Afshar v. Commissioner

Decision Date18 May 1981
Docket NumberDocket No. 6099-72.
Citation41 TCM (CCH) 1489,1981 TC Memo 241
PartiesNasser G. Afshar v. Commissioner.
CourtU.S. Tax Court

Helen E. Marmoll, for the petitioner. Ruud L. Duvall, for the respondent.

Memorandum Findings of Fact and Opinion


The Commissioner determined the following deficiencies in, and additions to, the petitioner's Federal income taxes:

                                                           Additions to Tax
                                                    Sec. 6653(b)       Sec. 6654
                  Year               Deficiency     I.R.C. 19541  I.R.C. 1954
                  1958 ..........    $73.250.18      $36.625.09         $2,047.04
                  1959 ..........     15,001.61        7,500.81            415.04
                  1960 ..........     45,489.89       22,744.95          1,267.67
                  1961 ..........     21,188.58       10,594.29            587.23
                  1962 ..........     21,867.73       10,933.87            605.98

The issues for decision are: (1) Whether the petitioner incurred business, travel, and entertainment expenses in excess of the amounts allowed by the Commissioner; (2) whether there was any underpayment of tax due to fraud within the meaning of section 6653(b); and (3) whether the petitioner is liable for additions to tax under section 6654 for underpayment of estimated taxes.

Findings of Fact

Some of the facts have been stipulated, and those facts are so found.

The petitioner, Nasser G. Afshar, resided in Alexandria, Va., at the time he filed his petition in this case. The petitioner was born in Teheran, Iran. He became a naturalized citizen of the United States in 1952, and since that time, he has resided in the United States. He is married to a native-born U.S. citizen. During the years in issue, 1958 through 1962, the petitioner lived with his wife and children in Glen Ridge, N.J. Since 1969, the petitioner has resided in Virginia.

The petitioner stipulated that during the years in issue he received gross income from the following persons in the amounts shown:

                         Payor                            1958           1959          1960           1961          1962
                  Fluor Corporation, Ltd. ........     $124,811.72    $27,568.82     $13,753.34       —              —
                  D.W. Winkelman Co., Inc. .......          —          22,405.00      28,874.32       —              —
                  Grant M. Scruggs, Jr. ..........          —           2,000.00          —           —              —
                  Johnson, Drake & Piper, Inc ....          —              —           3,600.00       —              —
                  J.E. Greiner Company ...........          —              —              —       $ 1,000.00    $27,500.00
                  Procon, Incorporated ...........          —              —          27,000.00    12,500.00      1,000.00
                  C.J. Langenfelder & Son, Inc. ..          —              —          20,000.00    10,000.00         —
                  Panama-Williams Corporation ....          —              —              —        19,500.00     5,000.00
                  Brookhart & Tyo. ................         —              —              —           —         11,500.00
                  Missouri Valley
                   Dredging Company ...............         —              —              —           —          5,000.00
                                                        ___________   __________     __________   __________   __________
                        Total .....................     $124,811.72   $51,973.82     $93,227.66   $43,000.00   $50,000.00

In addition, in 1961, the petitioner received dividend income of $63.75 and had short-term capital gains of $8,989.82. In 1960, he had a short-term capital loss of $1,000.00. Such dividend income, gains, and loss were the result of transactions through a brokerage account he maintained with H. Hentz & Co., a New York City brokerage firm. In 1957, the petitioner had been discharged in bankruptcy.

Fluor Corporation

In late 1957, the petitioner contacted Richard Lyon, the international sales manager for Fluor Corporation, Ltd. (Fluor), to inquire if Fluor would be interested in building a refinery for the Iranian government. Fluor was a large international engineering and construction firm headquartered in Los Angeles, Calif. Mr. Lyon arranged a meeting between the petitioner and Mr. Ellsworth, the executive vice president of the Engineering and Construction Division of Fluor. At such meeting, the petitioner represented that he had been selected by the Iranian government to secure a responsible contractor to build a contemplated oil refinery at Qum, Iran, where oil had recently been discovered. The purpose of such meeting was to determine whether Fluor was interested in pursuing the possibility.

Subsequent meetings were held between the petitioner and senior officers of Fluor at Fluor's Los Angeles offices. Such meetings were also exploratory in nature. The petitioner assured Fluor's officers that he was at least 90 percent sure that with his support Fluor would be selected to build the Qum refinery. Fluor's officials agreed that if the petitioner could secure such project, or if the Iranian government would accept Fluor for the project, Fluor would pay the petitioner a reasonable commission. The petitioner indicated that he desired a 2½ percent commission on the entire contract price. However, no specific figure was ever agreed upon and no written agreement was ever made. Orally, the petitioner agreed that he would bring a negotiating team from Teheran to Los Angeles, at his own expense, and that his commission, if any, would depend on the size and type of the contract obtained by Fluor.

In February 1958, the petitioner telephoned Mr. Ellsworth and requested $8,092.34 to cover the purchase price ($7,055.72) and shipping charges ($1,036.62) for two automobiles. The petitioner claimed that it was customary when a project is awarded to make such a gift to the person responsible for giving the contract. Fluor complied with such request. In February 1958, the petitioner purchased two 1958 model Chevrolets: a sport sedan and a Corvette. The purchase price for such automobiles was $7,055.72.

In February 1958, the petitioner again telephoned Mr. Ellsworth and requested $5,500, which was paid to him. Subsequently, when the petitioner claimed that he needed more funds, he telephoned Mr. Ellsworth or Mr. Lyon and requested that they send him money. Such funds were to be used by the petitioner to cover his expenses in bringing the Iranian negotiating team to Los Angeles. On a monthly basis, such payments ranged from a low of $1,000 in October 1959 to a high of $47,000 in April 1958. From February 1958 through March 1960, Fluor paid to the petitioner $105,500.

In February 1958, at the petitioner's request, Fluor furnished an air travel card to the petitioner. From April 1958 through September 1960, Fluor paid charges on such travel card of $52,433.57. Such charges ranged from a low of $350.25 in September 1958 to a high of $14,197.00 in May 1958.

On April 8, 1958, as a result of the petitioner's representations, Fluor's officers began making tentative arrangements for a party of Iranians who were to arrive in Los Angeles during the week of April 14th. On April 14, 1958, the petitioner sent Mr. Ellsworth a telegram which stated: "EVERYTHING IS ARRANGED ARRIVING NEW YORK * * * ALONE WILL CALL YOU AFSHAR." On or about April 17, 1958, the petitioner advised Mr. Lyon that the Iranian party had been delayed due to a change in the Shah's marital status. He advised Mr. Lyon that the negotiating party would arrive in Los Angeles the end of April. The party was to consist of Iran's European ambassador and head of its United Nations delegation in Europe, the Minister of Finance, the speaker of the lower house of government, two Iranian senators, and a director of the Iranian National Oil Company. The petitioner also represented to Mr. Lyon that the Shah's daughter and the ex-prime minister's son might accompany the negotiating party.

On April 25, 1958, the petitioner sent a telegram to Mr. Ellsworth that there would be a delay in the negotiating party's arrival. On May 6, 1958, Mr. Lyon received a telegram from the petitioner which stated: "I WILL CALL YOU DATE OF OUR ARRIVAL SOON. DO NOT BE CONCERNED LATE ARRIVAL EVERYTHING FINE." The petitioner continued to advise Fluor's officers that the party would be arriving shortly. The expected arrival date was changed to October, then to November, to December 1958, and on into 1959. The negotiating party never arrived in Los Angeles; nor did the petitioner ever produce any Iranian officials to discuss the proposed oil refinery contract.

In 1960, Fluor's officers informed the petitioner that they were not going to make further payments to him; the last such payment was made in March 1960. However, after Fluor terminated cash payments to the petitioner, he continued to use the air travel card. Flour asked that such travel card be returned, but the petitioner continued to use it after such request was made. Finally, Mr. Ellsworth threatened that if the petitioner did not return the card, Fluor was going to refuse to honor any further charges on it. Fluor refused to make further payments to the petitioner because its officers came to the conclusion that he was unable to deliver a contract or to do what he said he could do. An internal memo of Fluor dated November 1960 concluded that the petitioner was "no more than an adventurer." Also, Fluor's officers were aware that charges had been...

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