Delsanter v. Comm'r of Internal Revenue, Docket Nos. 49167
| Citation | 28 T.C. 845 |
| Decision Date | 18 July 1957 |
| Docket Number | 52557.,52515,52463,Docket Nos. 49167 |
| Parties | ANTHONY DELSANTER, ET AL.,1 PETITIONERS, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. |
| Court | United States Tax Court |
OPINION TEXT STARTS HERE
Michael E. Cozza, Esq., and Arlene B. Steuer, Esq., for petitioners in Docket Nos. 49167 and 52515.
Protagoras D. Maktos, Esq., and John J. O'Brien, Esq., for petitioners in Docket No. 52557.
Russell G. Mock, Esq., for petitioners in Docket No. 52463.James F. Kennedy, Jr., Esq., and R. G. Daha, Esq., for the respondent.
1. Partnership profits from a gambling casino determined in the light of the applicable burden of proof and evidence in the record.
2. Petitioners are liable for additions to tax for underestimation for 1948 and 1949 pursuant to section 294(d)(2), I.R.C. 1939, and for failure to file declarations for 1949 pursuant to section 294(d)(1)(A). However, they are not liable for additions to tax for 1948 under section 294(d)(1)(A) by reason of having filed ‘zero’ declarations for that year.
3. Depreciation deductions on slot machines denied for failure of proof; deductions for loss resulting from confiscation and destruction of slot machines by Ohio public officials denied.
Respondent determined deficiencies in the income tax of petitioners and additions to tax as follows:
+-----------------------------------------------------------------------------+
¦ ¦ ¦ ¦Additions to tax ¦
+----------------------------------+-----+------------+-----------------------¦
¦ ¦Year ¦Deficiencies¦ ¦ ¦
+----------------------------------+-----+------------+-----------+-----------¦
¦ ¦ ¦ ¦Sec. 294 ¦Sec. 294 ¦
¦ ¦ ¦ ¦(d) ¦(d) ¦
+----------------------------------+-----+------------+-----------+-----------¦
¦ ¦ ¦ ¦(1) (A) ¦(2) ¦
+----------------------------------+-----+------------+-----------+-----------¦
¦ ¦ ¦ ¦ ¦ ¦
+----------------------------------+-----+------------+-----------+-----------¦
¦Anthony Delsanter ¦( ¦$17,360.01 ¦$2,020.53 ¦$1,212.32 ¦
¦ ¦1948 ¦ ¦ ¦ ¦
+----------------------------------+-----+------------+-----------+-----------¦
¦ ¦( ¦8,074.28 ¦991.85 ¦595.11 ¦
¦ ¦1949 ¦ ¦ ¦ ¦
+----------------------------------+-----+------------+-----------+-----------¦
¦Estate of Mary Catherine Tobin, et¦( ¦47,273.44 ¦5,566.27 ¦3,339.76 ¦
¦al ¦1948 ¦ ¦ ¦ ¦
+----------------------------------+-----+------------+-----------+-----------¦
¦ ¦( ¦16,546.32 ¦2,005.53 ¦1,203.32 ¦
¦ ¦1949 ¦ ¦ ¦ ¦
+----------------------------------+-----+------------+-----------+-----------¦
¦ ¦ ¦ ¦ ¦ ¦
+----------------------------------+-----+------------+-----------+-----------¦
¦John Farah and Shamis Farah ¦( ¦86,892.10 ¦10,450.50 ¦6,270.32 ¦
¦ ¦1948 ¦ ¦ ¦ ¦
+----------------------------------+-----+------------+-----------+-----------¦
¦ ¦( ¦43,132.44 ¦5,223.40 ¦3,134.03 ¦
¦ ¦1949 ¦ ¦ ¦ ¦
+----------------------------------+-----+------------+-----------+-----------¦
¦Ralph Coletto and Tessie Coletto ¦( ¦47,321.28 ¦5,605.87 ¦3,363.52 ¦
¦ ¦1948 ¦ ¦ ¦ ¦
+----------------------------------+-----+------------+-----------+-----------¦
¦ ¦( ¦29,780.36 ¦3,669.38 ¦2,201.63 ¦
¦ ¦1949 ¦ ¦ ¦ ¦
+----------------------------------+-----+------------+-----------+-----------¦
¦ ¦ ¦ ¦ ¦ ¦
+-----------------------------------------------------------------------------+
The full amounts of the deficiencies and additions to tax are in dispute.
The principal issue involves the determination of the taxable income of a gambling partnership for 1948 and 1949. Also at issue is whether petitioners are liable for additions to tax for failure to file declarations of estimated tax, and for substantial underestimation of estimated tax for 1948 and 1949.
An additional issue presented only in Docket No. 52515 is whether petitioners John and Shamis Farah are entitled to deductions for depreciation of slot machines in 1948 and 1949, and for a loss brought about by the confiscation and destruction of those machines by officials of the State of Ohio in 1949. As a result of the deductions thus claimed, these petitioners seek a refund for 1948 and 1949.
FINDINGS OF FACT.
Some of the facts have been stipulated and are so found.
Petitioners John Farah (hereinafter referred to as Farah) and Shamis Farah are husband and wife and residents of Cleveland, Ohio. They filed joint returns for the years 1948 and 1949.
Petitioners Ralph Coletto (hereinafter referred to as Coletto) and Tessie Coletto are husband and wife and residents of Cleveland, Ohio. They filed joint returns for the years 1948 and 1949.
Edward F. Tobin (hereinafter referred to as Tobin), a resident of Warren, Ohio, is a petitioner for himself in his individual capacity and also as administrator of the estate of his deceased wife, Mary Catherine Tobin. Tobin and his wife filed joint returns for the years 1948 and 1949.
Petitioner Anthony Delsanter (hereinafter referred to as Delsanter) is a resident of Warren, Ohio, and filed income tax returns for each of the years 1948 and 1949.
All of the above returns were filed with the collector of internal revenue for the eighteenth district of Ohio.
In 1947 a partnership known as the Jungle Novelty Company was formed for the purpose of operating a gambling casino called the Jungle Inn (sometimes hereinafter referred to as the Jungle) near Youngstown, Ohio.
During 1948 and 1949 the members of the partnership and their respective interests therein were as follows:
+-----------------------------------+
¦ ¦1948 ¦1949 ¦
+---------+------------+------------¦
¦ ¦(per cent) ¦(per cent) ¦
+---------+------------+------------¦
¦Farah ¦40 ¦40 ¦
+---------+------------+------------¦
¦Tobin ¦25 ¦20 ¦
+---------+------------+------------¦
¦Coletto ¦25 ¦30 ¦
+---------+------------+------------¦
¦Delsanter¦10 ¦10 ¦
+-----------------------------------+
The Jungle was operated for 45 weeks during 1948, and from January 1, 1949, until August 12, 1949. It was raided by officials of the State of Ohio around 9 p.m. but not later than 9:30 p.m. on Friday, August 12, 1949, and has been closed since that time.
Partnership activities conducted on the premises of the Jungle during 1948 and 1949 consisted of the operation of a ‘horsebook’ every afternoon except Sunday, and the operation every evening of dice games, slot machines, poker games, roulette, chuck-a-luck, and bingo games. Poker and dice games were also occasionally conducted in the afternoons.
The number of patrons and the amount of gambling at the Jungle increased on a daily basis on Fridays, Saturdays, and Sundays.
Patrons came to the Jungle almost exclusively by automobile or taxicab, and there was an increase in patronage upon the cessation of inclement winter weather. The amounts won by the partnership increased when patronage and gambling increased. All of the operations at the Jungle, with the exception of bingo, were carried on by the partnership for and at a profit.
The partnership commenced operation with a bankroll of $25,000 in cash. This bankroll was under the supervision of Farah. Amounts were taken therefrom and allocated as bankrolls to the separate gambling operations.
The employees of the Jungle were paid fixed salaries.
Horsebook. Three men to take bets and fill out betting slips, a cashier, a slip sorter, and two supervisors were employed in this operation. A $2,000 bankroll was allocated to the horsebook.
The horsebook did not accept bets placed by telephone. A patron of the horsebook would place his bet with one of the bet takers. This employee would receive the amount of the bet, make out a slip in duplicate, keep the original, and deliver the duplicate to the person making the bet. Each bet taker used slips of a particular color.
In general, a slip contained a serial number, a number identifying the horse involved, and information relative to the amount and type of the bet. No information relating to the person placing the bet appeared on the slip.
The Jungle paid track odds up to certain fixed maximums. At the start of the period at issue the maximum odds were 15, 6, and 3 to 1 on win, place, and show respectively. Sometime during the period in controversy the odds were raised to 20, 8, and 4 to 1. Most bets ranged between $2 and $5. However, there were occasional bets in excess of these amounts.
If a bettor won he would take his slip to the cashier for payment. Not all bettors claimed their winnings. Unclaimed winnings were kept separately for 30 days and then added to the thirtieth day's profits.
For most of the period at issue the Jungle subscribed to a wire service at a cost of $225 per week. The Jungle made no payments for wire service in May, June, and July, 1949.
The Jungle did not accept bets on...
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