Page 859
10 T.C. 859 (1948)
MYRNA S. HOWELL, PETITIONER,
v.
COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.
No. 12147.
United States Tax Court.
May 17, 1948
1. Held, returns in question were joint returns of husband and wife.
2. Where joint returns are filed by husband and wife the liability for taxes and penalty is both joint and several.
M. Alfred Roemisch, Esq., for the petitioner.
Howard M. Kohn, Esq., for the respondent.
The Commissioner determined deficiencies in income tax for the years 1940, 1941, and 1942, and asserted penalties for filing false and fraudulent returns, against ‘ Dr. Charles J. Howell and Mrs. Myrna S. Howell, husband and wife,‘ as follows:
| Year |
Deficiency |
50% penalty |
The proceeding was filed in the name of Myrna S. Howell only. Petitioner alleged that the Commissioner erred in determining (1) that she was liable for any income tax for the years 1940, 1941, and 1942, and (2) that she was liable for any penalties under section 293(b) of the Internal Revenue Code. It is alleged, in the alternative, that section 51(b) of the code is unconstitutional, and that if such section is constitutional the assessment and collection of any deficiency as to petitioner for the taxable years are barred. FINDINGS OF FACT. Petitioner and Charles J. Howell were married on August 10, 1939, and lived together as wife and husband continuously from that date to and including the taxable years here involved. Howell had been married previously and was divorced from his first wife on April 11, 1939. Since 1917 Howell has been a doctor of dental surgery and for many years, including the taxable years, maintained his offices in the Keith Building, Cleveland, Ohio. The petitioner worked as a receptionist for Howell and three other doctors who occupied the same offices, from August 1928 to March 1936. She left the employ of Howell in 1936. During that period she was married to one Bailey. After her marriage to Howell, petitioner was not gainfully employed until 1943, when she was employed as a clerk by the O.P.A. Ration Board at an annual salary of $1,880. Page 860 Income tax returns for the years 1940, 1941, and 1942 were filed in due time with the collector of internal revenue for the eighteenth district of Ohio. The caption on page 1 of the 1940 return, so far as pertinent, reads as follows:
| PRINT NAME AND ADDRESS PLAINLY.
| (See Instruction C)
|
| Dr. Charles J. Howell— Myrna S. Howell |
| (Name) (Use given names of both husband and wife, if this is a joint return) |
The captions of the 1941 and 1942 returns are the same except that the word ‘ and‘ was used in place of the two dashes, as follows: ‘ Dr. Charles J. Howell and Myrna S. Howell.‘ To the question on the 1940 return: ‘ Are items of income or deductions of both husband and wife included in this return?,‘ the answer given is ‘ Yes.‘ The 1940 return was verified by petitioner's husband alone and signed by petitioner and her husband, as follows:
| |
(Signature) |
(See Instruction E) |
| [Signed] |
Charles J. Howell |
| [Signed] |
Myrna S. Howell (Signature) |
The 1941 return was signed and verified by petitioner's husband only. The 1942 return was signed by petitioner and her husband, as follows:
| [Signed] |
Charles J. Howell |
| (If this is a joint return (not made by agent), it must be signed by both husband and wife) A return made by an agent must be accompanied by a power of attorney. (See Instruction F) |
The petitioner took no part in the preparation of the returns for the taxable years. At the request of her husband she signed blank return forms for 1940 and 1942. The returns were prepared in the office of her husband and she did not see the completed returns prior to the mailing thereof to the collector's office. The items of income and deductions reported on such returns are as follows:
| Dividends |
|
$275.00 |
$180.00 |
| Net long term loss from sale of capital assets |
($2,285.02) |
(400.00) |
|
| Net long term loss from sale of other than capital assets |
|
(587.00) |
|
| Net profit from business or profession |
10,428.98 |
10,095.50 |
8,157.05 |
| Total |
8,143.96 |
9,383.00 |
8,337.05 |
| Contributions |
350.00 |
350.00 |
300.00 |
| Other deductions (alimony) |
|
255.98 |
2,100.00 |
| Total |
462.92 |
1,789.16 |
2,883.71 |
| Net income |
7,681.04 |
7,593.84 |
5,453.34 |
Page 861 In the 1940 return the following short term capital losses were reported:
| Goodbody & Co. (commodities) |
$2,143.75 |
$6,599.25 |
| Goodbody & Co. (commodities) |
1,973.50 |
29,532.50 |
| Fuller Rodney & Co. (commodities) |
970.35 |
2,934.15 |
| Mrs. Myrna Howell (Goodbody & Co., commodity accounts) |
1,750.00 |
3,886.75 |
| Net loss on commodity transactions |
|
36,115.05 |
| Loss on sale of 100 shares Wheeling Steel |
|
802.55 |
| Loss on sale of 100 shares S.P. Sugar |
|
239.06 |
| Total short term capital losses |
|
37,156.66 |
In schedule H of the 1940 return there were shown ‘ Real Estate Taxes‘ in the amount of $263.78, but they were not deducted in computing net income. In the 1941 return the interest deduction of $711.65 was shown in schedule C of the return to consist of ‘ Mtg and Bank Loans‘ interest of $688 and ‘ Wives interest‘ of $83.65. Under the short term capital losses there were reported a loss of $369.77 on the sale on November 17, 1941, of 50 shares of Republic Steel acquired November 13, 1940, at a cost of $1,202.50 and a loss on commodity trading of $479, or a total short term capital loss of $848.77. There was also reported a long term capital loss of $800 on the sale on April 4, 1941, of land acquired July 6, 1934, and also an ordinary loss of $587.50 on the sale of a building acquired July 6, 1934. Such land and building were the so-called Painesville property hereinafter referred to. The deduction for taxes included real estate taxes of $311.53. In the 1942 return the deduction for taxes included real estate taxes in the amount of $368.31. Page 862 Except as to the professional income and deductions of petitioner's husband in each return, the commodity transactions in the name of petitioner reported in the 1940 return, and the interest paid item in the 1941 return, the returns do not specify any particular item of income or deduction as attributable to either petitioner or her husband. No separate returns for the taxable years were filed by petitioner. Separate returns were filed by petitioner for 1939 and 1943. In the separate 1943 return, in addition to salary of $1,880, dividend income of $50 was reported. On or about March 1, 1946, Charles J. Howell was indicted on five counts for filing false and fraudulent income tax returns for the years 1939 to 1943, inclusive. Upon arraignment, Howell pleaded guilty and on April 23, 1946, was sentenced to imprisonment for a period of fifteen months and assessed costs in the amount of $27. The returns for 1940, 1941, and 1942 involved in the criminal proceedings against Howell are the same returns involved herein. The notice of deficiency herein is addressed to ‘ Dr. Charles J. Howell and Mrs. Myrna S. Howell, Husband and Wife, 1436 Keith Building, Cleveland, Ohio. ‘ The Commissioner determined that the taxable net income of the parties for 1940, 1941, and 1942 was $25,920.99, $22,785.88, and $25,528.36, respectively. Prior to and during the taxable years, Howell dealt in commodities and securities on margin. Commodity accounts, both regulated and unregulated, and security accounts were opened by him in the name of Mrs. Myrna Howell, as follows:
| Oct. 25, 1939 |
Goodbody & Co. |
Regulated Commodity. |
| May 10, 1940 |
Goodbody & Co. |
Unregulated Commodity. |
| Sept. 30, 1941 |
Jackson & Curtis |
Regulated Commodity. |
| May 31, 1941 |
Jackson & Curtis |
Unregulated Commodity. |
| Nov. 4, 1940 |
Loeb, Rhoades & Co., New York, through Prescott & Co., of Cleveland, Ohio. |
Securities. |
| Oct. 27, 1942 |
Paine, Webber, Jackson & Curtis |
Securities. |
The moneys deposited in such accounts were paid by petitioner's husband out of his own funds. The commodity accounts reflect numerous transactions, some resulting in profits and others in losses. The annual net profit or net loss in each commodity account and the net profit or net loss reflected in all such accounts for each year are as follows:
| |
Net gain |
Net loss |
Net gain or |
| Goodbody & Co., regulated account |
|
$556.25 |
|
| Goodbody & Co., unregulated account |
|
443.00 |
|
| Jackson & Curtis, regulated account |
$325.00 |
|
|
| Total |
325.00 |
999.25 |
($674.25) |
| Goodbody & Co., regulated account |
282.75 |
|
|
| Goodbody & Co., unregulated account |
53.00 |
|
|
| Jackson & Curtis, regulated account |
|
220.00 |
|
| Jackson & Curtis, unregulated account |
|
184.00 |
|
| Jackson & Curtis, regulated account |
|
741.25 |
(741.25) |
Page 863 The security account with Carl M. Loeb, Rhoades & Co. was opened with a deposit of a check of $1,000 on November 4, 1940. The account shows purchases of stock as follows: Nov. 7, 1940, 100 shares Republic Steel, cost $2,202.50; Nov. 12, 1940, 50 shares Republic Steel, cost $1,204.25. The 50 shares were sold on November 17, 1941, at $832.73. A short term loss of $369.77 resulting from such sale was reported in the 1941 income tax return. The account shows additional deposits of...
