298 F.2d 830 (4th Cir. 1962), 8445, Millikin v. C.I.R.

Docket Nº:8445.
Citation:298 F.2d 830
Party Name:M. S. MILLIKIN, and M. S. Millikin and Dorothy P. Millikin, Petitioners, v. COMMISSIONER OF INTERNAL REVENUE, Respondent.
Case Date:January 31, 1962
Court:United States Courts of Appeals, Court of Appeals for the Fourth Circuit

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298 F.2d 830 (4th Cir. 1962)

M. S. MILLIKIN, and M. S. Millikin and Dorothy P. Millikin, Petitioners,



No. 8445.

United States Court of Appeals, Fourth Circuit.

January 31, 1962

Argued Jan. 5, 1962.

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B. Gerard Hartzog, Columbia, S.C., for petitioners.

Arthus E. Strout, Atty. Dept. of Justice, Washington, D.C. (Louis F. Oberdorfer, Asst. Atty. Gen., Lee A. Jackson, and Meyer Rothwacks, Attys., Dept. of Justice, Washington, D.C., on brief), for respondent.

Before SOBELOFF, Chief Judge, and HAYNSWORTH and BOREMAN, Circuit judges.

HAYNSWORTH, Circuit Judge.

The petitioners seek a review of a decision of the Tax Court determining deficiencies of income tax for the years 1945 through 1950, and approving the Commissioner's imposition of fraud penalties. Its determination was based upon net worth computations. The principal contention here revolves around the husband's claim to have had a cash hoard of $40,000 at the opening of the net worth period. We think the evidence justified the finding of the Tax Court that he had no more than $6,000 in cash at that time, and that it supports the other findings and conclusions of that court.

The husband filed an individual return for each of the years 1945-1949, inclusive, and the husband and wife filed a joint return for 1950. These returns disclosed, using approximate figures, net income of $1600 in 19458 $13,000 in 1946, $3700 in 1947, a loss of $7300 in 1948, net income of $3,000 in 1949, and of $5200 in 1950. By computing the increased net worth on an annual basis,

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to which was added nondeductible expenses in each year, the Tax Court determined that there was net income in each of these years of $18,600, $41,000, $23,400, $16,400, ($1400), and $13,700, respectively.

In making these computations, the Commissioner and the Tax Court had information of the exact amount of the cash in bank at the opening and close of each annual period. The Commissioner gave no credit for any undeposited cash hoard as of January 1, 1945, but the Tax Court gave Milliken credit for $6,000 as of that date. The Tax Court did not give Milliken credit for the value of his equity in certain record playing machines he owned in January 1945. The failure to give him credit for a larger amount of undeposited cash and for the value of his equity in the record playing machines is the principal basis of his attack upon the decision of the Tax Court.

Milliken testified that on January 1, 19458 he had $40,000 in currency. He explained the accumulation of this cash hoard by consistent savings through frugal living during the 20-year period following his marriage to Dorothy P. Milliken in 1925. In the summer of 1944, he testified, this hoard was in small bills, which he took to the Federal Reserve Bank in Charlotte, north Carolina, where he exchanged the small bills for others of larger denomination. This testimony was supported by a teller of the Federal reserve Bank, who testified that he recalled that Milliken did come to the bank with a bag of small bills which were exchanged for bills in denominations of $50 and $100. He testified that to count the bills and make the exchange required some thirty minutes, from which he estimated that the total amount involved exceeded $30,000, but he had no other recollection of the amount of the money. He was unable to recall just when this transaction occurred, though he testified it was after January 19, 1942 and prior to 1948.

Another official of the Federal Reserve Bank testified that, beginning on May 21, 1945, records were made of all such transactions when the amount involved was as much as $1,000. He had searched the records of the bank and found no record of any such exchange by Milliken. From this testimony, Milliken reasons that the exchange recalled by the teller must have occurred prior to May 21, 1945, and that this testimony strongly corroborates his testimony that he had a cash hoard of at least $40,000 on January 1, 1945.

Milliken's financial history weighs heavily against the claim, however.

Petitioner finished only the ninth grade in school. At the age of twenty, in 1925, he married Dorothy. Thereafter, he went into the dry cleaning business in Hamlet, North Carolina, and for some years worked as a part time brakeman on a railroad. His earnings as a Brakeman never exceeded $600 in any of these early years, and in 1931 amounted to only $69.96. In 1932, the dry cleaning business was declining, so he sold it out, and the petitioner moved to Hickory, North Carolina, where...

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