Hoefle v. Commissioner of Internal Revenue

• Citation: 114 F.2d 713
• Decision Date: 16 September 1940
• Docket Number: No. 8232.,8232.
• Parties: HOEFLE v. COMMISSIONER OF INTERNAL REVENUE.
• Court: United States Courts of Appeals. United States Court of Appeals (6th Circuit)

114 F.2d 713 (1940)

HOEFLE v. COMMISSIONER OF INTERNAL REVENUE.

No. 8232.

Circuit Court of Appeals, Sixth Circuit.

September 16, 1940.

Clement V. Jacobs, of Dayton, Ohio, for petitioner.

Harry Marselli, Sp. Asst. to Atty. Gen. (Samuel O. Clark, Jr., Asst. Atty. Gen., and Sewall Key and Harry Marselli, Sp. Assts. to Atty. Gen., on the brief), for respondent.

Before ALLEN, HAMILTON, and ARANT, Circuit Judges.

ARANT, Circuit Judge.

The Commissioner of Internal Revenue asserted a deficiency in petitioner's income tax for the year 1931, and also assessed penalties for late filing and for failure, with intent to defraud the United States, fully to report income. The Board of Tax Appeals sustained the Commissioner in his holding that certain unidentified deposits constituted income, his denial of certain deductions claimed for bad debts, and his assessments of penalties.

For some time prior to 1931, petitioner was in the employ of W. C. Rands, Inc., a company engaged in the investment brokerage business in Detroit, Michigan. He first served as secretary to the president and later handled purchases and sales of securities. His salary was $400 a month. He began in 1926 buying and selling securities in a small way for himself, and his market activities gradually expanded. In 1931 he sold 48,500 shares of stock in one hundred and twenty-four separate transactions, using four accounts, each under a code number, with three brokerage houses. The stock, which had cost him $4,045,562.50, brought $4,216,311.50. After deduction of short dividends and premiums in the amount of $18,093.66 and a loss of $725.74, a net profit of $151,929.60 remained. There were other items of income, including salary, interest on savings, and fees from an estate.

Petitioner did not file his return until November 5, 1933, a year and seven months after it was due, and after he had seen a newspaper report, which he confirmed by inquiry of his brokers, that the Bureau of Internal Revenue was investigating brokers' accounts.

The only question here is whether the Board's findings of fact are supported by substantial evidence. If they are, we can not reverse, even if, on the basis of the record, we think we would find differently. Palmer v. Commissioner, 302 U.S. 63, 58 S. Ct. 67, 82 L.Ed. 50; Helvering v. F. R. Lazarus & Co., 308 U.S. 252, 60 S.Ct. 209, 84 L.Ed. 226; Marshall v. Commissioner, 6 Cir., 57 F.2d 633, certiorari denied, 287 U. S. 621, 53 S.Ct. 20, 77 L.Ed. 539.

Properly taking the position that the Commissioner's determination that certain unidentified deposits constituted income was prima facie correct and the burden upon the taxpayer to overcome this presumption, the Board said:

"Here we have the unsupported, naked statement by petitioner that he had no other income. On the record this is not enough. We are unable to accept the taxpayer's uncorroborated, self-serving statement as overcoming the Commissioner's finding. For obvious reasons we cannot give full credence to such declarations.

"To meet his burden of proof and overthrow respondent's determination, petitioner should have introduced evidence identifying and explaining the nature of the bank deposits in question. The unconvincing statement that he had received moneys to invest for members of his family is not sufficient. The consequence is that the respondent's determination must be upheld."

There was no reversible error in this finding of the Board.

The Board also upheld the Commissioner's denial of deductions for bad debts, neither of which had been claimed in petitioner's return. As to the first alleged loan, petitioner testified as follows: "The loan to Mr. Violette was covered by checks dated March 4 and February 4, 1930. This man came into the office of Rands, Inc. He had some oil interests in Michigan and said he was short of money at the time and asked me to lend him some; that if I did he would come back and give me some units or something in the company he was going to form; that it would probably be fall before he did it. He left with me at the time a stock certificate of a...