Davis v. Commissioner
| Citation | 23 TCM (CCH) 1449,1964 TC Memo 244 |
| Decision Date | 18 September 1964 |
| Docket Number | Docket No. 88927. |
| Parties | Anne Davis v. Commissioner. |
| Court | United States Tax Court |
Maurice J. Walsh, 105 W. Adams St., Chicago, Ill., for the petitioner. Jay B. Kelly, for the respondent.
Memorandum Findings of Fact and Opinion
Respondent determined that petitioner is liable as a transferee of the assets of David J. Pleason to the extent of $27,500, such liability being the fair market value of a boat caused to be transferred to her by Pleason on February 15, 1959.
The issues presented for our consideration are: (1) Whether petitioner is liable as transferee of the O/S Doctor Walling to the extent of the transferor's beneficial interest therein under section 6901 of the 1954 Code; and, if so, the value of said interest; (2) whether interest upon the transfer in question is chargeable to petitioner from the date of transfer, February 15, 1959, or from June 10, 1960, the date the notice of deficiency of transferee liability was issued; (3) whether or not the statute of limitations bars assessment of the transferee liability involved herein and (4) whether petitioner is entitled to a setoff because of an overpayment of her personal income taxes for the fiscal years ending November 30, 1942, and November 30, 1944.
The facts are partly stipulated, together with certain exhibits attached, and to the extent so stipulated are incorporated herein by reference.
Anne Davis, hereinafter sometimes referred to as petitioner, resides at 7932 Chappel Avenue, Chicago, Illinois. Petitioner and her husband, Sheldon R. Davis, filed their joint Federal income tax return for the taxable year 1959 with the district director of internal revenue in Chicago, Illinois.
Petitioner is the daughter of David J. Pleason (sometimes called the transferor). Pleason resides in Brownsville, Texas.
On June 10, 1960, respondent mailed to Anne Davis a statutory notice of deficiency in which it was determined that she was liable as a transferee of assets of David J. Pleason. The statutory notice contained the following explanation of said liability:
Respondent, at the trial, conceded that the transferee's liability is limited to $16,905.92, the now alleged value of the transferor's beneficial interest in the O/S Doctor Walling.
Pleason's deficiencies in income taxes with additions to the tax due to fraud with intent to evade tax for the taxable years 1943 and 1944, in the amounts of $231,430.54 and $50,865.49, respectively, were determined by this Court on May 20, 1954, in the case reported as David J. Pleason Dec. 20,348, 22 T. C. 361 (1954), affd. 55-2 USTC ¶ 9730 226 F. 2d 732 (C. A. 7, 1955), certiorari denied 350 U. S. 1006 (1956).
Pleason's income tax deficiencies and additions to tax for 1943 and 1944 were assessed on February 4, 1955. A Notice and Demand for Payment was mailed to him on February 15, 1955. A Notice of Federal Tax Lien in the amount of $291,336.72 was filed with the office of the Cook County Recorder of Deeds, Chicago, Illinois, on June 21, 1955.
On November 30, 1955, Pleason entered into a written contract with Kent Shrimp Company, a corporation, incorporated under the laws of Florida (hereinafter sometimes called Kent) regarding the sale of a shrimp boat called the O/S Doctor Walling. Kent agreed to sell the vessel to Pleason for the sum of $31,000, payable $1,500 in cash and the balance of $29,500, without interest, payable out of 25 percent of the established price from shrimp produced by the vessel. The sums so paid were to be credited against the unpaid purchase price.
Kent also agreed that upon payment of 60 percent of the purchase price it would deliver a bill of sale to Pleason for the vessel free and clear of any liens, whereupon Pleason would execute a first preferred ship mortgage on the vessel securing the payment to Kent for the unpaid portion of the deferred purchase price. Pleason also agreed to keep the vessel insured against marine and other risks for an amount at least equal to the full commercial value of the vessel and in no event less than the unpaid balance of the consideration. All losses under the insurance policies were to be payable for the benefit of Pleason and Kent as their interests may appear. The parties agreed to change the registered home port of the vessel from Tampa, Florida, to Brownsville, Texas, upon the payment of 60 percent of the purchase price, by requesting the Collector of Customs in Brownsville, Texas, to issue the registration to Pleason, subject to the first preferred ship mortgage in Kent's favor.
The O/S Doctor Walling was described as an oil screw or vessel, Official No. 264567, of Tampa, Florida. It was built in Florida in 1952 of wood construction with an over-all length of 68 feet, depth of 7.6 feet and width of 18.8 feet. Its registered tonnage was 59.71 gross and 27 net tons.
The records of Kent show the down payment of $1,500 on December 12, 1955, and receipt of various checks by it were credited to the account of Webb and Pleason. By December 26, 1958, Kent's record of the unpaid balance was $10,094.29. Pleason actually owed $10,594.29 as of December 26, 1958. The discrepancy of $500 is due to payments received by Kent from sources other than Pleason which were credited to Pleason's account. Payments numbered 1 through 56, covering the period from December 2, 1955, through December 26, 1958, are denominated as "25% liquidation" payments from Pleason and L. Webb. Petitioner's first payment appears on March 13, 1959, and her last payment to Kent Shrimp Company on June 19, 1959, when petitioner's note and mortgage were sold to one Russell L. Miller of Kent, Ohio. Laurent Webb was an accountant who managed the accounts for the O/S Doctor Walling in behalf of Pleason.
The ownership of the O/S Doctor Walling was registered with the United States Bureau of Customs, Tampa, Florida, in the name of Kent.
A Statement of Financial Condition was furnished to the Internal Revenue Service by David J. Pleason on August 6, 1956, in connection with an offer in compromise. In the documents, Pleason swore that he was unable to satisfy his unpaid income tax liabilities and that if called to testify he would state that from and after August 6, 1956, and at all times material to this proceeding he was insolvent. On November 29, 1957, Pleason was notified by respondent that his offer in compromise regarding said income tax liabilities for the taxable years 1943 and 1944 was rejected.
On May 22, 1957, a Notice of Federal Tax Lien in the amount of $286,475.23 was filed with the Office of the Recorder of Deeds, Cameron County, Brownsville, Texas.
On January 27, 1959, a Notice of Levy in the amount of $354,314.85 was served on the First National Bank of Brownsville, Brownsville, Texas. The levy notified the bank, inter alia, as follows:
You are further notified that all sums of money or other obligation owing from you to account of "Doctor Walling, Boat Account", as his interest may appear therein, are hereby levied upon for satisfaction of the aforesaid tax.
Said levy produced the amount of $4,179.20 which sum was credited to the tax account of Pleason on June 8, 1959.
On February 4, 1959, a Notice of Federal Tax Lien in the amount of $296,475.23 was filed with the Clerk of the Circuit Court, Hillsborough County, Florida, regarding the interest of Pleason as purchaser of the O/S Doctor Walling.
On February 12, 1959, a Notice of Levy was served on Anne Davis. On February 24, 1959, a Final Demand was served on her for the amount of $354,314.85 with regard to "all property, rights to property, moneys, credits and bank deposits then in your possession, to the credit of, belonging to, or owned by David J. Pleason * * *."
On March 6, 1959, a Notice of Levy was served on the Brownsville Shrimp Exchange, Brownsville, Texas, in the amount of $350,135.65 with respect to the tax liabilities of Pleason.
On January 12, 1959, Pleason wrote to Kent requesting that the balance then due on the O/S Doctor Walling of $10,594.29 be repaid under a new arrangement of 35 or 36 equal monthly payments. Pleason also requested the bill of sale agreed to under his contract with Kent. After a further exchange of correspondence between Kent and Pleason and/or Laurent Webb, Kent agreed to the proposal contained in Pleason's letter of January 12, 1959. According to the new agreement Pleason's lawyers were to prepare the bill of sale and preferred ship mortgage.
On March 2, 1959, a resolution of the board of directors of Kent was passed authorizing its president to execute the bill of sale of the O/S Doctor Walling. The resolution is as follows:
To continue reading
Request your trial