Baker v. Comm'r of Internal Revenue, Docket No. 46416.
| Decision Date | 21 September 1955 |
| Docket Number | Docket No. 46416. |
| Citation | 24 T.C. 1021 |
| Parties | GEORGE H. BAKER, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. |
| Court | U.S. Tax Court |
OPINION TEXT STARTS HERE
Held, upon the facts the assessment and collection of the deficiencies and additions to tax because of fraud herein determined are not precluded by reason of a compromise within the purview of section 3761, Internal Revenue Code of 1939. Symington P. Landreth, Esq., and Bertram P. Rambo, Esq., for the petitioners.
William G. Handfield, Esq., for the respondent.
Respondent determined deficiencies in income tax and additions to tax because of fraud in the following amounts:
+--------------------------------+
¦ ¦ ¦50 per cent ¦
+----+----------+----------------¦
¦Year¦Deficiency¦addition to tax ¦
+----+----------+----------------¦
¦1944¦$682.03 ¦$1,330.83 ¦
+----+----------+----------------¦
¦1945¦638.13 ¦4,030.36 ¦
+----+----------+----------------¦
¦1946¦1,015.26 ¦9,882.60 ¦
+--------------------------------+
The additions to tax exceed the deficiencies because substantial amounts of the deficiencies were paid prior to the issuance of the notice of the notice of deficiency.
Petitioner concedes the correctness of the deficiencies in tax determined by respondent. He also concedes that each of the original returns filed for the taxable years involved was fraudulent. The only issue presented is whether the respondent is precluded from assessing and collecting the deficiencies and additions to tax by reason of a compromise.
Petitioner is an individual residing in the State of Pennsylvania. During the years 1944, 1945, and 1946 petitioner was doing business under the name of Howard Cleaners in and around Philadelphia, Pennsylvania. Petitioner filed fraudulent income tax returns for each of those years with the collector of internal revenue for the first district of Pennsylvania.
On October 15, 1947, upon advice of counsel, petitioner filed amended income tax returns for the taxable years 1944, 1945, and 1946 disclosing deficiencies in income tax, to which the petitioner added 5 per cent as self-imposed penalties for negligence. The amounts of such deficiencies and penalties, together with interest to October 15, 1947, for each of those years were as follows:
+---------------+
¦1944¦$2,385.44 ¦
+----+----------¦
¦1945¦8,498.86 ¦
+----+----------¦
¦1946¦20,343.70 ¦
+---------------+
On the same date petitioner paid the tax, penalties and interest shown on the amended returns as due for the years 1944 and 1945 and made a partial payment of $5,343.70 on the amount due for 1946.
On February 11, 1949, the United States Government filed a tax lien against petitioner for the amount of $14,988.55 in the Office of the Prothonotary of the Courts of Common Pleas, Philadelphia, Pennsylvania, and in the Office of the Clerk of the United States District Court for the Eastern District of Pennsylvania.
Both before and after the filing of these liens Thomas J. Clary, now Judge of the United States District Court for the Eastern District of Pennsylvania and then one of petitioner's counsel, had several conversations with Edward A. Dooley (now deceased), Chief Field Agent of the Bureau of Internal Revenue in Charge of Collections, concerning settlement of the balance owing for the year 1946. Clary told Dooley that if petitioner's assets were sold on levy, the Government would not get more than 35 or 40 per cent of the tax due. He further explained that petitioner could borrow enough money from the Broad Street Trust Co. of Philadelphia to pay the balance due together with accrued interest if the bank could be assured no fraud penalty would be asserted. Dooley was specifically asked to check with his superiors in Washington so that Clary would have the assurance from him that no fraud penalty would be imposed.
Sometime in late April or early May 1949 Clary and Symington Landreth, also an attorney for petitioner, conferred with Dooley and an internal revenue agent named Donnelly. At that conference Dooley orally assured Clary that no fraud penalty would be imposed on petitioner. Petitioner's counsel left the conference confident that Dooley had full authority from his superiors to give that assurance. Bertram P. Rambo, another of petitioner's attorneys, negotiated the loan with the bank solely on the strength of the assurance given to Clary. Rambo had no memorandum or statement from any Treasury official to the effect that such assurance had been given.
A check in the amount of $15,341.12 drawn on the account of the firm of Rambo, Knox and Landreth, dated May 19, 1949, was mailed to Chief Field Deputy E. A. Dooley. The payment was accepted, the check cashed, and the liens discharged by the Government in June 1949.
Subsequently petitioner was indicted in the United States District Court for the Eastern District of Pennsylvania for attempted evasion of income taxes for the years 1944, 1945, and 1946. On February 6, 1951, upon his plea of nolo contendere, petitioner was given a suspended sentence and 3 years probation and was fined $10,000.
A statutory notice of deficiency was mailed to petitioner on October 16, 1952, determining deficiencies in income tax for the years 1944, 1945, and 1946 in the aggregate amount of $2,335.42 and additions to tax under section 293(b), Internal Revenue Code of 1939, in the net aggregate amount of $13,836.18 ($15,243.79 less $1,407.61).
Petitioner filed fraudulent income tax returns containing substantial understatements of income for each of the years 1944, 1945 and 1946. Thereafter, upon advice of counsel and after an investigation had been begun by internal revenue agents, petitioner filed amended returns disclosing additional income and deficiencies in tax, to which he added 5 per cent as penalties for negligence and interest to October 15, 1947, the date of filing. On the same date he paid all the tax, penalty, and interest shown thereon for the years 1944 and 1945 and a portion of tax for the year 1946. In May 1948, after counsel for petitioner had been assured by one of the internal revenue agents that, if petitioner paid the balance of the tax, penalty, and interest shown on the amended return, no fraud penalties would be imposed on him, petitioner paid the balance.
Petitioner contends that such assurance and payment constituted a compromise and settlement of all his tax liabilities for the years 1944, 1945, and 1946, by reason of which respondent is...
To continue reading
Request your trial
-
Webb v. Commissioner
...Petitioner may have assumed that the revenue agent and section chief had authority to bind the Commissioner. See Baker v. Commissioner [Dec. 21,234], 24 T.C. 1021, 1024 (1955). However, it is the responsibility of those dealing with a Government agent to determine the extent of that agent's......
-
Estate of Bommer v. Commissioner, Docket No. 15485-94.
... ... On or about December 26, 1991, Revenue Agent Donald Grigsby notified counsel for petitioner of the ... On March 12, 1992, the District Director of Internal Revenue, Cincinnati, Ohio, issued Letter 627 (DO), entitled ... 7, 1956); George H. Baker [Dec. 21,234], 24 T.C. 1021, 1024 (1955); and Earl C. Parks ... ...
-
Boulez v. Comm'r of Internal Revenue
...orders, revenue procedure, and regulations. At best, such counsel may have assumed that McGowan had such authority (see Baker v. Commissioner, 24 T.C. 1021, 1024 (1955)), but this is simply not enough to confer the necessary authority on McGowan. It has long been settled that “persons deali......
-
Estate of Meyer v. Comm'r of Internal Revenue, Docket No. 2860-71.
... ... 7, 1965); [58 T.C. 71] Bennett v. United States, 231 F.2d 465 (C.A. 7, 1956); George H. Baker, 24 T.C. 1021, 1024 (1955); and Earl C. Parks, 33 T.C. 298, 302 (1959), acq. 1960-1 C.B. 5. That ... ...