Lesser v. Comm'r of Internal Revenue, Docket Nos. 63409-63418
| Decision Date | 07 March 1967 |
| Docket Number | Docket Nos. 63409-63418,64754-64758. |
| Citation | 47 T.C. 564 |
| Parties | LOUIS LESSER, TRANSFEREE, ET AL.,1 PETITIONERS v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT |
| Court | U.S. Tax Court |
OPINION TEXT STARTS HERE
George T. Altman, for the petitioners.
Richard W. Janes, for the respondent.
1. Gain on the sale of houses in three separate real estate subdivisions held taxable to transferor corporations which acquired title to the land, built the houses thereon through a contractor but purportedly transferred the properties to their transferee stockholders just before the houses were deeded to the public. In many instances the public bought the houses even before they were build and while the corporations still held title thereto.
2. While petitioners held liable as transferees for taxes due from the transferor corporations to the extent of the cash distributions made to them by the transferors, the notices of transferee liability were untimely and barred by the statute of limitations.
3. Held, there was no omission of gross income in excess of more than 25 percent of gross income reported in the returns filed by the transferor corporations, and no extension of the statute of limitations under sec. 275(c), I.R.C. 1939. Colony, Inc. v. Commissioner, 357 U.S. 28 (1958), controls.
4. Waiver extending the period for assessment against one of the transferor corporations, signed by the former vice president and manager, after the corporation's dissolution, held invalid.
These proceedings involve transferee liabilities for 1950 income and excess profits taxes of three separate alleged transferor corporations. The deficiencies determined against the transferors and the transferee liabilities determined against each of the petitioners, being the alleged value of assets transferred to them, are as follows:
The transferor corporations were all engaged in separate residential real estate developments in the Los Angeles area. Respondent has determined that the income realized on the sale of the houses and lots after the corporations had purportedly sold the houses to the individual stockholders before the construction was finished, was ordinary income to the transferor corporations rather than capital gains to the stockholders.
Petitioners contend that the transferor corporations were not actually engaged in the development of the subdivisions in their own right but were ‘only agencies (of the stockholders) for a limited purpose,‘ and that the houses were sold to the ultimate purchasers as property of the stockholders individually.
Petitioners further contend that they are not liable as transferees for any unpaid taxes of the transferor corporations, and that in any event the deficiencies are barred by the statute of limitations.
The parties failed to agree to a stipulation of facts as required under our Rules of Practice (Rule 31(b)) but in their briefs numerous requested findings of fact are agreed to, or not objected to. We regard such requested findings as undisputed or agreed to facts and include them in our Findings of Fact herein by this reference. We have set out below only the facts which we consider essential to the questions determined. Many of the facts requested by the parties are deemed unessential, or argumentative, or are not supported by the evidence, and are, therefore, omitted. The entire extensive record and multitude of exhibits are in many respects, contradictory and the record is highly confused and in a very unsatisfactory state.
Pioneer Plaza, Inc., Pioneer Plaza #2, Inc., and Teri-Plaza, Inc., hereinafter referred to for identification as ‘transferors,‘ were all corporations organized under the laws of the State of California. Their articles of incorporation conferred broad business powers, including those essential to the subdivision and development of unimproved real estate and the construction and sale of houses thereon.
The transferee petitioners were all residents of California and were stockholders of one or more of the transferor corporations. The income tax returns of all parties involved, for the periods with which we are here concerned, were filed at Los Angeles, Calif. The return of Pioneer Plaza, Inc., was for the fiscal year ending August 31; of Pioneer Plaza #2, Inc., for the fiscal year ending July 31; and of Teri-Plaza, Inc., for the fiscal year ending September 30. The corporate returns were all made on a cash receipts and disbursements and a completed contract basis.
The principal organizers of the corporations were a family group consisting of several members of the Lesser family, sometimes referred to hereinafter as investors, headed by Louis Lesser, and another group of three business associates engaged in the construction business under the firm name of Aldon Construction Co.,2 hereinafter sometimes referred to as the contractors. The common stock of all three corporations, of a par value of $5 per share, was divided equally between members of the Lesser group and the Aldon Construction Co. group. Preferred shares of a par value of $100 per share were issued to members of the inventors' group only, in payment for the land which they acquired and conveyed to the corporations. The following table shows the date of organization and the stock issued by each of those corporations:
+----------------------------------------------------------------------+
¦ ¦Pioneer Plaza, Inc.¦Pioneer Plaza #2,¦Teri-Plaza, Inc.¦
+---------------+-------------------+-----------------+----------------¦
¦ ¦(organized ¦Inc (organized ¦(organized ¦
+---------------+-------------------+-----------------+----------------¦
¦Stockholder ¦June 29, 1949) ¦Jan. 12, 1950) ¦Dec. 13, 1949) ¦
+---------------+-------------------+-----------------+----------------¦
¦ ¦Common ¦Preferred ¦Common¦Preferred ¦Common¦Preferred¦
+---------------+-------+-----------+------+----------+------+---------¦
¦Ben Lesser ¦30 ¦320 ¦24 ¦80 ¦15 ¦300 ¦
+---------------+-------+-----------+------+----------+------+---------¦
¦Louis Lesser ¦30 ¦320 ¦24 ¦80 ¦15 ¦300 ¦
+---------------+-------+-----------+------+----------+------+---------¦
¦Claire Lomas ¦30 ¦320 ¦ ¦ ¦15 ¦300 ¦
+---------------+-------+-----------+------+----------+------+---------¦
¦Willaim Malat ¦30 ¦320 ¦24 ¦80 ¦15 ¦300 ¦
+---------------+-------+-----------+------+----------+------+---------¦
¦Shirley Rudman ¦30 ¦320 ¦ ¦ ¦15 ¦300 ¦
+---------------+-------+-----------+------+----------+------+---------¦
¦Albert Leighton¦50 ¦ ¦66 2/3¦ ¦25 ¦ ¦
+---------------+-------+-----------+------+----------+------+---------¦
¦Donald Metz ¦50 ¦ ¦66 2/3¦ ¦25 ¦ ¦
+---------------+-------+-----------+------+----------+------+---------¦
¦Willard Woodrow¦50 ¦ ¦66 2/3¦ ¦25 ¦ ¦
+---------------+-------+-----------+------+----------+------+---------¦
¦David Gershuny ¦ ¦ ¦40 ¦200 ¦ ¦ ¦
+---------------+-------+-----------+------+----------+------+---------¦
¦Eva Gershuny ¦ ¦ ¦40 ¦200 ¦ ¦ ¦
+---------------+-------+-----------+------+----------+------+---------¦
¦Louis Rudman ¦ ¦ ¦24 ¦80 ¦ ¦ ¦
+---------------+-------+-----------+------+----------+------+---------¦
¦Louis Lomas ¦ ¦ ¦24 ¦80 ¦ ¦ ¦
+----------------------------------------------------------------------+
The elected officers of the transferor corporations were as follows:
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