

circumstances of this case, we find that petitioners had

reasonable cause for and acted in good faith with respect to the

treatment of their lemon farming activity.     We accordingly find
                               -24-

that petitioners are not liable for the accuracy-related penalty

as it relates to this portion of the underpayment.

     The other items on petitioners’ returns for the years at

issue are not accorded the same treatment.   These other non-lemon

farming activity items, including the abusive trust items, were

not considered in the prior audit.    Petitioners have not shown a

genuine effort to assess their proper tax liability, nor have

they shown that they relied on the advice of a professional with

respect to these items.   See sec. 1.6664-4(b)(1), Income Tax

Regs.   Petitioners have not shown they acted with reasonable

cause and in good faith with respect to these non-lemon farming

activity items, and, accordingly, they are liable for the

accuracy-related penalty on the portion of the underpayment

attributable to these items.

     To reflect the foregoing and the concessions of the parties,

                                           Decision will be entered

                                      under Rule 155.


17 F.3d 70
UNITED STATES of America, Plaintiff-Appellee,v.Robert Mitchell PENN, Defendant-Appellant.
No. 93-5190.
United States Court of Appeals,Fourth Circuit.
Argued Oct. 28, 1993.Decided Feb. 17, 1994.

ARGUED:  Hunt Lee Charach, Federal Public Defender, Charleston, West Virginia;  Gregory Stuart Smith, FEDERAL DEFENDER PROGRAM, INC., Atlanta, Georgia, for Appellant.  Kelly D. Ambrose, Assistant United States Attorney, Charleston, West Virginia, for Appellee.  ON BRIEF:  George H. Lancaster, Jr., Assistant Federal Public Defender, Charleston, West Virginia, for Appellant.  Michael W. Carey, United States Attorney, Charleston, West Virginia, for Appellee.
Before ERVIN, Chief Judge, PHILLIPS, Circuit Judge, and MICHAEL, United States District Judge for the Western District of Virginia, sitting by designation.
OPINION
ERVIN, Chief Judge:

1
Under 18 U.S.C. Sec. 3565(a), a defendant originally sentenced to a term of probation who is found to have violated a condition of probation ordinarily may either be continued on probation or may have his sentence of probation revoked, in which case the court may impose any other sentence that was available at the time of the defendant's original sentence.  If the defendant's violation relates to possession of a controlled substance, however, the court must revoke the sentence of probation and must sentence the defendant to "not less than one-third of the original sentence."   The issue in this appeal is whether the undefined phrase "original sentence" in 18 U.S.C. Sec. 3565(a) refers to the maximum term of imprisonment available under the Sentencing Guidelines range applicable to the defendant at the time of the original sentencing hearing, or whether the phrase refers to the term of probation originally imposed.

I.

2
On January 3, 1991, Robert Penn plead guilty to interstate travel to promote unlawful activity in violation of 18 U.S.C. Sec. 1952(a)(3) and was sentenced to 3 years probation with a condition that he serve 6 months of community confinement.  At the time of the original sentencing, the district court found that Penn's Sentencing Guidelines range was 6 to 12 months and that no reason for a departure existed.

3
A United States probation officer filed a petition with the district court on December 4, 1992, alleging that Penn had violated the conditions of his probation by illegally possessing cocaine base, a controlled substance.  At a hearing before the district court on February 1, 1993, Penn admitted his illegal possession of a controlled substance.

4
Based upon Penn's admission, the district court made a factual finding that Penn possessed a controlled substance for the purpose of use rather than distribution, which would expose him to incarceration for a range of 3 to 9 months according to the revocation table in Sec. 7B1.4(a) of the Sentencing Guidelines.  At that point, the government responded that it believed 18 U.S.C. Sec. 3565(a) required the district court to sentence Penn to 12 months imprisonment, because that was one-third of his term of 3 years probation.  Penn asserted that the "one-third" language in 18 U.S.C. Sec. 3565(a) referred to one-third of Penn's original Guidelines range of 6 to 12 months and not one third of his term of probation.  The district court ordered both sides to submit briefs on this issue and continued the matter.

5
On February 16, 1993, Penn appeared before the district court for disposition.  The district court construed the term "original sentence" to mean the three years of probation it imposed on Penn on January 3, 1991, and thus sentenced Penn to "not less than one-third" of three years, or at least twelve months.  Penn noted his objection.  The district court then sentenced Penn to 12 months incarceration.  On appeal, Penn argues that "original sentence" as used in Sec. 3565(a) refers to the sentence of imprisonment available at the time of his initial sentencing.  We agree with Penn, and therefore vacate the judgment and remand for resentencing.

II.

6
Revocation of probation is controlled by 18 U.S.C. Sec. 3565, which provides as follows:

7
(a) Continuation or Revocation.--If the defendant violates a condition of probation at any time prior to the expiration or termination of the term of probation, the court may, after a hearing pursuant to Rule 32.1 of the Federal Rules of Criminal Procedure, and after considering the factors set forth in section 3553(a) to the extent they are applicable--

8
(1) continue him on probation, with or without extending the term or modifying or enlarging the conditions;  or

9
(2) revoke the sentence of probation and impose any other sentence that was available under subchapter A at the time of the initial sentencing.

10
Notwithstanding any other provision of this section, if a defendant is found by the court to be in possession of a controlled substance, thereby violating the condition imposed by section 3563(a)(3), the court shall revoke the sentence of probation and sentence the defendant to not less than one-third of the original sentence.

11
(Emphasis added.)   Penn was sentenced under the last part of Sec. 3565(a), which Congress added as part of the Anti-Drug Abuse Act of 1988, Pub.L. No. 100-690, Sec. 7303(a)(2), 102 Stat. 4181, 4464 (1988) (codified at 18 U.S.C. Sec. 3565(a)) [hereinafter the "1988 Amendment"].

12
The meaning of the term "original sentence" as used in Sec. 3565 is a question of first impression in this circuit.  The eight circuits that have considered this issue have reached opposite conclusions.  Three circuits have held that "original sentence" refers to the term of probation to which the defendant was sentenced.   United States v. Sosa, 997 F.2d 1130 (5th Cir.1993);   United States v. Byrkett, 961 F.2d 1399 (8th Cir.1992);   United States v. Corpuz, 953 F.2d 526 (9th Cir.1992).  Five circuits have interpreted "original sentence" to mean the sentence the defendant could have received when initially sentenced.   United States v. Alese, 6 F.3d 85 (2d Cir.1993);   United States v. Diaz, 989 F.2d 391 (10th Cir.1993);   United States v. Clay, 982 F.2d 959 (6th Cir.1993), cert. denied, --- U.S. ----, 114 S.Ct. 1386, 128 L.Ed.2d 60 (1994);   United States v. Granderson, 969 F.2d 980 (11th Cir.1992), cert. granted, --- U.S. ----, 113 S.Ct. 3033, 125 L.Ed.2d 721 (1993);   United States v. Gordon, 961 F.2d 426 (3d Cir.1992).

13
The 1988 Amendment was first interpreted by the Ninth Circuit in United States v. Corpuz, 953 F.2d 526 (9th Cir.1991).  In Corpuz, the defendant pled guilty to counterfeiting, a crime with a suggested Guidelines range of 1 to 7 months imprisonment.  Instead the defendant was sentenced to 3 years probation, which was subsequently revoked when he was found in possession of drugs.  Relying on the 1988 Amendment, the Ninth Circuit affirmed the district court's reasoning that the original sentence language referred to the sentence actually imposed, and not to the available imprisonment range under the Guidelines.

14
To resolve the conflict between the 1988 Amendment and Sec. 3565(a)(2), which immediately precedes it, that court found significance in the 1988 Amendment's phrase "[n]otwithstanding any other provision in this section," and noted that the 1988 Amendment thus applies and takes precedence over the rules of Sec. 3565(a)(2) when the possession of a controlled substance is involved.  The Ninth Circuit does not appear to have been troubled by the conversion of time served on probation to time served in prison.  As it observed, the phrase "original sentence" logically includes a term of probation because, under the Sentencing Reform Act of 1984, " 'probation is a type of sentence.' "  Corpuz, 953 F.2d at 528-529 (quoting S.Rep. No. 225, 98th Cong., 2d Sess. 88 (1983) U.S.Code Cong. & Admin.News 1984, 3182, 3271).

15
Other circuits, however, have taken issue both with the Ninth Circuit's statutory interpretation and its attempts at "legal alchemy." Gordon, 961 F.2d at 432.   While the government in the instant case correctly argues that probation is a sentence under the Sentencing Reform Act of 1984, a sentence of probation does not equate to a sentence of incarceration.  See Granderson, 969 F.2d at 984 ("Probation and imprisonment are not fungible.");  Gordon, 961 F.2d at 432-33 ("Although both are forms of punishment, their characteristics and objectives are different....  [O]ne-third of three years probation is one year probation, not one year imprisonment.").

16
Given [the] traditional understanding of probation, the onus was on Congress to make it absolutely clear where "sentence" is to refer to a "sentence of probation," by including the appropriate modifying prepositional phrase or by making the meaning absolutely clear from the context.

17
Clay, 982 F.2d at 962.   Without this additional clarification, the term "original sentence" should be given its traditional meaning of a sentence of imprisonment, which in this case would refer to the original Sentencing Guidelines imprisonment range.

18
Furthermore, possession of cocaine provided the reason for revoking Penn's probation, but it is not the crime for which Penn is now incarcerated.  In its policy statements concerning revocation of probation, the Sentencing Commission established that resentencing for violations of probation would sanction primarily the "defendant's breach of trust, while taking into account, to a limited degree, the seriousness of the underlying violation and the criminal history of the violator."   United States Sentencing Guidelines, Chapter 7, Pt. A, 3(b).  The Guidelines explicitly reject the alternative theory of resentencing violators for the particular conduct triggering the revocation "as if that conduct were being sentenced as new federal criminal conduct."   Id.

19
Moreover, in interpreting a statute, it is a "fundamental rule of statutory construction that all parts of a statute must be read together."  Gordon, 961 F.2d at 431.   Therefore, the 1988 Amendment should be read together with Secs. 3565(a)(1) and (a)(2), which immediately precede it.  Under Secs. 3565(a)(1) and (a)(2), the district court has the discretion to continue a defendant on probation, extend the term of probation, or revoke the probation and impose any sentence that was available at the initial time of sentencing.  In contrast, in the 1988 Amendment, "Congress emphatically narrowed the court's sentencing discretion by requiring that a minimum sentence of one-third of the original sentence be imposed."  Diaz, 989 F.2d at 392.   The 1988 Amendment thus "establishes a 'floor' below which the district court cannot resentence despite section 3565(a)(2) otherwise allowing the imposition of any sentence within the original sentencing range."  Gordon, 961 F.2d at 431 (emphasis in original).  It is still within the discretion of the district court, therefore, to sentence Penn to 12 months incarceration, but 12 months is the "ceiling" of the sentencing range rather than the "floor."   The "floor" is one-third of the initial maximum 12 month sentence of incarceration, which is 4 months of incarceration.  Under the district court's interpretation, a probation period of three years would translate into a "ceiling" of three years incarceration.  We do not believe that Congress could possibly have intended to give the district court the discretion to triple a defendant's sentence for violating probation.

20
In United States v. Alli, 929 F.2d 995 (4th Cir.1991), we considered and rejected the possibility that a defendant could be sentenced to a term of incarceration in excess of the guideline range applicable to the defendant at the time of his initial sentencing.  We held in Alli that when a defendant's probation is revoked, resentencing is limited to the sentence that was available at the time the underlying offense was committed.  The defendant in Alli was subject to 6 to 12 months imprisonment for the initial offense, and the district court imposed three years probation.  When cited for probation violations, the defendant submitted urine samples showing traces of cocaine.  The district court, applying Sec. 3565(a)(2),* revoked probation and sentenced the defendant to 15 months imprisonment.  We reversed and held that the sentence of incarceration for probation violation could not exceed the recommended term under the Guidelines for the original offense.  Id. at 998.

21
Although the 1988 Amendment was not at issue in Alli, the case nonetheless bolsters our position on this issue.  The length of Penn's "original sentence" is therefore circumscribed by the Sentencing Guidelines range available at the time Penn initially was sentenced to probation.  However, because Penn's original guideline range was 6 to 12 months, a resentencing of 12 months imprisonment would still be within the district court's revocation sentencing range, assuming that the district court chooses to sentence Penn to greater than "one-third of the original sentence" or the full "original sentence."

22
For the foregoing reasons we conclude that the most reasonable interpretation of Sec. 3565(a) is that a person found to have committed a narcotics related violation is to be resentenced to a term of incarceration that is at least one-third but does not exceed the maximum prison term to which the person originally could have been sentenced.  This interpretation accords with the Supreme Court's enunciation of the policy of lenity in Bifulco v. United States, 447 U.S. 381, 387, 100 S.Ct. 2247, 2252, 65 L.Ed.2d 205 (1980).

23
When interpreting ambiguous criminal statutes, the rule of lenity comes into play:  We "will not interpret a federal criminal statute so as to increase the penalty that it places on an individual when such an interpretation can be based on no more than a guess as to what Congress intended".

24
Granderson, 969 F.2d at 983 (quoting Bifulco, 447 U.S. at 387, 100 S.Ct. at 2252).   We therefore vacate the judgment of the district court and remand the case to permit the district court to resentence Penn for violation of his probation to a term of incarceration not less than four months and not in excess of 12 months.

25
VACATED AND REMANDED.

*
 It is interesting to note that the district court judge had the discretion to find the defendant Alli guilty of possession of a controlled substance and avail himself of the 1988 Amendment.  The Sentencing Guidelines leave to the district court the determination of whether evidence of drug usage established solely by laboratory analysis constitutes "possession of a controlled substance" as set forth in the statutes.  U.S.S.G. Sec. 7B1.4, application note 5.  The district court did not make such determination of fact, however, and instead elected to proceed under the general probation violation provision in subsection (a)(2)


151 Wis.2d 198 (1989)
445 N.W.2d 319
STATE of Wisconsin, Plaintiff-Appellant,
v.
Leonard MURDOCK, Defendant-Respondent.[]
No. 88-0918-CR.
Court of Appeals of Wisconsin.
Submitted on briefs October 18, 1988.
Decided May 11, 1989.
*199 For the plaintiff-appellant the cause was submitted on the briefs of Donald J. Hanaway, attorney general, and Barry M. Levenson, assistant attorney general.
For the defendant-respondent the cause was submitted on the brief of David M. Sweet, of Milwaukee.
Before Moser, P.J., Sullivan and Fine, JJ.
[1]
FINE, J.
This case presents a significant search and seizure issue: what is the scope of a permissible warrantless search of premises when the search is incident to a lawful arrest? Since the issue involves the application of constitutional principles to undisputed facts, we decide this matter de novo. See State v. Fry, 131 Wis. 2d 153, 171, 175, 388 N.W.2d 565, 573, cert. denied, 479 U.S. 989 (1986).[1]
*200 I.
Four law enforcement officers went to a rooming house where Leonard Murdock lived to arrest him on three warrants. They found Murdock in a room with two other men. The room was small, approximately ten by twelve feet or twelve by fourteen feet. Connected to the room was a pantry-type closet, which was approximately six by four feet. There was either no door to the pantry-closet or it was open.
Murdock and the other men were ordered to the floor, and were handcuffed with their hands behind their backs. After the men were handcuffed, one of the officers saw a .22 caliber round on a shelf in the pantry. There were drawers underneath the shelf, and the officer opened them looking for a weapon. The officer testified at the suppression hearing that before they went into the rooming house to arrest Murdock, one of the other officers had explained that Murdock was suspected of having "waived a gun at a witness or someone and he was supposedly armed."
A short-barreled rifle was found in one of the drawers. At the time the rifle was found, Murdock was laying on the ground in front of the pantry, approximately three to four feet from the drawer and, according to the trial court, the officers had the situation under "complete control," there being "no resistance."
Murdock was charged with the felony of possessing a short-barreled rifle in violation of sec. 941.28, Stats. Although not challenging the lawfulness of his arrest, Murdock filed a motion to suppress the rifle. The trial court granted the motion and dismissed the case. We reverse.

*201 II.
[2]
This case is governed by the search and seizure provisions in the United States Constitution, the Wisconsin Constitution, and the Wisconsin statutes. The Fourth Amendment to the United States Constitution provides:
The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated, and no Warrants shall issue, but upon probable cause, supported by Oath or affirmation, and particularly describing the place to be searched, and the persons or things to be seized.
Article I, section 11 of the Wisconsin Constitution is substantially the same:
The right of the people to be secure in their persons, houses, papers, and effects against unreasonable searches and seizures shall not be violated; and no warrant shall issue but upon probable cause, supported by oath or affirmation, and particularly describing the place to be searched and the persons or things to be seized.
Section 968.11, Stats., provides:
When a lawful arrest is made, a law enforcement officer may reasonably search the person arrested and an area within such person's immediate presence for the purpose of:
(1) Protecting the officer from attack;
(2) Preventing the person from escaping;
(3) Discovering and seizing the fruits of the crime; or

*202 (4) Discovering and seizing any instruments, articles or things which may have been used in the commission of, or which may constitute evidence of, the offense.
In the context of an analysis of what is the permissible scope of a search incident to a lawful arrest, these constitutional and statutory provisions are consistent with one another and are coextensive. See Fry, 131 Wis. 2d at 165-168, 171-176, 388 N.W.2d at 570-572, 573-575. Accordingly, to paraphrase Gertrude Stein's famous aphorism about roses, what is lawful under the Fourth Amendment to the United States Constitution, is lawful under Article I, section 11 of the Wisconsin Constitution, is lawful under sec. 968.11, Stats. See ibid.
[3]
A warrantless search incident to a lawful arrest is permissible for two reasons: (1) to prevent the person being arrested from having access to weapons that might endanger the arresting officer or permit the suspect's escape, and (2) to prevent the person being arrested from concealing or destroying evidence. Chimel v. California, 395 U.S. 752, 762-763 (1969). Thus, Chimel recognized that there is "ample justification" for officers who are lawfully arresting a suspect to search "the area from within which he might gain possession of a weapon or destructible evidence." Id. at 763.
Chimel concerned the full-scale search of a burglary suspect's home. The arresting officers "looked through the entire three-bedroom house, including the attic, the garage, and a small workshop." Id. at 754. In striking down the search as an unreasonable invasion of Chimel's Fourth Amendment rights, the Supreme Court overturned a line of cases that lower courts had interpreted as authorizing almost any search that was incident to a lawful arrest. Id. at 755-768. Chimel adopted a case-by-case *203 approach to determine whether a particular search was reasonable under the Fourth Amendment. Id. at 765. Twelve years later, in New York v. Belton, 453 U.S. 454 (1981), the Supreme Courtin the context of an automobile searchrejected this case-by-case approach in favor of a clear-cut, bright-line rule. Significantly, both Chimel and Belton were written by the same person, Justice Potter Stewart.
In Belton, a police officer stopped an automobile he saw speeding. After he stopped the car, the officer reasonably suspected the driver and passengers of illegally possessing marijuana. He ordered them out of the car, placed them under arrest, patted them down, and "`split them up into four separate areas of the Thruway,'" while he searched the car. Belton, 453 U.S. at 455-457. The officer found Belton's leather jacket lying on the back seat. Unzipping one of the jacket's pockets, the officer discovered cocaine. Id. at 456.
New York's highest court threw out the search on the ground that a "`warrantless search of zippered pockets of an unaccessible jacket may not be upheld as a search incident to a lawful arrest where there is no longer any danger that the arrestee or a confederate might gain access to the article.'" Ibid. The United States Supreme Court reversed, holding that since the jacket "was `within the arrestee's immediate control' within the meaning of" Chimel, the search was "incident to a lawful custodial arrest, and it did not violate the Fourth and Fourteenth Amendments." Id. at 462-463.
Belton went beyond determining whether the officer's search of the jacket was reasonable under the specific circumstances of that case. It crafted a bright-line rule as to what constitutes an "area from within which [the person being arrested] might gain possession of a weapon or destructible evidence" to pass muster *204 under Chimel, 395 U.S. at 763, irrespective of whether the area searched was actually accessible:
[W]e hold that when a policeman has made a lawful custodial arrest of the occupant of an automobile, he may, as a contemporaneous incident of that arrest, search the passenger compartment of that automobile.
It follows from this conclusion that the police may also examine the contents of any containers found within the passenger compartment, for if the passenger compartment is within reach of the arrestee, so also will containers in it be within his reach.
Belton, 453 U.S. at 460 (footnotes omitted). Significantly, as two of the dissenting justices pointed out, Belton and his friends were arrested "after they had been removed from the car, patted down, and separated" so that at the time of the arrest and subsequent search "none of them could have reached the jackets that had been left on the back seat of the car." Id. at 466 (Brennan, J., dissenting) (emphasis in original). They thus characterized the Court's decision as "for the first time grant[ing] police officers authority to conduct a warrantless `area' search under circumstances where there is no chance that the arrestee `might gain possession of a weapon or destructible evidence.'" Id. at 468 (quoting Chimel, 395 U.S. at 763). In essence, however, Belton merely applied what Chimel had already recognized, namely that a search incident to a lawful arrest "must constitutionally be confined to the area within the arrestee's reach at the time of his arrest." Vale v. Louisiana, 399 U.S. 30, 33 (1970) (emphasis supplied).[2] Whether the area was within the arrestee's reach at the *205 time of the search, as opposed to the time of the arrest, is not material. Belton; Fry.
Fry was arrested for the crime of trespass. Fry, 131 Wis. 2d at 157-58, 388 N.W.2d at 567. The arresting officers had been told by another law enforcement agency that Fry was known to carry a gun in the glove compartment of his car and that any officer seeing him "should use caution." Id. at 157, 388 N.W.2d at 567. After his arrest, Fry and a passenger from Fry's automobile were handcuffed and placed in separate squad cars. Id. at 186, 388 N.W.2d at 579 (Bablitch, J., dissenting). The officers then searched Fry's car while Fry and his passenger were being guarded by other officers. A weapon was found in the locked glove compartment. Ibid.
Fry upheld the search and relied on Belton's bright-line rule for its analysis under the United States Constitution, the Wisconsin Constitution, and sec. 968.11, Stats. Fry, 131 Wis. 2d at 165-68, 171-176, 388 N.W.2d at 570-572, 573-575. As Fry explained:
The Belton rules is a simple and reasonable rule governing the search of an automobile after an arrest is made. A police officer may assume under Belton that the interior of an automobile is within the reach of a defendant when the defendant is still at the scene of an arrest, but the defendant is not physically in the vehicle. We cannot say as a matter of fact in all cases that a defendant never could regain access to the interior of an automobile after initially leaving the vehicle. Thus, we would seriously undermine police security if we adopted as a matter of constitutional fact the rule that the interior of an automobile never is within the reach of a suspect who is outside the vehicle at the arrest scene; such a rule would prohibit all automobile searches as an incident to arrest, unless the defendant was allowed to remain in the *206 automobile during the search, which increases the risk of danger to the officer. We cannot subscribe to such a limitation on the search incident to arrest rule.
Id. at 174-175, 388 N.W.2d at 574. The dissenting justices in Fry echoed, in part, the concerns expressed by the dissenting justices in Belton. See id. at 185, 187-188, 388 N.W.2d at 579, 580 (Bablitch, J., dissenting).
[4]
Belton saw the need for a bright-line rule to guide police officers who are forced to make split-second assessments at the risk of their lives. See Belton, 453 U.S. at 458. In this regard, it followed an earlier case, United States v. Robinson, 414 U.S. 218 (1973), where a similar need prompted the Court to approve the full search of the arrestee's person. As Robinson explained:
A police officer's determination as to how and where to search the person of a suspect whom he has arrested is necessarily a quick ad hoc judgment which the Fourth Amendment does not require to be broken down in each instance into an analysis of each step in the search. The authority to search the person incident to a lawful custodial arrest, while based upon the need to disarm and to discover evidence, does not depend on what a court may later decide was the probability in a particular arrest situation that weapons or evidence would in fact be found upon the person of the suspect.

Robinson, 414 U.S. at 235. Belton expanded on Robinson's theme:
When a person cannot know how a court will apply a settled principle to a recurring factual situation, that person cannot know the scope of his constitutional *207 protection, nor can a policeman know the scope of his authority.
Belton, 453 U.S. at 459-460. We agree with the State that there is the same need for a bright-line rule in premises searches. Simply put, the validity of a search incident to a lawful arrest must not depend on a leisurely, retrospective, analysis of countless factors, the assessment of which must be made in an instant by officers on the line. We therefore follow the clear path cut by Chimel, Robinson, Belton and Fry and hold that a warrantless premises search incident to a lawful arrest is valid as long as it is limited to the area generally within the "arrestee's reach at the time of his arrest,"[3] that is, the room in which the arrest is made, including a contiguous open area such as a closet or pantry, and the arresting officers have reasonable grounds to conclude that weapons or destructible evidence might be present in that room.[4] Since the search here satisfies both prongs of this test, it must be upheld.
The rule we adopt fully conforms with the teachings of Belton and Fry.[5] See United States v. Silva, 745 F.2d *208 840, 847 (4th Cir. 1984), cert. denied, 470 U.S. 1031 (1985) (lawful arrest in motel room justified warrantless search of nearby locked zippered bag even though arrestees were handcuffed behind their backs at the time); United States v. Palumbo, 735 F.2d 1095, 1097 (8th Cir.), cert. denied, 469 U.S. 934 (1984) (lawful arrest in hotel room justified warrantless search behind dresser drawer even though area might have been inaccessible to arrestee at the time of the search).[6]Compare Stackhouse v. State, 468 A.2d 333, 337-338 (Md. 1983), which declined to extend Belton to dwellings, with Foster v. State, 464 A.2d 986, 1000-1001 (Md. 1983), cert. denied, 464 U.S. 1073 (1984), which upheld the warrantless search of a partially open nightstand drawer even though the suspect was handcuffed behind her back at the time of the arrest. Significantly, the majority in Stackhouse relied on one of the two dissenting opinions in Belton. See Stackhouse, 468 A.2d at 338. Recognizing that the room in which a person is arrested generally encompasses the extent of the area within that person's reach, weas did Belton and Fryavoid the uncertainty of a case-by-case judicial sifting and weighing of *209 myriad matters (size of room, place in room where person arrested, proximity of search to place of arrest, the degree of stabilization, etc.). As already noted, law enforcement officers must instantaneously process these matters at a time of stress, and often at great personal risk.
The United States Supreme Court has reminded us that "[e]very arrest must be presumed to present a risk of danger to the arresting officer." Washington v. Chrisman, 455 U.S. 1, 7 (1982).[7] It is appropriate to balance this danger, and the danger that evidence will be destroyed, against the privacy rights we all enjoy. See New Jersey v. Bruzzese, 463 A.2d 320, 332-333 (N.J. 1983), cert. denied, 465 U.S. 1030 (1984). "`[P]hysical entry of the home is the chief evil against which the wording of the Fourth Amendment is directed.'" Payton v. New York, 445 U.S. 573, 585 (1980) (quoting United States v. United States District Court, 407 U.S. 297, 313 [1972]). As Belton notes, "the lawful custodial arrest justifies *210 the infringement of any [Fourth Amendment] privacy interest" caused by the search. See Belton, 453 U.S. at 461. By limiting the search to the zone of potential danger, recognized by both Belton, 453 U.S. at 460, and Fry, 131 Wis.2d at 174, 388 N.W.2d at 574, we heed the Supreme Court's forceful reminder that the Fourth Amendment was adopted by Framers well aware of the outrages perpetrated by the king's myrmidons under the aegis of the hated general warrants and writs of assistance. Payton, 445 U.S. at 583-584 n. 21. See Chimel, 395 U.S. at 760-761. We also heed the need for effective and safe law enforcement.[8]
*211 By the Court.Order reversed.
MOSER, P.J. (dissenting).
To begin with my reasons for dissent, I first note that the majority opinion overlooks the historical facts found by the trial court. Therefore, they have to be explicated here. On September 30, 1987, Milwaukee detective deputy sheriff Edmund Banaszak (Banaszak) was assigned three arrest warrants for Murdock. Two warrants were for possession of controlled substances, and one was for battery while armed with a knife. Banaszak and three other detectives assigned to arrest Murdock were also told that Murdock had previously pointed a weapon at a woman.
Banaszak and his three colleagues went to the Milwaukee rooming house where Murdock lived. After arriving at the rooming house, the officers were advised that Murdock had rented room "2," but was at that time moving into room "15," which was adjacent to room "2" and joined by a doorway.[1] At the suppression hearing, Banaszak stated that he knocked on the door to room "15," announced the presence of the police, heard movement within the room, and waited from ten to fifteen minutes for a response. When the door finally opened, he and his three colleagues walked in with their weapons drawn. The dimensions of the room were either ten feet by twelve feet or twelve feet by fourteen feet. Banaszak ordered the three people in the room to "hit the floor." They complied immediately, and while lying on their stomachs, their hands were handcuffed behind their *212 backs. Banaszak handcuffed Murdock, and while still bending over Murdock, observed detective Eugene Welch (Welch) holding a .22 caliber bullet which Welch found on a shelf in a small pantry. The pantry area was adjacent to the room, and was located three to four feet from Murdock's head as he lay face down and handcuffed on the floor. At that time, Banaszak also saw Welch open the middle drawer of a set of drawers built into the pantry wall, and extract a sawed-off rifle.
On cross-examination at the suppression hearing, Banaszak testified that Murdock's room was stabilized before the rifle was found. His testimony was as follows:
Q Mr. Banaszak, you testified that you have been a member of the Sheriff's Department for approximately 21 years; is that correct?
A Twenty-two.
Q Twenty-two years. Have you received training in proper arrest procedures?
A Yes.
Q Would it be correct to say that the first matter to be taken care of in arresting someone is to ensure that that person being arrested is subdued and cannot flee?
A No.
Q What would be the first step in that procedure?
A Stabilizing the area.
Q What do you mean by stabilizing the area?
A Making sure everybody I observed there [sic] actions and that they're not in any position to injure anyone.
Q Did you take that step in this case?
A Yes.
*213 Detective Welch testified similarly as follows:
Q So, every single person in that room had been more or less placed under control with handcuffs behind their backs and they were laying on the floor?
A Yes.
The detectives provided further uncontested testimony which established that throughout the arrest there was no struggle, no evasive action taken, no resistance and no escape attempts by anyone. In short, Murdock and his two guests immediately cooperated with every police request.
The trial court found that all of the above was historical fact, and particularly stressed that Murdock and his two guests were face down, with their hands handcuffed behind their backs, when Welch found the bullet, proceeded to rummage through the drawers in the pantry, and ultimately removed the sawed-off rifle. Furthermore, Banaszak was bent over Murdock's prone body, and Welch was positioned between Murdock and the weapon.
The trial court noted that while the officers had a right to be on the premises to make a lawful arrest and to seize the bullet, they did not have the right to make a further search on the pretense that because Murdock's head was approximately three to four feet from the pantry area, they feared for their safety. The trial court also noted that the officers had the situation under complete control, that the area was stabilized, and that there was no resistance. It therefore held that the search was unreasonable and unwarranted. In so doing, the court rejected the State's argument that it accept as a bright-line rule that a search of a home is an extension of the law, as authorized by the United States Supreme Court *214 in New York v. Belton,[2] and the Wisconsin Supreme Court in State v. Fry,[3] involving constitutionally valid automobile searches.
The majority opinion here rejected the trial court's determination that the search was illegal, and held that the search was valid because it was a logical extension of Belton and Fry. I disagree because the majority has disregarded the trial court's findings of historical facts, and has literally created its own. Also, Belton and Fry involved automobile searches which were incident to arrest and where the areas searched were within the control of the arrestee. Those cases did not involve searches of homes, and thus their extension to this case is limited.
In reviewing an order suppressing evidence, the trial court's findings of evidentiary or historical facts must be upheld unless they are against the great weight and clear preponderance of the evidence.[4] I believe the majority opinion ignores the uncontroverted historical facts obtained from the testimony of Banaszak and Welch. When they entered Murdock's home, all four detectives had their weapons drawn. Banaszak ordered Murdock and his two guests to the floor. They immediately complied. After the three men had their hands handcuffed behind them, and were lying facedown on the floor, and *215 while Banaszak was leaning over Murdock's prone body, Welch found a bullet on a shelf in the pantry. Welch was standing in the pantry, between Murdock and the drawers he was opening. The trial court found that the detectives had "stabilized the area" by making sure that Murdock and his guests were not in any position to injure any one, and that every person in the room was placed under control.
It is on these historical facts that the trial court concluded that the detectives were in control of the area, that Murdock could not secure the weapon, and that therefore the search was constitutionally unreasonable. Whether a search is reasonable is a question of constitutional fact.[5] Such findings of constitutional fact are reviewed by appellate courts independently.[6] On review of these constitutional fact findings, an appellate court cannot ignore the trial court's findings of historical facts. Rather, we must apply constitutional principles to the facts as found.[7] However, the majority here has ignored the trial court's findings of historical facts. In addition, the majority has adopted a bright-line rule relative to home searches, and determined that the search of Murdock's home was reasonable because every arrest must be presumed to present a risk of danger to the arresting officer(s). In support of this presumption, the majority cites to a federal uniform crime report which suggests that during 1987, twenty-seven police officers were killed in arrest situations. Those deaths are tragic, but they are not presented in the record of the case before this court, and cannot be used to support a rejection of the trial *216 court's historical and constitutional fact finding. Under the facts of this case, Murdock could not secure the weapon found by Welch, and thus there was an unwarranted, unreasonable search through the drawers in the pantry of his home.
I further reject the majority's finding as constitutional fact that the unwarranted search was reasonable because of the possibility that the evidence might be destroyed. There is absolutely no historical evidence in the record, argument to the trial court, ruling by the trial court or argument in the appellate briefs tendered to this court on the issue of destruction of evidence. Such a finding of constitutional fact by this court has no merit.
The United States Supreme Court has held that there are two justifications for an unwarranted search of a home incident to a lawful arrest: (1) if there is a need to remove any weapons that the arrestee might try to use to resist arrest, or (2) to prevent the destruction or concealment of evidence.[8] The Supreme Court distinguished the necessity and inherent reasonableness of searching an arrested person, or an area that the arrestee might reach in order to grab a weapon, by stating that there is
no comparable justification, however, for routinely searching any room other than that in which an arrest occursor, for that matter, for searching through all the desk drawers or other closed or concealed areas in that room itself. Such searches, in the absence of well-recognized exceptions, may be made only under the authority of a search warrant.[9]
The Court also held that trial court decisions regarding claimed illegal searches incident to a lawful arrest must be approached on a case-by-case basis to determine if a *217 search is reasonable under the fourth amendment.[10] This test is still the law in this country concerning the validity of a search of a home incident to a lawful arrest.[11] This court has no authority to change existing law, and we are bound by the mandates of the Supreme Court. The fact of the matter is that the majority opinion is not a logical extension of the United States Supreme Court's decision in Chimel, as construed in Belton and Fry. Instead, the majority opinion arrogates to itself the power to reverse Chimel. No federal or state lower courts can reject a United States Supreme Court construction of the federal Constitution; it is the duty of inferior courts to administer the Constitution as construed by our highest court.[12]
Thus, after finding historical facts, trial courts must then determine whether arresting officers properly searched an arrest scene. If an item is found pursuant to such a search, a trial court must ascertain whether the search incident to the arrest was valid because the item found, such as the weapon here, was in an area accessible to the arrestee, and that the arrestee might grab it in an attempt to resist arrest. Under the historical facts of this case, no such determination can be made.
I thus conclude that the majority opinion finds constitutional facts that cannot be derived from the historical facts. I differ, and would hold that the trial court's determination that the search of the pantry drawers was unreasonable was correct, because under the fourth amendment, one's home is entitled to special dignity and sanctity, and fundamentally, searches such as this are *218 per se unreasonable.[13] Furthermore, I would affirm the trial court's finding as historical fact that the weapon found was in an area which Murdock could not possibly access, thus the search was unreasonable. I would therefore affirm the trial court's decision.
NOTES
[]  Petition to review granted.
[1]  Contrary to the dissent's assertions, Dissent at pages 211, 214-215 and 217, we do not ignore but, rather, adopt the trial court's findings of historical facts, about which there is no dispute.
[2]  Vale, like Chimel and Belton, was also written by Justice Stewart.
[3]  Vale, 399 U.S. at 33, interpreting Chimel, 395 U.S. at 763.
[4]  We mention "destructible evidence" in conformity with Chimel, 395 U.S. at 763; Belton, 453 U.S. at 460, and Fry, 131 Wis. 2d at 184, 388 N.W.2d at 578 as well as sec. 968.11(3), (4), Stats. It is not meant to assert, as contended by the dissent, Dissent at 216, that this case involved evidence that could be destroyed. It obviously did not. Neither did Fry.
[5]  The dissent here misreads both Belton and Fry when it states that those cases "involved automobile searches which were incident to arrest and where the areas searched were within the control of the arrestee." Dissent at 214 (emphasis supplied). As noted in this opinion, the arrestees in Belton were separated from the automobile at the time of the search and, indeed, a dissent in Belton pointed out that none of the men arrested "could have reached the jackets." Belton, 453 U.S. at 466. By the same token, Fry and his passenger were not only out of Fry's automobile when it was searched but were, indeed, sitting handcuffed in separate squad cars guarded by other officers. Fry, 131 Wis. 2d at 186, 388 N.W.2d at 579 (Bablitch, J., dissenting). The situations in both Belton and Fry were thus "stabilized," see Dissent at 212-213, 215, at the time of the respective searches.
[6]  One commentator, not sympathetic to the Belton "bright-line" rule, recognizes that its application to premises "would most likely be in the form of one of the intermediate positions found wanting in Chimela one-room rule or, more likely, a rule based on the extent of the person's control just before his arrest." 2 W.R. La Faye, Search and Seizure, sec. 6.3 at 635 (2d ed. 1987) (emphasis in original).
[7]  During 1987, 27 officers were slain during arrest situations, accounting for more line-of-duty deaths than any other circumstance," Uniform Crime ReportsLaw Enforcement Officers Killed and Assaulted p. 3 (U.S. Dept. of Justice 1987). Eighteen police officers were killed in arrest situations during the first six months of 1988. Release, U.S. Dept. of Justice. Contrary to the dissent's assertion, Dissent at 215-216, we may acknowledge the tragedies, both past and potential, inherent in these figures though they are not part of the appellate record in this case. As explained by the Federal Advisory Committee's note to Rule 201 of the Federal Rules of Evidence, this type of information may be used by trial and appellate courts as an aid in the ascertainment of legal principles, 59 Wis.2d at R26-R27, because that task "should be guided by experience and understanding." Davis, Judicial Notice, 55 Col. L. Rev. 945, 949 (1955) quoted in the Judicial Council Committee's note to Rule 902.01, Stats., 59 Wis. 2d at R25.
[8]  Contrary to the dissent's assertion, Belton does not stand for the proposition that the Chimel case-by-case approach "is still the law in this country concerning the validity of a search of a home incident to a lawful arrest." Dissent at 217. Indeed, as Beltonstates, "while the Court in Chimel held that the police could not search all the drawers in an arrestee's house simply because the police had arrested him at home, the Court noted that drawers within an arrestee's reach could be searched because of the danger their contents might pose to the police." Belton, 453 at 461 (citing Chimel, 395 U.S. at 763). Belton abandoned Chimel's case-by-case evaluation of whether, in fact, the searched areas were in "an arrestee's reach" in favor of a bright-line rule that does not turn on whether the area was actually accessible or not. It neither extended, nor declined to extend, the bright-line rule it announced to searches of premises. The issue was simply not before the Court. Rather than "revers[ing] Chimel," see Dissent at 217, this court follows Belton and Fry, so that police officers who must make split-second decisions need not try to guess whether some court might later consider the situation "stabilized." See Dissent at pages 212-213, 215.

We also disagree with the implication in the dissenting opinion that this decision is a license for unbridled search; it is not. The bright-line rule here, as in Belton/Fry, is narrow and specific. See page 207, supra.
[1]  See State v. Warfield, 184 Wis. 56, 60, 198 N.W. 854, 856 (1924). A person's rented room in a rooming house is his/her home for purposes of determining whether a reasonable or unreasonable search and seizure has taken place under the Wisconsin Constitution, art. I, sec. 11, and the fourth amendment of the United States Constitution.
[2]  453 U.S. 454 (1981). The Supreme Court reversed the New York State Court of Appeals, and held that it was proper for police to search an automobile glove compartment while the defendant stood outside the automobile.
[3]  131 Wis. 2d 153, 388 N.W.2d 565 (1986). Our supreme court extended Belton to allow a police search of an automobile glove compartment when the defendant was out of the automobile, handcuffed and sitting in a police automobile.
[4]  State v. Guzy, 139 Wis. 2d 663, 671, 407 N.W.2d 548, 552 (1987).
[5]  See State v. Flakes, 140 Wis. 2d 411, 426, 410 N.W.2d 614, 620 (Ct. App. 1987).
[6]  Fry, 131 Wis. 2d at 171, 388 N.W.2d at 574.
[7]  State v. Owens, 148 Wis. 2d 922, 931, 436 N.W.2d 869, 873 (1989).
[8]  Chimel v. California, 395 U.S. 752, 763 (1969).
[9]  Id.
[10]  Id. at 765.
[11]  See Belton, 453 U.S. at 460.
[12]  See South Carolina v. Bailey, 289 U.S. 412, 420 (1933).
[13]  See Laasch v. State, 84 Wis. 2d 587, 594, 267 N.W.2d 278, 283 (1978).


714 F.2d 118
U. S.v.Kouhestanian
82-1227, 82-1231
UNITED STATES COURT OF APPEALS Second Circuit
11/16/82

1
S.D.N.Y.

AFFIRMED