State of Minnesota, Respondent,

This opinion will be unpublished and
may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (2016).

STATE OF MINNESOTA
IN COURT OF APPEALS
A17-0292

State of Minnesota,
Respondent,

vs.

Mark John Mimbach,
Appellant.

Filed August 7, 2017
Affirmed
Florey, Judge

Ramsey County District Court
File No. 62-CR-15-8105

Lori Swanson, Attorney General, St. Paul, Minnesota; and

John J. Choi, Ramsey County Attorney, Thomas B. Hatch, Peter Marker, Assistant County
Attorneys, St. Paul, Minnesota (for respondent)

David W. Buchin, Buchin Law Office, St. Cloud, Minnesota (for appellant)

Considered and decided by Halbrooks, Presiding Judge; Reyes, Judge; and Florey,
Judge.
U N P U B L I S H E D O P I N I O N
FLOREY, Judge
Appellant challenges the district court’ s restitution order following his conviction
of, and sentence for, failing to file tax returns for the tax years 2009-2013. Appellant argues
that the district court (1) abused its disc retion by basing its restitution award on an
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erroneous valuation of his trailer business a nd (2) erred by concluding that appellant was
not a professional gambler for purposes of Minnesota’s Alternative Minimum Tax (AMT).
We affirm.
FACTS
Appellant Mark Mimbach pleaded guilty to fi ve counts of failure to file tax returns
for the tax years 2009-2013. At sentencing, the district court denied appellant’s motion for
a dispositional departure and im posed a 23-month exec uted sentence. The district court
also ordered restitution in the amount of $340,580.27.
Appellant challenged the restitution or der, claiming that his accountant, M.D.,
determined that he owed only $2,912 in taxe s for the tax years 2009-2013. Appellant’s
position was based on amended tax returns, which he filed on August 1, 2016, two weeks
before sentencing. The 2016 amended tax re turns drastically reduced appellant’s tax
liability for the tax years 2009-2013, from $165,913, to zero. The reduction in appellant’s
tax liability stemmed from two sources: (1) earnings generated from appellant’s operation
of a trailer-sales business and (2) appellant’s gambling endeavors. The 2016 amended tax
returns reflected that the beginning and ending inventory levels for appellant’s trailer-sales
business were changed to show a dramatic decline in the inventory from the beginning of
2009, to the end of 2013, which reduced appellant’s tax liability to zero. The amended tax
returns also recharacterized appellant’s gambling activity as a trade or business, instead of
a recreational activity, which allowed appellan t to deduct his losses under Minnesota’s
AMT, thereby reducing his tax liability to zero.
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Shortly before the restitution hearing, ap pellant’s accountant provided the state with
additional information regarding appellant’s trailer business. Based on this information,
the state recalculated appellant’s restitution obligation and determined that appellant’s total
obligation was $254,586.04.
Following the restitution hear ing, the district court fo und that, because appellant
kept no records of “business inventory over time and did not maintain in the normal course
of business records of transactions subject to taxation,” the Minnesota Department of
Revenue (DOR) was required to assume that appellant’s “invent ory did not change
significantly during the subject years, resulti ng in a cost of goods sold reflective of
inventory purchases and other miscellaneous expenses.” The district court then found that
the DOR “engaged in a meticulous, conscientious review of available documents, piecing
together and reconstructing information [appellant] should have maintained in the regular
course of business to calculate revenue and expenses associated with [appellant’s] business
operations.” The district court also found that the inventory representations offered by
appellant are “pure speculation and conjecture and lack credibility.” Therefore, the district
court concluded that the state “prove[d] by a preponderance of the evidence the propriety
of the requested restitution associated with [appellant’s] trailer business.”
The district court also rejected appellant’s claim that he is a professional gambler.
The district court found that appellant’s “representations characterizing his gambling
activity as a trade or business are not credible and do not negate the preponderance of the
evidence showing that [appellant] engaged in recreational gambling.” Thus, the district
court concluded that appellant could not deduct his gambling losses under the AMT. The
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district court then set appellant’s restituti on obligation at $254,586 .04. This appeal
followed.
D E C I S I O N
District courts have broad di scretion in awarding restitution. State v. Tenerelli, 598
N.W.2d 668, 671 (Minn. 1999). Unless that di scretion is abused, a restitution order will
not be reversed. State v. Andersen, 871 N.W.2d 910, 913 (Minn. 2015).
I.
“The primary purpose of restitution is to restore crime victims to the same financial
position they were in before the crime.” State v. Johnson, 851 N.W.2d 60, 65 (Minn. 2014)
(quotation omitted). The district court “must have some fact ual basis” for its restitution
determination. State v. Gaiovnik, 794 N.W.2d 643, 651 (Minn. 2011); see State v. Fader,
358 N.W.2d 42, 48 (Minn. 1984) (remanding where the record did not provide factual basis
to support amount of restitution ordered). The record itself can provide a factual basis for
a restitution award. Fader, 358 N.W.2d at 48; see also Gaiovnik, 794 N.W.2d at 651. “The
district court’s factual findings will not be disturbed unless th ey are clearly erroneous.”
Andersen, 871 N.W.2d at 913. The state bear s the ultimate burde n of proving the
“propriety of the restitution” by a preponderance of the evidence. State v. Thole , 614
N.W.2d 231, 235 (Minn. App. 2000).
Appellant challenges several of the district court’s findings related to his tax liability
for his trailer business for the tax years 2009-2013. Appellant contends that because these
findings are not supported by th e record, the district court abused its discretion by
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concluding that the state proved, by a prep onderance of the evidence, appellant’s tax
liability for his trailer business for those years.
Appellant first challenges the district c ourt’s finding that M.D. “was informed by
an unidentified source that at some point , perhaps in 20 03, the value of [appellant’s]
business inventory was approximately $830,000.” Appellant contends that this is “not an
accurate description of M.D.’s testimony” because M.D. tes tified that he learned the
information from appellant’s previous accountant. But M.D. never provided the name of
appellant’s previous accountant from whom he received his information. Moreover, M.D.
testified that he never saw “a document that showed that an inventory had been taken.”
Instead, M.D. testified that he received his information by talking with the previous
accountant. Because M.D. neve r provided the name of th e “previous accountant” and
admitted that he never saw a document showing that an inventory of appellant’s business
had been taken, the source of M.D.’s info rmation was not identified in the restitution
proceedings. Therefore, the district court’s finding is supported by the record.
Appellant also challenges the district cour t’s findings that (1) “[n]o records exist
showing [appellant’s trailer] inventory valuation, or how or when the inventory depleted,
or any fluctuations in invent ory over time, or any other in formation associated with the
inventory” and (2) M.D. “assumed that an in ventory valued at $830,000 existed in 2003,
guessed at when inventory may have depleted, and conveniently assigned valuations based
upon those assumptions and guesstimates to a rrive at the conclusion that [appellant] had
no tax liability for this trailer business betw een 2009 and 2013.” Ap pellant claims that
these findings “misstate” and conflict with M.D.’s testimony pertaining to how M.D.
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calculated appellant’s inventor y valuation. But appellant’s argument assumes that the
district court found M.D.’s testimony to be credible, when the dist rict court repeatedly
stated that M.D.’s testimony was not credible and even referred to M.D.’s calculations as
a “giant leap[] in logic [that ha s] no basis in fact.” It is well-settled that the fact-finder is
in the best position to assess the credibility of witnesses, and the reviewing court defers to
the fact-finder’s credibility determinations. See State v. Al-Naseer, 788 N.W.2d 469, 473
(Minn. 2010). If believed, the evidence presented by the st ate proves appellant’s tax
liability for his trailer busine ss for the relevant tax years by a preponderance of the
evidence. In finding the stat e’s evidence credib le, and any conflicting evidence to be
incredible, the district court thoroughly explained its cred ibility determinations, and we
defer to these determinations. See id. Accordingly, the district court did not abuse its
discretion in determining appellant’s tax liab ility for his trailer business for the tax years
2009-2013.
II.
Appellant also challenges the district c ourt’s determination that he is not a
professional gambler. The Minnesota AMT, like the federal AMT, was created to reduce
the ability of certain individu als to avoid payment of indi vidual income tax by using
numerous tax deductions or exemptions available under the regular tax formula. Busch v.
Comm’r of Revenue , 713 N.W.2d 337, 343 (Minn. 20 06). Under Minnesota law, a
Minnesota taxpayer is required to calculate the amount of his or her Minnesota income tax
each year under both the regular Minnesota formula and the AMT formula, pay the tax due
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under the regular formula, and then pay an additional tax on the amount of the tax computed
under the AMT minus the regular tax. Minn. Stat. § 290.091, subd. 1 (2016).
Under Minnesota regular tax formulas, a taxpayer may claim an itemized deduction
for gambling losses to offset winnings. See Minn. Stat. § 290.01, subd. 19 (2016). But,
except in limited circumstances, a taxpaye r may not deduct gambling losses when
calculating the Minnesota AMT. Minn. Stat . § 290.091, subd. 2 (2016). Thus, in
computing the Minnesota AMT, “a taxpayer’s gambling winnings are included in taxable
income, but the taxpayer cannot deduct gambling losses.” Busch, 713 N.W.2d at 344.
The exception to the rule that a taxpa yer may not deduct gambling losses under the
Minnesota AMT is the trad e or business deduction. See Minn. Stat. § 290.091, subd. 2.
Under this exception, the Minnesota AMT allows trade or business expenses to be deducted
from taxable income. Busch, 713 N.W.2d at 344. Accordingly, “if a person is engaged in
the trade or business of gambling, he or she would be able to deduct his or her gambling
losses from adjusted gross income as trade or business e xpenses for the purposes of both
federal and Minnesota AMT.” Id.
In considering whether and when gambling constitutes a trade or business under the
Minnesota AMT, our supreme court has cons idered the following nine nonexclusive
factors: (1) whether the ac tivity is carried on in a busin ess-like manner and the taxpayer
maintains complete and accurate books and records on the activity; (2) the expertise of the
taxpayer or his advisors; (3) the time and e ffort expended by the taxpayer in carrying on
the activity; (4) the expectation that assets used in the activ ity may appreciate in value;
(5) the success of the taxpayer in carrying on other similar or dissimilar activities; (6) the
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taxpayer’s history of income or losses with respect to the activ ity; (7) the amount of
occasional profits, if any, whic h are earned; (8) the financial status of the taxpayer; and
(9) elements of personal pleasure or recreation. Id. at 347.
Here, in considering these nine factors, th e district court found that (1) appellant did
not “maintain complete and accurate books or records” associat ed with his gambling
endeavors, such as “ledgers, receipts, separate bank accounts or credit cards,” and did not
maintain records of his expend itures, such as meals, lodging, mileage, or other expenses;
(2) although he “made up” a “mysterious [gambling] scheme,” appellant is “not a gambling
expert”; (3) appellant’s time and effort associated with his gambling activity was “sporadic
and inconsistent,” and his la ck of accurate records prevented the court from determining
the amount of time appellant actually gambled; (4) appellant never generated a net profit
from his gambling activities between 2009-2013, and instead, derived his livelihood from
his trailer business; and (5) at the sentencing hearing, appellant “characterized himself not
as a professional gambler but instead as a ‘v ery avid gambler,’” wo rds that “describe a
recreational hobby not unlike hunting or bird watching.” Based on these findings, the
district court concluded that “[t]his is not a situation where [appellant] was engaged in
regular, consistent, profit-seeking endeavors at a casino pursuant to an established business
plan, schedule, or technique.” Rather, the district court determined that appellant had “no
business plan, or schedule, or established technique,” failed to “undertake any effort to treat
his gambling activity as his trade or busine ss,” and “never consider ed himself to be a
professional gambler until two weeks before sentencing when he discovered the potential
convenience in making such a cl aim.” Thus, the district c ourt concluded that appellant
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could not deduct his gambling losses for purposes of the Minnesota AMT because appellant
engaged only in recreational gambling.
Appellant does not dispute that he is subj ect to the Minnesota AMT. But he claims
that the district court’s findings pertaining to the nine factors “misstate[]” the evidence. He
contends that, based upon the testimony of M.D. and the statement of appellant’s gambling
expert, the conclusion that appella nt is a professional gambler is “at least as likely” as is
the “conclusion that he is not.”
We disagree. Appellant’s argument is based upon his interpretation of the evidence
presented, and an assumption that his accountant’s and gambling expert’s testimony were
credible. To the contrary, the district court specifically rejected appellant’s interpretation
of the evidence and did not find his witnesses’ testimony to be credible. The district court’s
findings are supported by the testimony of Ca rla Engebretson, a Revenue Tax Specialist
Senior for the DOR. Engebretson described the evidence she reviewed in analyzing each
factor and concluded that after weighing a ll the factors, appella nt was involved in
recreational gambling. Although, if believed , the evidence presented by appellant may
support his claim, the district court specifically found the evidence and testimony presented
by appellant to be incredible, and again, we defer to the district court’s credibility
determinations. See Al-Naseer, 788 N.W.2d at 473. Therefore, the district court’s findings
pertaining to the nine factors articulated in Busch are not clearly erroneous.
Because the district court’s findings are not clearly erroneous, the conclusion that
appellant is not a professional ga mbler is review ed de novo. See Busch, 713 N.W.2d at
343 (stating that the question of how the law is to be app lied to undisputed facts is a
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question of law that is reviewed de novo). The evidence pertaining to the nine factors
establishes that appellant did not carry on his gambling activities in a business-like manner,
was not a gambling expert, was sporadic and inconsistent in his time and effort associated
with his gambling, never generated a net profit in his gambling activities between 2009-
2013, and did not consider himself to be a professional gambler until it was convenient for
him to do so. Based on these factors, the district court properly determined that appellant
is not a professional gambler. Accordingly, appellant is not entitled to deduct his gambling
losses for purposes of Minnesota’s AMT.
Affirmed.