Calhoun v. Commissioner , 23 T.C. 4 ( 1954 )

Myrtle O. Calhoun (Formerly Myrtle O. Worth), Petitioner, v. Commissioner of Internal Revenue, Respondent

Calhoun v. Commissioner

Docket No. 47593

United States Tax Court

23 T.C. 4; 1954 U.S. Tax Ct. LEXIS 77;

October 7, 1954, Filed

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Decision will be entered for the petitioner.

Petitioner's husband filed income tax returns without petitioner's name on the caption or without her signature on the returns. Held, on the facts, that petitioner did not file joint returns with her husband, nor did she intend to file joint returns with him in the years before us.

L. Paul Ewell, Esq., and Philip C. Herr, Esq., for the petitioner.

A. Russell Beazley, Jr., Esq., for the respondent.

Johnson, Judge.

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JOHNSON

Respondent determined deficiencies in petitioner's income tax and fraud penalties as follows:

		50 per cent
Year	Deficiency	penalty
1943	$ 8,145.16	$ 4,072.58
1944	2,893.38	1,446.69
1945	663.89	331.95
1947	1,816.93	908.47
1948	7,361.48	3,680.74

The sole issue is whether petitioner and her husband filed joint returns for 1943, 1944, 1945, 1947, and 1948. There was an overassessment for 1946.

FINDINGS OF FACT.

Petitioner, formerly Myrtle O. Worth, and John S. Worth were husband and wife from 1943 through 1948. Petitioner was divorced from John S. Worth in 1949. For the years before us John S. Worth filed income tax returns, Forms 1040 and 1040F, with the collector of internal revenue for the district of Maryland. The caption of these returns was in the name of "John S. Worth" or "John Worth" and they were signed in the name of "John S. Worth" or "John Worth." In each year petitioner was claimed as an exemption. On each of the returns, except those for 1943 and 1948, where the question was asked did the husband and wife make a separate return, Worth answered that petitioner was not making a separate return. For 1943 and 1948 the question with reference to petitioner's making a separate return was not answered.

John S. Worth indicated his occupation as "Chicken Farms," "Poultry Farmer," and "Poultryman." On each of the Forms 1040 there was an income item which had been carried over from Form 1040F; this was income from the poultry business. The 1946 return also included gain from "Truck Hauling." The poultry business was conducted on real property owned by petitioner and Worth as tenants by the entirety. Worth and his employees did the physical labor required in the poultry business, but on occasions petitioner deposited receipts for the business and drew some of the checks for business expenses. Deposits were made and checks were drawn on the joint account of petitioner and Worth. During some of these years petitioner also maintained a separate savings account and she made transfers from the joint account to her separate savings account.

The returns were prepared by Worth or were prepared for him by someone else. Petitioner took no part in the preparation of the returns, other than obtaining some information for Worth. She did not see the returns until the time of the hearing. No part of the income or deductions, except that connected with the tenancy by the entirety, reported in the years before us was attributable to petitioner in her individual capacity. Petitioner did not file separate returns for any of the years 1943 through 1948.

For a short time in 1944 petitioner worked in a manufacturing plant in Seaford, Delaware. She earned less than $ 400 during this period, none of which was reported on Worth's 1944 tax return.

During the summers of 1947 and 1948, while petitioner was on vacation, she operated a rooming house in Ocean City, Maryland. The rooming house was operated at a loss and was subsidized by money from the joint bank account. No entries were made on Worth's returns for 1947 and 1948 for the loss sustained in the operation of the rooming house.

In December 1948, petitioner left Worth and she withdrew $ 15,000 from their joint account. On Worth's return for 1948 he claimed a loss from "Money drawn from bank by wife who skipped with same on 12-27-48 $ 15,000.00." Worth attached to his 1948 return a letter from the Office of Collector, District of Maryland. This letter had been addressed to "Mr. John Scott Worth" in care of his attorneys, and it granted him an extension of time to file his 1948 return.

There was no agreement between petitioner and Worth as to how the income derived from property owned by them as tenants by the entirety would be shared.

The deficiency notice was addressed to John S. Worth and petitioner. Petitioner and Worth filed separate petitions with the Tax Court. A decision was entered by the Tax Court in the case of John S. Worth, Docket No. 47727, and it was held that there were deficiencies in income tax and fraud penalties due from Worth for the years 1943, 1944, 1945, 1947, and 1948. The decision of the Tax Court was based on a stipulation entered into by Worth and the Commissioner wherein it was agreed that the deficiencies in income tax and fraud penalties were those as determined in the deficiency notice.

Respondent's statement in the deficiency notice, in part, is as follows:

It is held that the income tax returns for the years 1943, 1944, 1945, 1947 and 1948 filed in the name of John S. Worth, were in fact joint returns of husband and wife since they included income of both the husband and wife, exemption was claimed thereon for both spouses, and separate returns were not filed by the wife.

Petitioner did not file, and did not intend to file, joint income tax returns with Worth in 1943, 1944, 1945, 1947, and 1948.

OPINION.

The sole issue before us is whether petitioner and her former husband filed joint returns for the years 1943, 1944, 1945, 1947, and 1948. Respondent determined that joint returns were filed by them, but petitioner maintains that she did not file joint returns with her husband and, further, that she did not intend to file joint returns.

The keystone of respondent's argument is that in Maryland each spouse is entitled to one-half of the income from property held by them as tenants by the entirety. Whitelock v. Whitelock, 156 Md. 115">156 Md. 115, 143 Atl. 712, 715; Brown v. Brown, 204 Md. 197">204 Md. 197, 103 A. 2d 856, 863. The question of how that income is reported is a question of fact, and the intention of the parties is to be considered in ascertaining this fact. See Virginia M. Wilkins, 19 T.C. 752">19 T. C. 752; Zabelle Emerzian, 20 T. C. 825; Hyman B. Stone, 22 T. C. 893. If the intention of the parties is not apparent on the face of the return, their intention must be gleaned from other sources.

In general, a husband and wife may make a single return jointly; but, if a joint return is made, the tax liability shall be computed on the aggregate income and the liability with respect to the tax shall be joint and several. Sec. 51 (b), I. R. C., 1939.

The present case is not like that of W. L. Kann, 18 T.C. 1032">18 T. C. 1032, affd. 210 F. 2d 247, where the wife failed to take the stand and where there was no evidence to overcome the presumptive correctness of respondent's determination. Here petitioner did testify and there is nothing in the record to support a finding that petitioner intended that the return filed be a joint return. Her name was not included in the caption, nor did she sign any of the returns. See Myrna S. Howell, 10 T. C. 859, affd. 175 F.2d 240">175 F. 2d 240. There were no income, losses, or deductions attributable to petitioner in an individual capacity included in the returns filed by Worth. See Eva M. Manton, 11 T.C. 831">11 T. C. 831.

It is noteworthy that petitioner did not prepare the returns, nor did she see them until the time of the hearing. All of the facts support petitioner's position in that they point out the absence of any affirmative action on petitioner's part to join with her husband in the filing of tax returns. Petitioner had no intention of filing joint returns.

Notwithstanding petitioner's inactivity or her intention, there remains the fact that under Maryland law petitioner was entitled to one-half the income from property owned as tenants by the entirety, and all income reported and that admittedly not reported by Worth was derived from the services of himself and others than petitioner and from property held by petitioner and Worth as tenants by the entireties. Undoubtedly petitioner should have reported some share of this income, but she had a choice as to how she could report it. She could have filed a separate or a joint return. Since she did not intend to or did not in fact file a joint return, she incurs no joint or several liability based on a joint return. Therefore, the joint and several liability attributed to her in the deficiency notice was improper.

Even though our decision is based on a finding of fact, we have considered those cases relied upon by respondent. In particular, respondent relies upon Walter M. Ferguson, Jr., 14 T.C. 846">14 T. C. 846, to support his position. In that case a husband and wife operated a restaurant as a partnership. All income from the partnership was reported by the husband, and no return was filed by the wife. There we held that the return was a joint return.

The Ferguson case can be distinguished from the present case on the facts. In the Ferguson case the reported income was family partnership income, and husband and wife knew it to be their income. In the present case the petitioner did not know that she was entitled to the income, by operation of law, from property held as tenants by the entirety, and she had no intention of joining her husband in the returns that he filed. In the Ferguson case there was sufficient evidence to support a finding that husband and wife intended to file a joint return, but in the present case the evidence will not support such a finding. In McCord v. Granger, 201 F.2d 103">201 F. 2d 103, the Court of Appeals pointed out that the single circumstance of a return reporting both husband's and wife's income is not sufficient to hold that it was a joint return. Cf. Louis M. Roth, 17 T.C. 1450">17 T. C. 1450.

Considering the record as a whole we find that petitioner did not file, and did not intend to file, joint returns with Worth in 1943, 1944, 1945, 1947, and 1948.

Decision will be entered for the petitioner.