Joyce v. Commissioner

Walter M. Joyce and Myrtle Joyce, Petitioners, v. Commissioner of Internal Revenue, Respondent

Joyce v. Commissioner

Docket No. 52458

United States Tax Court

25 T.C. 13; 1955 U.S. Tax Ct. LEXIS 80;

October 14, 1955, Filed

---

Decision will be entered under Rule 50.

1. Estimated Tax -- Failure to File Declaration -- Reasonable Cause -- Sec. 294 (d) (1) (A). -- No reasonable cause having been established for failure to file declarations of estimated tax, held, Commissioner's addition to tax proper.

2. Deductions -- Depreciation -- Partial Use of Family Car for Business Purposes. -- Deduction allowed on Court's determination of reasonable allowance for depreciation. (Cohan v. Commissioner, 39 F. 2d 540.)

J. E. Rappoport, Esq., for the petitioners.

James F. Shea, Esq., for the respondent.

Murdock, Judge.

---

MURDOCK

The Commissioner determined deficiencies in and additions to the income tax of the petitioners as follows:

		Addition under
Year	Deficiency	sec. 294 (d) (1) (A)
1950	$ 158.76	$ 1,077.00
1951	306.12	1,372.70

The issues for decision are whether there was reasonable cause for the late filing of the declarations of estimated tax so that the additions to the tax are not due and whether the petitioners are entitled to deductions for depreciation of an automobile.

FINDINGS OF FACT.

The petitioners, husband and wife, filed timely joint income tax returns for 1950 and 1951 with the collector of internal revenue for the first district of Ohio. Myrtle had no income.

Walter, as sole proprietor, conducted a business of selling copper and brass products at wholesale during the taxable years. He reported gross profits from that business in excess of $ 78,000 and net profits in excess of $ 41,000 for each taxable year. The tax due shown on his original returns was $ 12,741.22 for 1950 and $ 19,384.76 for 1951.

The petitioners filed a declaration of estimated tax for 1950 on December 22, 1950. The estimated tax of $ 10,000 shown thereon was paid on December 27, 1950. The petitioners filed a declaration of estimated tax for 1951 on January 15, 1952. The estimated tax of $ 20,000 shown thereon was paid on January 15, 1952. The petitioners filed no other declarations of estimated tax for the taxable years.

The petitioners could reasonably have expected at all times during each taxable year that their gross income from sources other than wages would exceed $ 100 and that their gross income would exceed $ 600 for that year.

The failure of the petitioners to make and file a declaration of estimated tax for each taxable year within the time prescribed was not due to reasonable cause but was due to willful neglect.

Walter owned an automobile during the taxable years which he used, partly for the purposes of his business and partly for nonbusiness purposes, in the ratio of about 80 per cent for the former and 20 per cent for the latter. The cost, the date of purchase, and the probable useful life of the automobile at times material hereto have not been proven. No deduction for depreciation of the automobile was taken on the original returns for the taxable years or allowed in the determination of the deficiencies. The deficiency notice was mailed on January 15, 1954. Thereafter amended returns were filed claiming a deduction of $ 530 as depreciation on the automobile for each year. The entries on the depreciation schedule represented that the automobile had been acquired in 1949 at a cost of $ 2,650, it had an estimated life of 4 years, and it had been "Used in Business at 80%." A reasonable allowance for depreciation on the automobile on account of its use in Walter's business for each taxable year is $ 400.

OPINION.

The petitioners concede that their declarations of estimated tax should have been filed on March 15 of the year to which applicable and seek to avoid the additions imposed by section 294 (d) (1) (A) by showing reasonable cause for the late filings on December 22, 1950, and January 15, 1952. Counsel for the petitioners argues that Walter relied upon the advice of an accountant that he did not have to file declarations of estimated tax because the general practice of the Bureau of Internal Revenue was not to require the filing of such returns during 1950 and 1951. The record does not support that argument in any particular and one phase of it is incredible.

Walter testified that he did the accounting work for his business, was responsible for the filing of the declarations of estimated tax for 1950 and 1951, and did not rely upon or seek the advice of anyone else in connection with those returns except to ask the public accountant, who was then preparing his final returns, for the amount which he should show as estimated tax. Walter did not seek to excuse himself for his failure to file the declarations on time by reason of anything which the accountant told him or failed to tell him. He never indicated that he employed the accountant in that connection. The accountant's testimony indicates that he never assumed responsibility for advising Walter as to when or whether he should file declarations of estimated tax although he knew the requirements of the Code and the regulations on the subject.

Walter knew that he should file declarations of estimated tax but said he thought he had until December 15 of the year in question to file them. Walter was intelligent and was conducting a successful business which made him liable for the additions if he failed to file proper and timely returns. He should have obtained any necessary information on the subject which he lacked. He claims no more than mistake as to or ignorance of the law and that does not amount to reasonable cause which would relieve him from the additions to the tax under section 294 (d) (1) (A). ; ; , affd. ; .

The petitioners also claim depreciation deductions for each year for an automobile which Walter used in his business but for which no deduction was claimed or allowed. The finding has been made that he used the automobile in the ratio of about 80 per cent for business and about 20 per cent for nonbusiness purposes during the taxable years. However, the cost and the date of purchase have not been proven by competent evidence, and no satisfactory evidence of the probable useful life of the automobile has been introduced. The accountant merely told how he prepared the schedules on the amended returns. The petitioners have not shown the make or model of the automobile or whether it was new or used when purchased, which might be helpful in the absence of better evidence of cost and life. However, it is clear that some deduction should be allowed, and following the principle of , the Court has fixed $ 400 as a reasonable allowance for depreciation of the automobile for each of the taxable years.

Decision will be entered under Rule 50.