Carver v. United States
| Decision Date | 20 June 1969 |
| Docket Number | 383-65.,No. 382-65,382-65 |
| Citation | 412 F.2d 233 |
| Parties | A. R. CARVER and A. R. Carver, as Executor of the Estate of Kate W. Carver, Deceased v. The UNITED STATES. A. R. CARVER, as Alleged Transferee of Assets of Chase National Company, Inc. v. The UNITED STATES. |
| Court | U.S. Claims Court |
George W. Ericksen, Tampa, Fla., attorney of record, for plaintiff; Macfarlane, Ferguson, Allison & Kelly, Tampa, Fla., and Stanley W. Rosenkranz, Tampa, Fla., of counsel.
Donald T. Fish, Washington, D. C., with whom was Asst. Atty. Gen. Johnnie M. Walters, for defendant; Philip R. Miller and Joseph Kovner, Washington, D. C., of counsel.
Before COWEN, Chief Judge, and LARAMORE, DURFEE, DAVIS, COLLINS, SKELTON and NICHOLS, Judges.
*
These cases were consolidated for trial, and at the trial the issue of liability was severed from the determination of the amount of recovery, if any.
It is our opinion that the plaintiff1 is entitled to a partial recovery.
In case No. 382-65, the plaintiff, A. R. Carver, sues as an individual taxpayer, and as executor of the estate of his deceased wife, Kate W. Carver (by reason of the filing of joint federal income tax returns by husband and wife during the years in question, 1955 and 1956).
In case No. 383-65, the same A. R. Carver is plaintiff, suing as the alleged transferee of assets of Chase National Company, Inc. (hereinafter referred to as Chase National). The years involved are 1954-1958.
Recovery is sought of the following amounts of income tax, penalties, and interest:
______________________________________________________________________________
Year Tax Penalties Interest Total
______________________________________________________________________________
Case No. 382-65
1955 .................... $32,797.50 ........... $12,668.56 $45,466.06
1956 .................... 12,399.69 ........... 4,090.97 16,490.66
________________________________________________
Total .................. 45,197.19 ............ 16,759.53 61,956.72
================================================
Case No. 383-65
1954 .................... 459.92 114.98 203.04 777.94
1955 .................... 24,079.20 6,019.80 9,185.72 39,284.72
1956 .................... 9,111.11 2,277.78 2,929.03 14,317.92
1957 .................... 1,612.53 403.13 421.65 2,437.31
1958 .................... 913.97 228.49 184.14 1,326.60
________________________________________________
Total ................ 36,176.73 9,044.18 12,923.58 58,144.49
================================================
Combined total ....... 81,373.92 9,044.18 29,683.11 120,101.21
______________________________________________________________________________
Chase National was incorporated under the laws of Florida in 1925. Mr. Carver was one of the incorporators. Its purpose was to obtain financing for the construction of a combination bank and office building in Lakeland, Florida. Upon deterioration of economic conditions, the original plan was abandoned. Four years later the other incorporators assigned their stock subscription rights to Mr. Carver. Thereafter, from 1929 into 1957, he used the corporate name in a variety of transactions related to his law practice and personal investments in real estate and real estate mortgages.
Throughout the period of Mr. Carver's use of Chase National, the corporation was in reality a mere shell. The issuance by the State of Florida of a corporate charter gave it status as a legal entity, but no stock certificates were issued, no directors or officers were elected, no books were kept, and no federal tax returns were filed.
On June 15, 1957, all real property with record title in Chase National, and all notes, claims, liens, leases, and mortgages shown of record to be in the name of Chase National were formally conveyed to Mr. Carver. On April 29, 1960, the corporation was officially dissolved by proclamation of the Governor for failure to pay the state capital stock tax.
The parties have agreed to the following statement (as contained in the next succeeding paragraph) of the position of the Commissioner of Internal Revenue in assessing the taxes for which plaintiff is suing, although plaintiff does not accept the contents of the statement as factually accurate in relation to Chase National.
With respect to the calendar years 1954-1958 (earlier years were barred by the statute of limitations), the Commissioner of Internal Revenue determined that Chase National was an active business corporation engaged in real property and loan transactions. As such, he determined that Chase National should have reported as taxable income or loss any gains or losses from the sale of real property in its name and any interest income received from borrowers, excepting certain transactions carried out in the name of Chase National by Mr. Carver for his clients (as to which no taxes were assessed).
The Commissioner assessed income tax deficiences (plus interest) against Mr. and Mrs. Carver as recipients of dividend income from Chase National in the amounts that he was treating as income to Chase National. These amounts had been paid either directly or indirectly (through a bank account listed in the name of Chase National) to the Carvers during the years 1954, 1955, and 1956. By way of offset, the Commissioner recognized that the Carvers had previously reported this income (from interest and on gains and losses from the sale of the real estate) on their joint federal income tax returns. The income tax deficiencies and interest assessed against the Carvers were as follows:
_______________________________________________________________________
Year Income tax Interest Total
_______________________________________________________________________
1954 ................... $ 133.10 $ 31.94 $ 165.04
1955 ................... 32,797.50 12,668.56 45,466.06
1956 ................... 12,399.69 4,090.97 16,490.66
____________________________________________
Total .............. 45,330.29 16,791.47 62,121.76
_______________________________________________________________________
The Commissioner also assessed income tax deficiencies (plus interest and penalties for failure to file returns) against Mr. Carver as transferee of Chase National's assets in the following amounts:
_______________________________________________________________________
Year Income tax Penalties Interest Total
_______________________________________________________________________
1954 .......... $ 459.92 $ 114.98 $ 203.04 $ 777.94
1955 .......... 24,079.20 6,019.80 9,185.72 39,284.72
1956 .......... 9,111.11 2,277.78 2,929.03 14,317.92
1957 .......... 1,612.53 403.13 421.65 2,437.31
1958 .......... 913.97 228.49 184.14 1,326.60
____________________________________________________
Total ..... 36,176.73 9,044.18 12,923.58 58,144.49
_______________________________________________________________________
Because of various adjustments not here in issue, overassessments resulted in 1957 and 1958 in the amounts of $100.82 and $258.75, respectively.
All assessed amounts were paid. Timely claims for refund were filed (except for the amount of $165.04 assessed against Mr. and Mrs. Carver for the year 1954). The claims for refund were denied, and the present actions were timely instituted for the claimed amounts, plus interest.
Defendant contends (1) that the activities of Chase National and the purposes underlying Mr. Carver's use thereof warranted its being taxed as a viable corporate entity; (2) that Mr. Carver's receipt of Chase National's property in liquidation warranted his being treated as a transferee of assets of the corporation, so that its unpaid tax obligations could be collected from him; and (3) that amounts received by Mr. Carver from proceeds of sales and loan transactions by Chase National constituted constructive dividend income to him from Chase National.
Plaintiff asserts that under Florida law Chase National, during its entire existence, never owned any assets and was never in receipt of income, earnings, or profits.
The threshold issue, therefore, is whether or not the Commissioner of Internal Revenue was warranted in treating Chase National as a viable, taxable, corporate entity.
For the proposition that the Commissioner was so warranted, defendant relies on the landmark case of Moline Properties, Inc. v. Commissioner of Internal Revenue, 319 U.S. 436, 63 S.Ct. 1132, 87 L.Ed. 1499 (1943) and a line of cases resting thereon.2
The corporation in Moline was organized as a security device in the purchase of real property, with control of it in the lender. When the debt was paid, the stock reverted to the individual who had organized the corporation, and he continued it to hold title to the real estate. No books were kept by the corporation and it had no bank account. Following payment of the debt and the reverter of the stock, the corporation (1) refinanced the mortgage, (2) leased a portion of the property for a parking lot, and (3) ultimately sold the property for a substantial gain. The corporation contended that the gain was taxable to the sole stockholder and not to the corporation. The court rejected its contentions of alter ego and agency3 and held the gain taxable to the corporation.
Defendant submits that, as specifically stated in Moline, and as confirmed by the other...
To continue reading
Request your trial
-
Dooley v. Commissioner
...engaged in business activities subsequent to formation. This is a disjunctive inquiry. Carver v. United States 69-2 USTC ¶ 9476, 412 F. 2d 233 (Ct. Cl. 1969). If either prong of the two-pronged inquiry is satisfied, the corporation's tax existence is established. This court and others have ......
-
Ford Motor Co. v. United States
...of the corporation, but by the owners acting individually.") (citing National Carbide Corp., 336 U.S. at 433-34; Carver v. United States, 412 F.2d 233, 239 (Ct. Cl. 1969); Tomlinson v. Miles, 316 F.2d 710, 714 (5th Cir. 1963)). As the Court of Claims explained:That a corporation is regarded......
-
McDonald v. Commissioner
...analysis is disjunctive, so that if either part is satisfied, the corporation's tax existence is established. Carver v. United States, 188 Ct. Cl. 202, 412 F.2d 233 (1969); Dooley v. Commissioner, supra. Furthermore, the corporate business purpose or the quantum of business activity require......
-
Stoody v. Comm'r of Internal Revenue
...entity (if found to exist) should be disregarded for purposes of Federal taxation is a question of Federal law. Carver v. United States, 412 F.2d 233 (Ct. Cl. 1969). Petitioner's cases covering instances where the corporate entity was disregarded under State law for the benefit of creditors......
-
The Treatment of Nominee Corporations for Income Tax Purposes
...1984). 68. See Vaughn v. United States, 740 F.2d 941, 947 (Fed. Cir. 1984), aff'g 3 CI. Ct. 316 (1983). 69. See Carver v. United States, 412 F.2d 233, 240 (CI. Ct. 1969) (the Pipkin 70. 759 F.2d 879 (Fed. Cir. 1985), aff'g in part and rev'g in part 3 CI. Ct. 457 (1983). 71. Id. at 881-82. 7......
-
Representing an Investor in a Real Estate Syndication
...Service that the income from the property is taxable to the corporation. See Moline Properties, Inc., 319 U.S. 436 (1943); A. R. Carver, 412 F.2d 233(Ct.Cl. 1969). 6 Senate Bill 35, passed by the 1972 Session of the Colorado Legislature. 7 Section 104-2-7, Colorado Revised Statutes, 1963. 8......