73 T.C. 215 (1979), 2087-77, Goodwin v. C.I.R.

Docket Nº:2087-77.
Citation:73 T.C. 215
Opinion Judge:SCOTT, Judge:
Attorney:David C. Goodwin, pro se. James F. Kearney, for the respondent.
Judge Panel:FEATHERSTON, J., dissenting: DRENNEN, TANNENWALD, and HALL, JJ., agree with this dissenting opinion.CHABOT, J., dissenting:
Case Date:October 31, 1979
Court:United States Tax Court

Page 215

73 T.C. 215 (1979)




No. 2087-77.

United States Tax Court

October 31, 1979

Held: 1. Conviction of petitioner under sec. 7206(1), I.R.C. 1954, for the same years involved in the instant case in which an addition to tax under sec. 6653(b), I.R.C. 1954, is asserted estops him from denying that his returns were false and fraudulent and that there was an omission of income from his return in each year;

2. A part of the underpayment in petitioner's tax for each of the years here in issue was due to fraud; and

3. Amount of income which petitioner failed to report in each year determined from the record.

David C. Goodwin, pro se.

James F. Kearney, for the respondent.

Page 216

SCOTT, Judge:

Respondent determined deficiencies in Federal income tax and additions to tax under section 6653(b)[1] (fraud) for the calendar years and in the amounts listed below:

Additions to tax
Year Deficiency sec. 6653(b)
1968 $1,926.30 $963.15
1969 2,379.31 1,189.65
1970 2,666.57 1,333.29
In his answer, respondent asserts that the addition to tax for 1969 should be increased by $481.18, for a total addition to tax of $1,670.83 for 1969. The following three issues are presented for our consideration: (1) Whether petitioner is estopped by his conviction of violating section 7206(1) by filing false returns which he knew substantially understated his total reportable income for each of the years 1968, 1969, and 1970 from denying in this case that his returns were false in that the income reported thereon was substantially understated; (2) whether there is an underpayment of tax any part of which is due to fraud for each of the years 1968, 1969, and 1970; and (3) whether petitioner failed to report income for the years in the amounts determined by respondent or in any other amounts.[2] FINDINGS OF FACT Some of the facts have been stipulated; the stipulations and the stipulated exhibits are incorporated herein by this reference. When the petition in this case was filed, petitioner was a legal resident of Trenton, N.J. During the years in issue, petitioner was a committeeman and during part of this time mayor of Hamilton Township in Mercer County, N.J., and was in charge of the road department of that township. He was also the Chief of the Bureau of Recreation of the State of New Jersey. He had no other gainful employment although he held unpaid positions as an officer of the American Legion and State Director of American Legion Baseball. On February 13, 1974, a United States grand jury for the Page 217 District of New Jersey, sitting at Newark, returned an indictment against petitioner charging him with five counts of extortion involving vendors and contractors selling to Hamilton Township during 1969 and 1970, and also charging him with three counts of violating section 7206(1) for 1968, 1969, and 1970--counts VI, VII, and VIII. Count VI of the indictment is as follows: COUNT VI That on or about the 9th day of February, 1969, in the District of New Jersey, the defendant herein: David C. Goodwin

a resident of Trenton, New Jersey, did wilfully and knowingly make and subscribe and cause to be made and subscribed, a United States Joint Income Tax Return (Form 1040) for the calendar year 1968, which was verified by a written declaration that it was made under the penalties of perjury, and which was filed with the Internal Revenue Service, which said income tax return he did not believe to be true and correct as to every material matter, in that it was stated on Line 7, Page 1, of said income tax return that total income was the sum of $18,747.68, whereas, as he then and there well knew and believed, the correct total income for the period reported was an amount substantially in excess of the reported total sum of $18,747.68.

In violation of Section 7206(1), Internal Revenue Code, Title 26, United States Code, Section 7206(1). Counts VII (relating to 1969) and VIII (relating to 1970) of the indictment are identical to count VI except as to the years involved and the dollar amount of reported income. On November 6, 1974, petitioner entered a plea of guilty to counts VI, VII, and VIII of the indictment which are alleged violations of section 7206(1). On March 19, 1975, a judgment with respect to the indictment returned on February 13, 1974, was entered against petitioner by the United States District Court, District of New Jersey. This judgment stated in part as follows:

Month Day Year
In the presence of the
attorney for the government
the defendant appeared in
person on this date 3 18 75
* * * * * * *
* * * * * * *
) GUILTY, and the court being satisfied that * * *
PLEA ) there is a factual basis for the plea, on Counts
) 6, 7, and 8.
* * * * * * *
) Defendant has been convicted as charged of the
FINDING & ) offense(s) of filing false and fraudulent income
JUDGMENT ) tax returns.
) 26:7206(1)
The court asked whether defendant had anything to
say why judgment should not be pronounced. Because
no sufficient cause to the contrary was shown, or
appeared to the court, the court adjudged the
defendant guilty as charged and convicted and
ordered that: The defendant is hereby committed to
the custody of the Attorney General or his authorized
SENTENCE ) representative for imprisonment for a period of
OR ) two (2) years on Count 6, execution of term sentence
PROBATION ) suspended and the defendant is placed on probation
ORDER ) for a period of two (2) years from this date. It is
further adjudged that the defendant do pay a fine of
$2,000.00 by the end of the period of probation. It
is further ordered and adjudged that imposition of
sentence on Count 7 and 8 is hereby suspended.
It is further ordered and adjudged that Counts
1, 2, 3, 4, and 5 are hereby dismissed.
Page 218 During 1968, 1969, and 1970, petitioner made it known to some persons seeking to do business with Hamilton Township that they would have to make contributions " to the party" (i.e., to the Harry E. Lieberman Democratic Club of Hamilton Township, hereinafter sometimes referred to as the Democratic Club) in order to get the township's business. Sometimes petitioner specified the amount. Sometimes petitioner stated that the amount was to be paid to him in cash. In a number of cases, the amounts so paid to petitioner were then paid by him to A. Harry Glogoff, treasurer of the Democratic Club. Some of the amounts so paid to petitioner were acknowledged by letters from the Democratic Club to the payors. Table I shows some of the sales of equipment, materials, and services made by vendors or contractors to Hamilton Township during the years in issue:
Date Vendor or contractor Amount
On or about Mar. 19, 1968 North Jersey Equipment Co. $15,460.00
On or about Apr. 23, 1968 W. E. Timmerman Co. 15,460.00
Various dates in 1968 Barrett Paving Co., Inc. [1]198,105.69
On or about July 2, 1969 Colonial Garage, Inc. 37,281.00
Various dates in 1969 Barrett Paving Co., Inc. [1]129,811.27
On or about May 7, 1970 North Jersey Equipment Co. 16,175.00
On or about June 10, 1970 Lynn Equipment Co. 29,900.00
On or about July 23, 1970 Colonial Garage, Inc. 13,350.00
Various dates in 1970 Barrett Paving Co., Inc. [1]124,643.19
Page 219 Respondent, in the notice of deficiency, determined petitioner received unreported income in the form of kickbacks from companies doing business with Hamilton Township, as indicated in table II:
Date Payor Amount
Mar. 19 North Jersey Equipment Co $750.00
May 5 W. E. Timmerman Co 750.00
May 29 Barrett Paving Co., Inc 701.25
July 24 do 1,371.50
Aug. 22 do 587.50
Sept. 25 do 736.37
Nov. 27 do 1,050.00
Dec. 17 do 500.00
May 28 Barrett Paving Co., Inc $690.00
June 25 do 700.00
Aug. 1 Colonial Garage, Inc 2,355.00
Aug. 14 Barrett Paving Co., Inc 1,500.00
Oct. 8 do 500.00
Nov. 3 do 1,000.00
Apr. 30 North Jersey Equipment Co $800.00
May 21 Barrett Paving Co., Inc 200.00
June 19 Lynn Equipment Co., Inc 1,500.00
July 8 Barrett Paving Co., Inc 1,150.00
Aug. 4 Colonial Garage, Inc 2,670.00
Aug. 13 Barrett Paving Co., Inc 1,000.00
Nov. 25 do 800.00
Page 220 Respondent's employees prepared a schedule showing contributions to the Democratic Club that were acknowledged by letters and which appear to have been deposited in a checking account of the Democratic Club, as indicated in table III:
Table III
Date Party involved Amount Check Cash
Aug. 5, 1968 Patrick Cleary $25 $25
Aug. 8, 1968 Barrett Paving Co., Inc 450 450
Aug. 29, 1968 Gil Frazier-Scheideler Equipment Co., Inc 250 250
Oct. 7, 1968 Colonial Garage, Inc 500 500
Oct. 7, 1968 Albert E. Barrett 1,000 1,000
Oct. 7, 1968 George Tindall 100 100
Oct. 7, 1968 Parsons, Brinckerhoff, Quade & Douglass, Engineers 400 $400
Oct. 7, 1968 Michael Bradley 200 200
Oct. 7, 1968 Shelly Acuff 800 800
Oct. 7, 1968 Joseph Leto 100 100
Nov. 12, 1968 Committeeman David Goodwin 100 100

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