Kaderly v. Commissioner , 21 B.T.A. 582 ( 1930 )

MAY E. KADERLY, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

Kaderly v. Commissioner

Docket No. 32671.

United States Board of Tax Appeals

21 B.T.A. 582; 1930 BTA LEXIS 1832;

December 8, 1930, Promulgated

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Respondent's determination of deficiencies in income tax and penalties approved.

B. M. Coon, Esq., for the respondent.

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TRAMMELL

This proceeding is for the redetermination of deficiencies in income tax and penalties as follows:

Year	Tax	Penalty
1920	$1,432.89
1921	1,691.66	$84.58
1922	2,299.62	114.98
1923	1,990.02	995.01
1924	268.90

The penalties for 1921 and 1922 were asserted on the ground that the petitioner was negligent in the preparation of the returns for those years while the penalty for 1923 was asserted on the ground that the return for that year was false and fraudulent and made with the intent to evade tax.

It is alleged in the petition that the determination of the deficiencies is based on the following errors:

(1) During the years under review this taxpayer invested large sums in the soft drink business - this sum closely approximating $80,000. The entire investment was lost.

(2) Taxpayer prays that the net income as shown in the deficiency letter from which this appeal is taken be reduced in the calendar year 1920 in the sum of $8,689.93, representing capital items included as income.

(3) Taxpayer prays that the net income for the calendar year 1921 be reduced by the allowance of a loss of $15,750.

(4) Taxpayer prays that the net income for the calendar year 1922 be reduced by the actual loss sustained in connection with the Jacksonville property in the sum of $31,154.79.

(5) Taxpayer prays that the net income for the calendar year 1923 be reduced by the allowance of loss in the sum of $13,233.19, this sum representing an actual loss sustained.

(6) Taxpayer prays that the net income for the calendar year 1924 be decreased in the sum of $9,763.26 as representing the deductible loss in that year.

FINDINGS OF FACT.

The petitioner is a resident of Chattanooga, Tenn., and during the years here involved was a tax consultant.

For the year 1920 she filed an income-tax return reporting a gross income of $6,861.30, a net income of $836.30 and disclosing no tax liability. in determining the deficiency for 1920 the respondent found that the gross income was understated by $15,801.50 and that the correct net income was $16,632.62.

For 1921 the petitioner reported a gross income of $19,996.40, a net income of $3,106.40, and a tax liability of $8.26. The respondent in determining the deficiency for this year determined the gross income to be $29,160.26 and the net income to be $18,468.06.

For 1922 the petitioner filed a return on which no items of income or deductions were shown, but upon which appears the statement "Net income less $1,000.00. Not liable for a return." The respondent determined that the petitioner's gross income was $39,808.14 and her net income was $23,791.63.

On her return for 1923 the petitioner reported a gross income of $22,162.83, a net income of $8,551, and a tax liability of $341.59. The entire gross income was shown as having been received from a business or profession. The respondent determined that the gross income from the petitioner's profession was $48,930.83 and that the net income therefrom was $24,534.32. During 1923 the petitioner sold a residence for $18,500 on which a profit of $4,239.62 was realized. This property had been acquired by the petitioner about 1920 or 1922 at a cost of $12,500. The petitioner did not report any profit from the sale in her return nor was any mention made therein of the transaction. The respondent determined the petitioner's total net income to be $27,847.08 for 1923.

For 1924 the petitioner filed a tentative return showing an estimated tax liability of $600. Thereafter a completed return was filed on which the total receipts from business or profession were shown as $39,248.72, the deductions applicable thereto as $17,887.09, and the income from this source as $21,361.66. From the latter amount certain deductions totaling $18,354.95 were taken, leaving a net income reported of $3,006.71. The personal exemption and credit for dependents totaling $4,100 taken by the petitioner resulted in the return disclosing no tax liability. The respondent determined the petitioner's net income to be $12,679.97.

When the two revenue agents who made an investigation into the petitioner's tax liability for 1920 through 1923 first called at the petitioner's office to make the investigation she informed them that she had no books and records and could not afford to keep records. After allowing the petitioner additional time within which to get together such records as she could, the agents called some months later, when she furnished them with a small memorandum book and a file of vouchers. The memorandum book showed certain expenditures for the maintenance of the petitioner's office, while the vouchers were only a bunch of receipts for expenditures incurred by the petitioner, including traveling and hotel expenses in connection with cases handled by her. In order to determine the petitioner's income it was necessary for the agents to resort to her bank account and other available sources of information.

The return for 1923 was false and fraudulent and was made with the intent to evade tax.

OPINION.

TRAMMELL: The allegations of error contained in the petition as well as the facts relied upon by the petitioner in support thereof were all denied by the respondent in his answer. No appearance was made for the petitioner at the hearing, nor was any evidence offered in her behalf. In the absence of evidence showing that the respondent's determination is erroneous, his determination of the deficiencies in tax for 1920 through 1924 and of negligence penalties for 1921 and 1922, is approved.

Since the respondent has determined a penalty for filing a false and fraudulent return for 1923, the provisions of section 601 of the Revenue Act of 1928 impose upon him the burden of proof with respect to establishing fraud with the intent to evade tax. We think he has sustained this burden and accordingly approve his determination of the penalty for 1923.

Judgment will be entered under Rule 50.