36 T.C. 438 (1961), 84182, Silverstein v. C.I.R.

Docket Nº:84182.
Citation:36 T.C. 438
Opinion Judge:DRENNEN, Judge:
Party Name:L. L. SILVERSTEIN, ESTATE OF ROSE L. SILVERSTEIN, DECEASED, L. L. SILVERSTEIN, EXECUTOR, PETITIONERS v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.
Attorney:Jack White, Esq., for the petitioners. Wallace M. Wright, Esq., for the respondent.
Case Date:May 26, 1961
Court:United States Tax Court
 
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Page 438

36 T.C. 438 (1961)

L. L. SILVERSTEIN, ESTATE OF ROSE L. SILVERSTEIN, DECEASED, L. L. SILVERSTEIN, EXECUTOR, PETITIONERS

v.

COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

No. 84182.

United States Tax Court.

May 26, 1961

Page 439

Jack White, Esq., for the petitioners.

Wallace M. Wright, Esq., for the respondent.

Payment of petitioner's prior years' tax liabilities by a corporation of which petitioner was an officer and stockholder constitutes taxable income to petitioner.

DRENNEN, Judge:

Respondent determined deficiencies in the joint income tax of L. L. Silverstein and Rose L. Silverstein for 1955 and 1956 in the amounts of $2,632.61 and $2,575.22, respectively. The only issue is whether payments of $10,000 made by a corporation of which L. L. Silverstein was a one-third owner on prior years' tax liabilities of L. L. Silverstein are taxable to L. L. Silverstein as constructive dividends.

FINDINGS OF FACT.

The stipulated facts are so found.

L. L. Silverstein and Rose L. Silverstein were husband and wife during the year 1955 and filed a joint Federal income tax return with the director of internal revenue for the district of South Carolina. Rose L. Silverstein died March 26, 1956; however, L. L. Silverstein (hereinafter referred to as petitioner) filed a joint Federal income tax return for the year 1956 with the director of internal revenue for the district of South Carolina under the provisions of section 6013(a)(3) of the Internal Revenue Code of 1954.

Petitioner was engaged, during the years 1942 to 1947, inclusive, in the operation of a jewelry business in Charleston, South Carolina, as an individual proprietorship. During those years, petitioner incurred substantial liabilities for unpaid Federal income and miscellaneous (jeweler's excise) taxes, additions to tax, and interest.

On July 6, 1950, two notices of Federal tax liens were filed by the collector of internal revenue in the office of the Register of Mesne Conveyance for Charleston County, South Carolina, one evidencing a total assessment in income tax against petitioner in the amount of $243,477.75, and the other evidencing a total assessment in excise tax against Leroy Jewelry Company, L. Leroy Silverstein, owner, in the amount of $111,441.54.

On December 2, 1952, petitioner submitted offers in compromise to settle the above-mentioned tax liabilities for a total of $100,000, the offers being based on petitioner's financial inability to pay the full amount due. On May 23, 1953, petitioner submitted amended offers in compromise increasing the total amount offered to $125,000. At the time the original offers in compromise were submitted, $75,000 cash was paid, and under the terms of the amended offers in compromise submitted May 23, the balance of $50,000 was to be paid in installments of $10,000 each, payable 1 year after the offers were accepted and in each of the succeeding 4 years.

On July 23, 1953, petitioner further amended the offers in...

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