Franklin v. Commissioner

Tyson,

dissenting: The opinion as adopted by the Board finds that there is negligence on the part of Harold B. Franklin, the husband of Anna May Franklin, both being petitioners in these consolidated proceedings, in omitting from his return his share in the item of $42,500 received as community income, and imposes upon him as a result the statutory penalty of 5 percent, but absolves Anna May Franklin from the imposition of a like penalty for an identical omission. I disagree with the opinion in so far as it fails to impose a negligence penalty on Anna May Franklin.

In the preparation of the returns in which the omissions occurred both petitioners acted through an agent, who knew of the item, but did not include it in income because he thought it a capital transaction, and each petitioner filed his or her respective return as so prepared. At the time of the preparation of these returns the only difference between the relative positions of the husband and wife with regard to this item was that the husband had actual knowledge of having received it, while it does not appear from the opinion that the wife did have such actual knowledge. However, in the opinion it is said:

From the evidence it appears that the transactions herein were all carried out by the direction of her husband and that he managed and controlled the community property as his own.

It thus appears that in managing and controlling the community-property the husband was acting as the agent of the wife, and his knowledge of the receipt of this $42,500 as well as any negligence on his part in thereafter failing to see that this item was included in her return is imputable to her.

Mrs. Franklin’s return having been prepared by her husband’s secretary as her agent for that purpose, the negligence of such agent, if any, in its preparation is also imputable to her. So, regardless of whether the negligence in oromiting the item from her return was attributable to either her husband or his secretary, or to the joint negligence of both, such negligence was hers under the familiar rule that the negligence of an agent when acting within the scope of his authority is the negligence of the principal.

I dissent from the opinion in so far as it failed to assess the statutory penalty of 5 percent against Anna May Franklin.