54 T.C. 1448 (1970), 3504-67, Romanelli v. C.I.R.

Docket Nº:3504-67.
Citation:54 T.C. 1448
Opinion Judge:FAY, Judge:
Party Name:HUGO ROMANELLI AND NORMA ROMANELLI, PETITIONERS v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT
Attorney:Max A. Reinstein, for the petitioners. Robert H. Burgess, for the respondent.
Judge Panel:DAWSON, J., concurring: RAUM, FORRESTER, and IRWIN, JJ., agree with this concurring opinion. TANNENWALD, J., concurring: FORRESTER and STERRETT, JJ., agree with this concurring opinion. QUEALY, J., dissenting:
Case Date:July 02, 1970
Court:United States Tax Court
 
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Page 1448

54 T.C. 1448 (1970)

HUGO ROMANELLI AND NORMA ROMANELLI, PETITIONERS

v.

COMMISSIONER OF INTERNAL REVENUE, RESPONDENT

No. 3504-67.

United States Tax Court

July 2, 1970

Page 1449

Max A. Reinstein, for the petitioners.

Robert H. Burgess, for the respondent.

Petitioner Hugo Romanelli owned and operated a tavern from 1961 through 1964, the taxable years in question. On Oct. 29, 1964, based upon the affidavit of a special agent who had investigated petitioner's tavern in an undercover capacity, a search warrant was issued authorizing the search of such tavern. The search warrant was founded upon the belief that petitioner had engaged in wagering activities in violation of secs. 4412 and 4905, I.R.C. 1954. On the same day the warrant was issued four special agents of the Internal Revenue Service entered petitioner's premises, served the search warrant upon him, and proceeded to search the premises for wagering paraphernalia. Customers who were present at the time were required to leave. While the search was being conducted petitioner was questioned extensively for about 45 minutes by one of the agents concerning his wagering activities. Petitioner did not receive warnings regarding his constitutional rights to remain silent or to counsel prior to the questioning. Held:

1. The search warrant was valid despite an irregularity in the number address of petitioner's tavern which was erroneously stated to be 5152 rather than 5158.

2. The search warrant, issued in 1964 and based upon violation of secs. 4412 and 4905, I.R.C. 1954 was valid. The Supreme Court decision of Marchetti v. United States, 390 U.S. 39 (1968), did not retroactively remove probable cause for its issuance. Evidence seized pursuant to said search warrant is therefore admissible.

3. The instant proceeding determining whether petitioners are liable for additions to tax under sec. 6653(b), I.R.C. 1954, is a civil proceeding. Thus, statements of petitioner to special agents during the course of the search are admissible in the instant proceeding. John Harper, 54 T.C. 1121 (1970), followed.

4. Petitioners are liable for additions to tax under sec. 6653(b), I.R.C. 1954.

FAY, Judge:

Respondent determined deficiencies in petitioners' income taxes as follows:

Additions
to tax,
sec. 6653(b),
Year Amount I.R.C. 1954
1961 $545.56 $272.78
1962 715.42 357.71
1963 974.53 487.27
1964 1,807.86 903.93
The issues for decision are (1) the amount, if any, of petitioners' income from gambling operations during the taxable years in question; and (2) whether petitioners are liable for additions to tax under section 6653(b)[1] for the fraudulent failure to report income. FINDINGS OF FACT Some of the facts were stipulated. The stipulation of facts, together with exhibits attached thereto, is incorporated herein by this reference. Petitioners Hugo and Norma Romanelli are husband and wife. Petitioners resided in Chicago, Ill., at the time of the filing of their petition in this case. For their taxable years 1961 through 1964, petitioners filed their joint Federal income tax returns on the calendar year basis with the district director of internal revenue, Chicago, Ill. Norma Romanelli is a petitioner in this case only because she filed a joint return with her husband. Hereinafter only Hugo Romanelli will be referred to as petitioner. In 1964, as part of an area investigation of wagering activities in the vicinity of Chicago in connection with the operation of restaurants, Page 1450 taverns, and the like, the Internal Revenue Service commenced an undercover investigation of Parkside Liquors, a tavern owned and operated by petitioner from 1955 through May 1966. To this end, special agents of the Internal Revenue Service, Intelligence Division began visiting petitioner's tavern in February 1964. Between February and October 29, 1964, at least three special agents had occasion to place wagers with petitioner and to observe others doing the same. Special Agent Donald Schultz placed between 40 and 50 horserace wagers with petitioner at Parkside Liquors during the 9-month period. In addition, he placed wagers with petitioner over the telephone during this period. Special Agent Stewart J. Hoak placed approximately 15 wagers on a weekly basis with petitioner from July 22, 1964, to October 29, 1964. Thereafter, on November 12 and November 19, he placed 2 additional wagers with petitioner. Special Agent Norbert L. Ruzycki placed 6 wagers with petitioner in the month of October 1964. On October 29, 1964, a search warrant was issued by U.S. Commissioner C. S. Bentley Pike of the U.S. District Court for the Northern District of Illinois, Eastern Division, authorizing the search of Parkside Liquors. The search warrant reads: Search Warrant UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS, EASTERN DIVISION Commissioner's Docket No. 23 Case No. 11292 UNITED STATES OF AMERICA V. PREMISES, BEING THE GROUND FLOOR OF A ONE-STORY BRICK BUILDING AT 5152 WEST IRVING PARK ROAD, CHICAGO, ILLINOIS, COMMONLY KNOWN AS PARKSIDE LIQUORS. SEARCH WARRANT To the United States Marshall or any other authorized officer Affidavit having been made before me by Norbert L. Ruzycki, a Special Agent of the Intelligence Division, Internal Revenue Service: that he has reason to believe that on the premises known as the ground floor of a one-story brick building at 5152 West Irving Park Road, Chicago, Illinois, commonly known as Parkside Liquors IN THE NORTHERN DISTRICT OF ILLINOIS there is now being concealed certain property, namely, records and wagering paraphernalia including, but not limited to, bet slips, rundown sheets, account sheets, recap sheets, United States Currency and Coin, checks, telephones, and divers other wagering paraphernalia, which have been and are being used in the business of accepting wagers Page 1451 which are being used in violation of Sections 4412 and 4905 of the Internal Revenue Code of 1954; hence, no property rights exist in said articles and things, and they are subject to seizure and forfeiture pursuant to the provisions of Section 7302, Internal Revenue Code of 1954 and as I am satisfied that there is probable cause to believe that the property so described is being concealed on the premises above described and that the foregoing grounds for application for issuance of the search warrant exists. You are hereby commanded to search forthwith the place named for the property specified, serving this warrant and making the search in the daytime and if the property be found there to seize it, leaving a copy of this warrant and a receipt for the property taken, and prepare a written inventory of the property seized and return this warrant and bring the property before me within ten days of this date, as required by law. Dated this 29 day of October, 1964 (S) C. S. BENTLEY PIKE U.S. Commissioner As therein indicated, the issuance of the search warrant was founded upon the affidavit of Special Agent Ruzycki and his experiences during the month of October 1964 in connection with Parkside Liquors. Ruzycki stated in his affidavit that he had reason to believe that the property described in the warrant was being concealed ‘ at 5152 West Irving Park Road, Chicago, Illinois, commonly known as Parkside Liquors.’ The Post-Office address of Parkside Liquors was, in fact, 5158 West Irving Park Road, Chicago, Ill. The affiant stated as the grounds for this belief: That on five different dates in October 1964, the last date being October 22, 1964, affiant placed horse race wagers on the premises of a ground floor liquor store of a one-story brick building at 5152 West Irving Park Road, Chicago, Illinois, commonly known as the ‘ Parkside Liquors.’ On each occasion the wager was placed with a man identified as Hugo Romanelli. On each occasion after accepting the wager, Hugo Romanelli would compare the bet slip with a scratch sheet kept by a cash register in the package goods section of the premises. On each occasion the affiant observed other customers in the liquor store hand slips of paper and currency to Hugo Romanelli. On October 20, 1964, the affiant told Hugo Romanelli that he had a winner coming. The affiant then observed Hugo Romanelli walk behind the package goods counter and return a short while later with the winnings, $2.20. On October 28, 1964, the affiant examined the records of the District Director of Internal Revenue, Chicago, Illinois for all wagering tax stamps issued and for all Registration and Application Forms 11-C filed in the Chicago District, Internal Revenue Service, for the period beginning July 1, 1964, and ending June 30, 1965, and said examination of those records revealed that the premises at 5152 West Irving Park Road, Chicago, Illinois, is not registered as an address where the business of accepting wagers is conducted, nor did the records reflect that the premises is the residence address of any wagering tax stampholder in the Chicago Internal Revenue District. Although Ruzycki had visited the premises of Parkside Liquors on at least five separate occasions prior to the execution of the affidavit, Page 1452 he did not specifically recall the number address of the tavern at the time he executed the affidavit but was informed of such address by another agent. However, the name ‘ Parkside Liquors' and its location, at the corner of Laramie Avenue and West Irving Park Road, were well known to him at that time. In checking whether Parkside Liquors had...

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