Reeves v. CIR

• Decision Date: 13 March 1963
• Docket Number: No. 14973.,14973.
• Parties: Elwin H. V. REEVES, Jr., et ux., Petitioners, v. COMMISSIONER OF INTERNAL REVENUE, Respondent.
• Court: U.S. Court of Appeals — Sixth Circuit

314 F.2d 438 (1963)

Elwin H. V. REEVES, Jr., et ux., Petitioners, v. COMMISSIONER OF INTERNAL REVENUE, Respondent.

No. 14973.

United States Court of Appeals Sixth Circuit.

March 13, 1963.

Frank W. Cubbon, Jr., Toledo, Ohio, of counsel (Cubbon & Rice, Toledo, Ohio, on the brief), for petitioners.

Alan D. Pekelner, Dept. of Justice, Washington, D. C. (Louis F. Oberdorfer, Asst. Atty. Gen., Meyer Rothwacks, Arthur I. Gould, Attys., Dept. of Justice, Washington, D. C., on the brief), for respondent.

Before CECIL, Chief Judge, and MILLER and O'SULLIVAN, Circuit Judges.

PER CURIAM.

This case is before the Court on petition of Elwin H. V. Reeves, Jr., and wife, taxpayers, for review of a decision of the Tax Court of the United States. The review is being prosecuted solely on the part of the husband who will be referred to as petitioner or taxpayer.

In 1954, the petitioner, Elwin Reeves, sold a tract of farmland, consisting of fifty-eight acres, for the sum of $145,000. In his income tax return for that year he reported a cost basis of the land as $115,391.86, and a long term capital gain of $29,608.14. The Commissioner of Internal Revenue, in a deficiency determination, found that the capital gain on the sale of the land was $132.974.84. This was arrived at by finding the cost basis of the land to be $11,241.09 and allowing $784.02 as selling expense. This cost basis included an allowance of $2,241.09 for capital improvements.

The petitioner claims that he inherited this land from his father and that in the appraisal of the estate, forty acres were appraised at $600 per acre, and eighteen acres were appraised at $750 per acre. He further claims that he spent a great deal of money over the years in capital improvements, which expenditures should be added to the cost basis of the land.

The petitioner's father died intestate January 12, 1919. The Tax Court found that the petitioner purchased forty acres of the land in question from his father in 1914 for $4,000 and that he purchased the other eighteen acres from his father's estate in 1920 for $5,000. The Tax Court further found that the petitioner was unable to sustain his claim of expenditures for improvements. It did, however, allow an increase of $1,160 in the cost basis to represent expenditures by the taxpayer for capital improvements. Cohan v. Commissioner of Internal Revenue, 39 F.2d 540, 543, C.A.2.

The Commissioner determined additions to the tax for 1954, under section 294(d) (1) (A) of the 1939 Internal Revenue Code, for failure to file a declaration of estimated tax. The Commissioner also determined that the petitioner sold land in 1955 upon which he had a capital gain of $4,662.38. The Tax Court sustained these determinations of the Commissioner and decided that there was an addition to the tax due for the taxable year 1954, for failure to file a declaration of estimated tax, in the amount of $1,730.44, and that there was a deficiency in income tax for the year 1955 in the amount of $163.15.

The petitioner did not ask for a review of the addition assessed under section 294(d) (1) (A). Counsel for the petitioner in oral argument in open court waived objection to the decision of the Tax Court for the 1955 taxes. The findings of fact of the Tax Court, upon the other issues which are before us for review, are supported by the evidence and are not clearly erroneous. The scope of our review is limited to this determination. Rule 52(a) Federal Rules Civil Procedure; section 7482(a), Title 26, U.S.C.; Commissioner v. Duberstein, 363 U.S. 278, 290, 80 S.Ct. 1190, 4 L.Ed. 2d 1218; United States v. United States Gypsum Co., 333 U.S. 364, 395, 68 S.Ct. 525, 92 L.Ed. 746; Kreis v. Commissioner, 227 F.2d 753, 755, C.A.6. The conclusions of the trial judge, as stated in his opinion and the decision entered pursuant to the findings of fact and opinion, are in accord with applicable principles of law. The findings, opinion and decision of the trial judge are reported at Prentice-Hall 1961 T.C.Memo.Dec. 61,132 (1961).

Counsel for the petitioner, in oral argument to this Court, raised for the first time the question that the government's claim was barred by the statute of limitations. This defense was not set forth in the taxpayer's petition to the Tax Court, was not suggested by the evidence before the Court, nor was there any request for leave to amend the petition in order to present that issue to the Court.

The general rule is that questions not raised in the trial courts cannot be considered in the appellate courts. Duignan v. United States, et al., 274 U.S. 195, 200, 47 S.Ct. 566, 71 L.Ed. 996; Blair, Commissioner v. Oesterlein Machine Company, 275 U.S. 220, 225, 48 S.Ct. 87, 72 L.Ed. 249; Burnet, Commissioner v. Commonwealth Improvement Co., 287 U.S. 415, 53 S.Ct. 198, 77 L.Ed. 399; General Utilities & Operating Co. v. Helvering, Commissioner, 296 U.S. 200, 206, 56 S.Ct. 185, 80 L.Ed. 154; Helvering, Commissioner v. Salvage, 297 U.S. 106, 56 S.Ct. 375, 80 L.Ed. 511; Helvering, Commissioner v. Tex-Penn Oil Co., 300 U.S. 481, 57 S.Ct. 569, 81 L.Ed. 755; Helvering, Commissioner v. Wood, 309 U.S. 344, 60 S.Ct. 551, 84 L.Ed. 796.

In Hormel v. Helvering, 312 U.S. 552, 558, 61 S.Ct. 719, 722, 85 L.Ed. 1037, the court recognized three exceptions to the general rule. "These decisions and others like them, while recognizing the desirability and existence of a general practice under which appellate courts confine themselves to the issues raised below, nevertheless do not lose sight of the fact that such appellate practice should not be applied where the obvious result would be a plain miscarriage of justice. Analogous in principle is the philosophy which underlies this Court's decisions with relation to appellate practices in other cases: those in which it has been held that a decision of the Board of Tax Appeals can be supported in the reviewing court on a new...