232 F.2d 678 (6th Cir. 1956), 12632, Kurnick v. C.I.R.

Docket Nº:12632.
Citation:232 F.2d 678
Party Name:John F. KURNICK and Celia Kurnick, Petitioners, v. COMMISSIONER OF INTERNAL REVENUE, Respondent.
Case Date:April 19, 1956
Court:United States Courts of Appeals, Court of Appeals for the Sixth Circuit

Page 678

232 F.2d 678 (6th Cir. 1956)

John F. KURNICK and Celia Kurnick, Petitioners,



No. 12632.

United States Court of Appeals, Sixth Circuit.

April 19, 1956

Page 679

J. P. Mikesell, Detroit, Mich., J. P. Mikesell, E. Reed Hunt, Detroit, Mich., on brief, for petitioners.

S. Dee Hanson, Washington, D.C., H. Brian Holland, Ellis N. Slack, John J. Kelley, Jr., Washington, D.C., on brief, for respondent.

Before SIMONS, Chief Judge, and ALLEN and MILLER, Circuit Judges.


This case arises out of a petition to review a decision of the Tax Court finding deficiencies against petitioners and imposing penalties for fraud. The Commissioner determined deficiencies and penalties as follows for the years 1943 to 1950:

SECTION 293(b)


1943 Income and Victory $ 461.77 $ 230.89

1944 Income 2, 318.66 1, 566.23

1945 Income 2, 590.04 1, 295.02

1946 Income 1, 819.35 909.68

1947 Income 1, 627.61 813.81

1948 Income 726.36 363.18

1949 Income 1, 488.92 724.46

1950 Income 876.44 438.22

Page 680

The Tax Court materially reduced to deficiencies but retained penalties for fraud.

The case arises out of the following facts:

Petitioners, husband and wife, during the taxable years sold groceries, cigarettes, etc., in a retail store, at which they also made retail liquor sales. Under 13 Mich.Stat.Ann. Section 18.985, Section 14, Comp.Laws 1948, § 436.14, such dealers were called specially designated distributors (or 'SDD's') and were subject to the control of the Michigan Liquor Control Commission. The prices at which SDD's purchased and sold liquors were controlled by the Michigan Liquor Control Commission, which set the actual selling price. An SDD could not deviate from the price either in the way of increase or decrease. The Commissioner investigated petitioners' income tax returns because the gross profit reflected on their returns on retail liquor sales was much less than that realized by similar retail liquor stores throughout the state which, from 1943 to 1947, realized an average gross profit of 8.15% on purchases and thereafter of 11.11%. For the years 1943-1947 petitioners' books and returns showed a gross profit of not more than 1.15%. The Commissioner determined that petitioners' gross...

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