Long v. Commissioner

CHAS. F. LONG, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. Long v. Commissioner Docket No. 11981. United States Board of Tax Appeals 12 B.T.A. 488; 1928 BTA LEXIS 3524; June 8, 1928, Promulgated *3524 The petitioner, in his income-tax return for 1918, falsely or fraudulently understated his income with intent to evade the income tax. Jesse I. Miller, Esq., and E. S. Parker, Jr., Esq., for the petitioner. Harold Allen, Esq., for the respondent. SIEFKIN *488 This is a proceeding for the redetermination of a deficiency in income tax and penalty for the year 1918 in the amounts of $63,678.26 and $31,995.21, respectively. The issues raised by the pleadings are as to the penalty and whether assessment and collection are barred by the statutes of limitation. *489 FINDINGS OF FACT. The petitioner, Charles F. Long, a resident of North Carolina, purchased $10,000 par value of the capital stock of the Southern Mirror Co., a North Carolina corporation, in January, 1913, for $10,000. In December, 1918, he sold the same stock for $145,000. During the year 1918, the petitioner, as president of the Southern Mirror Co. was paid compensation in the total amount of $9,700. The petitioner filed an income-tax return on March 27, 1919, for the year 1918, in which he reported as income $7,200 as salary as president of the Southern Mirror*3525 Co. and $3,218 as dividends, and took as deductions $204.97 for taxes paid and $1,300 for contributions. He was married and living with his wife during the year 1918 and had two dependents. On March 31, 1919, he paid the tax of $275.09 shown by said return. In January, 1919, the petitioner, being ill with influenza, went to Florida on the advice of his physician and did not return to his home until March, 1919. He consulted an attorney as to his income-tax return for 1918 and discussed with him the matter of the profit realized upon the sale of the stock of the Southern Mirror Co. He supplied all of the data for the income-tax return and the attorney filled out the return for him and the petitioner signed and took oath to it before a notary public. There was no reference in the return to the sale of stock in the Southern Mirror Co. or to any profit from such sale or to the compensation of $2,500 which the petitioner received in addition to the amount which he reported upon his return. The Southern Mirror Co. accumulated its earnings between 1913 and the date of the sale of the petitioner's stock in 1918. The petitioner, in his income-tax return for 1918, falsely or fraudulently*3526 understated his income with intent to evade the income tax. OPINION. SIEFKIN: The petitioner admits the tax liability is correct as asserted by the respondent, but says that his return was not false or fraudulent with intent to evade the tax and that, therefore, the fraud penalty should not be approved and that, there being no fraud in the case, the statute of limitations bars collection, even of the tax liability. The explanation given by the petitioner for omitting the profit of $135,000 from his return is that - The Southern Mirror Company had been paying the taxes on the income of the corporation in each and every year and I felt that if I gave it in and paid tax on it, that the Government would be collecting taxes on the same item twice, which I did not feel it was the intent of the Government to do. This explanation was repeated at another point of the petitioner's testimony in almost identical language when he said: *490 Well, I did not feel that the Government expected me to do it inasmuch as the corporation had been paying income taxes each and every year on the earnings which we had allowed to accumulate, instead of paying out any dividends, feeling that*3527 if I did the Government would be collecting taxes on the same item twice, which I did not feel it was the intention of the Government to do. The petitioner is a middle-aged intelligent business man. His testimony, we believe, is contrary to the facts and implies an ignorance inconsistent with his appearance and record. We do not believe the offered explanation or that the exclusion of the profit on the sale of stock from his return was the result of anything but a desire to evade taxes. We might further point out that no satisfactory explanation is offered as to the exclusion of the item of $2,500 compensation. No mention of either the profit of $135,000 or the $2,500 compensation is made on the return. If the petitioner had any doubts about these items being taxable income, it was his duty to disclose the facts upon his return. He did not do so and the conclusion is inescapable that he did not do so in the hope that the facts would never come to light. Since we have found the return to be false and fraudulent with intent to evade tax, the deficiency and penalty are not barred. Reviewed by the Board. Judgment will be entered for the respondent. MILLIKEN did*3528 not participate.