First Nat'l Bank in Houston v. Comm'r of Internal Revenue (In re Estate of Simmons)
| Decision Date | 31 May 1956 |
| Docket Number | Docket No. 42726. |
| Citation | 26 T.C. 409 |
| Parties | ESTATE OF HELENE SIMMONS, DECEASED, FIRST NATIONAL BANK IN HOUSTON, TEMPORARY ADMINISTRATOR, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. |
| Court | U.S. Tax Court |
OPINION TEXT STARTS HERE
Charles W. Bell, Esq., Clarence E. Kendall, Esq., and Clyde L. Wilson, Jr., Esq., for the petitioner.
Richard W. Janes, Esq., and Godfrey L. Munter, Jr., Esq., for the respondent.
Helene (petitioner's decedent) and Frank Simmons were husband and wife whose legal residence was in Texas. Helene owned, as her separate property, all of the stock in the Crosby Companies. She was president and a director of those companies but neither participated nor took active interest in the companies' affairs. She gave Frank her power of attorney, made him a director and vice president and general manager of the companies, and left the complete control of the companies' affairs in his hands. During 1946 and 1947, the years in issue, Frank (a) caused the companies to expend sums to or for the benefit of Helene alone, himself alone, or himself and Helene jointly, charging off such expenditures as corporate expenses, (b) received and retained money from sales of the companies' assets, and (c) received ‘kickbacks' from suppliers of the companies. Held:
1. The aforementioned sums constitute community income to Helene and Frank, one-half of which is taxable to Helene. The doctrine of Commissioner v. Wilcox, 327 U.S. 404, does not apply to this factual situation so as to cause those sums to be nontaxable as embezzlement income.
2. Withdrawals, totaling $109,264.43, made by Helene and Frank from the Crosby Companies in 1947 and charged on the companies' books as accounts receivable due from them were bona fide loans and not community income to them in 1947. These loans were subsequently repaid in full.
3. Certain overriding oil royalties were received by Frank in 1947 as compensation for his services in connection with some leases. The Commissioner has determined that these properties were community income and has determined their fair market value. Held, the Commissioner is sustained in his determination that the properties were community income but their fair market value was less than the Commissioner determined. Fair market value of such properties determined.
4. Certain ‘unidentified’ bank deposits made to the accounts of Frank and Helene in 1946 represented unreported community income to them for that year.
5. No part of Helene's deficiencies for either 1946 or 1947 was due to fraud with intend to evade taxes.
The Commissioner determined that petitioner was liable for deficiencies in its decedent's income taxes, and for additions thereto for fraud as follows:
+--------------------------+
¦ ¦ ¦Addition ¦
+----+----------+----------¦
¦Year¦Deficiency¦for fraud ¦
+----+----------+----------¦
¦1946¦$38,762.87¦$19,381.43¦
+----+----------+----------¦
¦1947¦54,859.10 ¦27,429.55 ¦
+--------------------------+
In the statement attached to the deficiency notice, the adjustments resulting in the deficiency determinations, and the explanations of those adjustments, are set forth as follows:
Taxable Year Ended December 31, 1946
+-------------------------------------------------------------------------+
¦Net community income as disclosed by returns ¦ ¦$33,973.26 ¦
+--------------------------------------------------+----------+-----------¦
¦Additional income: ¦ ¦ ¦
+--------------------------------------------------+----------+-----------¦
¦(a) Dividends ¦$72,926.19¦ ¦
+--------------------------------------------------+----------+-----------¦
¦(b) Capital gain ¦1,705.58 ¦ ¦
+--------------------------------------------------+----------+-----------¦
¦(c) Oil properties acquired ¦8,194.28 ¦ ¦
+--------------------------------------------------+----------+-----------¦
¦(d) Commissions omitted ¦1,147.25 ¦ ¦
+--------------------------------------------------+----------+-----------¦
¦(e) Unidentified deposits ¦30,798.56 ¦114,771.86 ¦
+--------------------------------------------------+----------+-----------¦
¦Net community income adjusted ¦ ¦$148,771.86¦
+--------------------------------------------------+----------+-----------¦
¦(f) Less: Community interest of decedent's husband¦ ¦72,724.51 ¦
+--------------------------------------------------+----------+-----------¦
¦Net income adjusted ¦ ¦$76,020.61 ¦
+-------------------------------------------------------------------------+
EXPLANATION OF ADJUSTMENTS
(a) Dividends reported to have been increased by amounts paid to you or for your benefit by the corporations listed below and by cash used by you from corporation receipts.
+-----------------------------------------------------------------------------+
¦Wynn Crosby Drilling Company ¦$44,493.21¦
+------------------------------------------------------------------+----------¦
¦Crosby Drilling Company ¦8,707.80 ¦
+------------------------------------------------------------------+----------¦
¦A. W. Crosby, Incorporated ¦3,872.58 ¦
+------------------------------------------------------------------+----------¦
¦Cash received by the above corporations and applied to personal ¦15,852.60 ¦
¦use ¦ ¦
+------------------------------------------------------------------+----------¦
¦Total ¦$72,926.19¦
+-----------------------------------------------------------------------------+
(b) Sale of DeSoto Parish land with retention of mineral rights resulted in the adjustment * * *
(c) Oil properties acquired from W. C. Schmitz without consideration are included in income at their fair market value.
(d) Cash commissions of $1,147.25 from Pan American Petroleum Company were omitted from the return and are, therefore, included here.
(e) Deposits which were unidentified as to source or purpose totalled $30,798.56 and this amount is included in taxable income.
(f) All items are community income and expense except royalties and capital gain and small deductions which belong on decedent's return.
+--------------------------------------------------------------------------+
¦Net community income as disclosed by returns ¦ ¦$46,357.56 ¦
+--------------------------------------------------+-----------+-----------¦
¦Unallowable deductions and additional income: ¦ ¦ ¦
+--------------------------------------------------+-----------+-----------¦
¦(a) Dividends ¦$45,165.36 ¦ ¦
+--------------------------------------------------+-----------+-----------¦
¦(b) Withdrawals ¦109,304.43 ¦ ¦
+--------------------------------------------------+-----------+-----------¦
¦Total ¦$154,469.79¦ ¦
+--------------------------------------------------+-----------+-----------¦
¦Additional deduction: ¦ ¦ ¦
+--------------------------------------------------+-----------+-----------¦
¦(c) Profit reported from sale of stock ¦44.51 ¦ ¦
+--------------------------------------------------+-----------+-----------¦
¦Net addition ¦ ¦154,425.28 ¦
+--------------------------------------------------+-----------+-----------¦
¦Net community income adjusted ¦ ¦$200,782.84¦
+--------------------------------------------------+-----------+-----------¦
¦(d) Less: Community interest of decedent's husband¦ ¦98,638.53 ¦
+--------------------------------------------------+-----------+-----------¦
¦Net income adjusted ¦ ¦$102,144.31¦
+--------------------------------------------------------------------------+
EXPLANATION OF ADJUSTMENTS
(a) Dividends reported have been increased by amounts paid to you or for your benefit by the following corporations and increased, also, by cash used by you from corporation receipts:
+-------------------------------------------------+
¦Wynn Crosby Drilling Company ¦$31,767.65¦
+--------------------------------------+----------¦
¦Crosby Drilling Corporation ¦250.00 ¦
+--------------------------------------+----------¦
¦A. W. Crosby, Incorporated (paid) ¦4,047.71 ¦
+--------------------------------------+----------¦
¦A. W. Crosby, Incorporated (cash used)¦9,100.00 ¦
+--------------------------------------+----------¦
¦Total ¦$45,165.36¦
+-------------------------------------------------+
(b) Withdrawals, shown by your accounts payable on the books of the corporations mentioned in (a) above, are added to income as taxable distributions. * * *
(c) Profit reported from sale of stock of Commonwealth and Southern, $44.51, is eliminated since it was a 1946 sale.
(d) Income is community income except royalties which are shown as allocated on the returns.
By appropriate assignments of error petitioner contested all of the above adjustments. However, petitioner introduced no evidence relative to adjustments (b) and (d) for 1946, nor does its brief contain any argument thereon. Consequently, it is deemed to have conceded those two adjustments and they will be appropriately reflected in the Rule 50 computation.
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