Crawford v. Comm'r of Internal Revenue (In re Estate of Arnett)
| Decision Date | 31 October 1958 |
| Docket Number | Docket No. 58343. |
| Citation | 31 T.C. 320 |
| Parties | THE ESTATE OF THOMAS E. ARNETT, DECEASED, THOMAS H. CRAWFORD, JR., ADMINISTRATOR C.T.A. AND ESTATE OF CLARA BELLE ARNETT, DECEASED, THOMAS H. CRAWFORD, JR., ADMINISTRATOR, PETITIONERS, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. |
| Court | U.S. Tax Court |
OPINION TEXT STARTS HERE
Edwin M. Slote, Esq., for the petitioners.
Robert O. Rogers, Esq., for the respondent.
One of the decedents, who were husband and wife, brought suit in 1947 to quiet title and to obtain an accounting from profits against oil companies and individuals who were operating a mineral interest to which the decedent held title. A District Court in 1948 in an interlocutory decree adjudged title to have been in the decedent, ordered an accounting of the defendants' profits, and appointed conservators to operate the interest until the litigation was terminated and judgment paid. The court also allowed the defendants to put in evidence of the innocence of their trespass. They were in a final decree adjudged innocent trespassers and permitted a setoff in the amount of their operation expenses. The decedent received his recovery in 1951 which consisted of the net profits from the trespassers' operations, interest on this judgment, net profits from the conservators' operations, and discounts earned by the trespassers and conservators for prompt payments during the period of their operations. From this recovery attorneys' fee were paid. Held:
1. The administrator is properly before this Court.
2. The decedents were entitled to percentage depletion deductions with regard to the gross profits from the operation of the mineral interest.
3. Said gross profits included costs of development and operation paid by trespassers.
4. Said gross profits did not include interest and discounts.
5. One-half of attorneys ‘fees deductible as properly allocable to collection of income.
On March 9, 1955, respondent mailed a statutory notice of deficiency addressed to Mr. Thomas E. Arnett and Mrs. Clara Belle Arnett (husband and wife) at an address in Jacksonville, Florida, in which he determined a deficiency of $2,031.34 in their income tax liability for the year ended December 31, 1951, arising by reason of his disallowance of a deduction claimed by the named taxpayers on account of a loss from the operation of a farm and held by respondent to constitute a personal loss not deductible for income tax purposes. A petition was filed herein on June 8, 1955, in which the petitioners named were ‘The Estate of Thomas E. Arnett, Deceased, Thomas H. Crawford, Jr., Administrator C.T.A. and Estate of Clara Belle Arnett, Deceased, Thomas H. Crawford, Jr., Administrator dbn.’ The petition alleged inter alia as follows:
The said Thomas E. Arnett died on or about the 21st day of August, 1954; and the said Thomas H. Crawford Jr., is the duly qualified and acting Administrator C.T.A. of the estate of said decedent. The said Clara Belle Arnett died on or about the 25th day of February 1953; and the said Thomas H. Crawford Jr., is the duly qualified and acting Administrator D.B.N. of the estate of the said decedent.
The petition alleged that the determination of tax set forth in respondent's notice of deficiency was based upon error in that respondent erred in his determination that the loss from the operation of the farm constituted a personal loss not deductible for tax purposes, and prayed that this Court ‘determine that there is no deficiency and personal income tax due from the respective estates of the said decedents for the calendar year 1951.’ The petition was signed by Thomas H. Crawford, Jr. (an attorney admitted to practice before this Court), ‘as Administrator C.T.A. of the estate of Thomas E. Arnett, deceased and as Administrator dbn of the estate of Clara Belle Arnett, deceased.’ Omitting the jurat before a notary public of the State of Florida, the verification of the petition reads as follows:
STATE OF FLORIDA
Thomas H. Crawford, Jr., being duly sworn, says that he is the duly appointed, qualified and acting Administrator C.T.A. of the estate of Thomas E. Arnett, deceased and the duly appointed qualified and acting Administrator D.B.N. of the estate of Clara Belle Arnett, deceased; that he has read the foregoing petition, or has had the same read to him and is familiar with the statements contained therein and that the statements contained therein are true except those stated to be upon information and belief, and those he believes to be true.
(Signed) Thomas H. Crawford, Jr.
On August 1, 1955, the respondent filed an answer herein in which he admitted the allegations in the petition relating to the deaths of Thomas and Clara Belle, the fiduciary status of Thomas H. Crawford, Jr., and the notice of deficiency, and denied other allegations in the petition. On December 14, 1955, A. F. Barone entered his appearance ‘for the Petitioners in the above entitled proceeding.’ By notice dated November 15, 1956, this case was set for trial at Jacksonville, Florida, on February 4, 1957, which notice was mailed to Thomas H. Crawford, Jr. On January 15, 1957, pursuant to motion granted on that date, respondent filed an amended answer which reiterated the allegations in the original answer and, in addition, affirmatively alleged as follows:
(a) Decedents are not entitled to the allowance for depletion in the amount of $84,691.35 as claimed on their joint Federal income tax return for the taxable year ended December 31, 1951.
(b) In the alternative, decedents are not entitled to the deduction for legal fees in the amount of $185,162.11 as claimed on their joint Federal income tax return for the taxable year ended December 31, 1951.
(c) In the alternative, the amount claimed by the decedents on their joint Federal income tax returns for the taxable year ended December 31, 1951 as an allowance for depletion should be reduced in an amount of not less than $38,111.11.
(d) In the alternative, the amount claimed by the decedents on their joint Federal income tax return for the taxable year ended December 31, 1951 as an allowance for depletion should be reduced in an amount of not less than $9,280.97.
In the prayer of the amended answer respondent claimed an increased deficiency for the year 1951 under the provisions of section 272(e) of the Internal Revenue Code of 1939 in alternative amounts of $64,694.94, $152,773.32, $27,653.02, and $6,776.46.
On February 4, 1957, A. F. Barone withdrew as counsel for petitioners and Edwin M. Slote, having entered his appearance for petitioners, filed herein a motion for continuance based upon the filing of the amended answer, which was granted. On February 28, 1957, petitioners, through their attorney Edwin M. Slote, filed herein a reply to the amended answer which prayed ‘that the Court determine that there is no deficiency and personal income tax due from the respective estates of the said decedents for the calendar year 1951.’
On October 29, 1957, notice was served on Edwin M. Slote, attorney for the petitioners, that this case was set for trial in Jacksonville, Florida, on February 3, 1958, and on that latter date this Court, on the call of the calendar in Jacksonville, fixed a time certain for the trial of this case, to wit: February 7, 1958, at 10 a.m. When this case was called for trial at that time counsel for petitioners filed a ‘Motion to Dismiss Proceedings under Rule 7(a)(2) and Rule 21.’ This motion contains allegations outlining the history of the pleadings herein, and also an allegation to the effect that on January 29, 1957, Edwin M. Slote, attorney for the petitioners, was ‘retained by the petitioners under an order of the County Judge's Court, in and for Duval County, Florida, * * * in the Estate of Thomas E. Arnett, deceased, to appear on behalf of the petitioners in the within Tax Court proceeding.’ The motion then alleges as follows:
That under Tax Court Rule 7(D), it is provided as follows:
‘Verifications by fiduciaries shall contain a statement that the fiduciaries signing and verifying have authority to act for the taxpayer.’
That the verification of the petition herein contains no such statement by Thomas H. Crawford, Jr., who verified the petition herein.
Upon information and belief, the said Thomas H. Crawford, Jr., had no authority from the said County Judge's Court to institute the within proceeding and/or verify the petition herein, in either or both said Estates in which Thomas H. Crawford, Jr., is acting or administrator as therein stated. (Certified copies of the docket shall be offered in evidence in support thereof.)
That by reason of the foregoing, the within proceeding is void ab initio and should be dismissed forthwith on the grounds that this Court did not at the time the petition was filed on June 8, 1955, and therefore now does not have any jurisdiction over the parties and this proceeding for the reasons aforesaid:
A) In failing to comply with Rule 7(D) of the Tax Court;
B) That the amended Answer was not properly authorized;
C) That there are, therefore, no pleadings properly before this Court which raise any triable issues for determination.
In support of said motion petitioners introduced into evidence photostatic copies of the probate dockets in the estates of Thomas and Clara Belle and a certified copy of an order signed by the county judge, reading as follows:
The petition of THOMAS H. CRAWFORD, JR., as Administrator C.T.A. of the Estate of Thomas E. Arnett, Deceased, for an order authorizing him to take certain action in the prosecution of the case under Docket Number 58343, now pending before the Tax Court of the United States, coming on this day to be heard; and after full discussion in open Court and it appearing to the Court that an order should be...
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