Flora v. Comm'r of Internal Revenue
| Decision Date | 20 January 1967 |
| Docket Number | Docket No. 2245-63. |
| Citation | 47 T.C. 410 |
| Parties | WALTER WILSON FLORA, PETITIONER v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT |
| Court | U.S. Tax Court |
OPINION TEXT STARTS HERE
Walter Wilson Flora, pro se.
Arthur B. Bleecher, for the respondent.
In Walter Wilson Flora, T.C. Memo. 1965-64, this Court held that petitioner was not entitled to an operating loss deduction based on a carryover of alleged operating losses incurred in 1954 and 1956 because petitioner had failed to prove that he had incurred operating losses in 1954 and 1956, the amounts thereof, if any, or the amounts thereof required by law to be applied against and absorbed by income for years preceding 1958. Held, petitioner's claim of a net operating loss deduction for 1959 based on a carryover of alleged operating losses from 1954 and 1956 is barred by the doctrine of collateral estoppel.
Respondent determined deficiencies in petitioner's income tax for the year 1959, and additions to tax under section 6653(a), I.R.C. 1954, in the amounts of $72,968.17 and $3,648.41, respectively. In his notice of deficiency issued to petitioner, dated March 11, 1963, respondent determined that petitioner was not entitled to a deduction in the amount of $124,503.25 claimed on his return for 1959 as a net operating loss deduction because petitioner had ‘failed to establish that any deduction is allowable.’ This was the only adjustment in petitioner's taxable income made by respondent, except for the allowance of the standard deduction and a personal exemption for petitioner. On his return for 1959 petitioner apparently reported profit from business in the amount of $107,446.26 and claimed the net operating loss mentioned above as a deduction, resulting in adjusted gross loss reported on the return in the amount of $17,056.99.
Petitioner filed a petition for redetermination of the above deficiency in this Court on June 3, 1963. The only error alleged in that petition was respondent's disallowance of ‘taxpayer's remaining carry-forward operating loss for 1954, and carry-forward loss for 1956.’ The principal thrust of the facts alleged in support of the alleged error was that as of the date of this notice of deficiency the statute of limitations barred respondent's right to review and disallow the operating losses claimed by petitioner for 1954 and 1956.
In his answer filed in this proceeding respondent alleged that he had disallowed what was claimed on petitioner's 1959 income tax return as a carry-forward operating loss in the amount of $124,503.25, and denied most of the remaining allegations of the petition. Further answering the petition, respondent alleged that the statute of limitations did not bar assessment or collection of the deficiency determined against petitioner for the year 1959, and alleged as facts in support thereof that petitioner's return for 1959 was timely filed on or before April 15, 1960, and the notice of deficiency for that year was mailed to petitioner on March 11, 1963.
This case, docket No. 2245-63, was duly set for trail at Denver, Colo., on October 19, 1964. On September 21, 1964, petitioner filed a motion for continuance, which was endorsed ‘No Objection’ by counsel for respondent, which stated as grounds for the motion that petitioner's case for an earlier year (1958), docket No. 2511-62, ‘involving the identical issue herein,‘ had been heard by Judge Hoyt of this Court but was not yet decided, and that ‘It is believed that the disposition of the aforementioned litigation may ultimately permit the disposition of the instant proceeding without the necessity of trial by this Court.’ Petitioner's motion was granted and this case was continued generally.
The case involving petitioner's tax liability for the year 1958, docket No. 2511-62, was decided by Judge Hoyt of this Court on March 25, 1965. In his opinion in that proceeding (Walter Wilson Flora, T.C. Memo. 1965-64) Judge Hoyt concluded that petitioner's alleged losses for 1954 and 1956 could not be allowed as a net operating loss deduction for the taxable year 1958 because petitioner had failed to provide that he incurred operating losses in 1954 and 1956, had failed to prove the amount of any operating losses incurred in 1954, and had failed to prove that any such purported operating losses for the years 1954 and 1956 had not been absorbed as operating loss carrybacks or carryforwards in years prior to 1958.
This case, docket No. 2245-63, was thereupon again set for trail in Denver, Colo., on November 15, 1965.
When this case was called for trial on November 15, 1965, respondent, pursuant to leave granted by the Court, filed an amendment to his answer in which he referred to the above proceedings in docket No. 2511-62 and the decision thereon entered by the Court on March 26, 1965, alleged that the period for filing an appeal from such decision had expired with no appear being taken, alleged that in that case the same parties presented a factual situation identical to that involved in this case, and averred that ‘petitioner is barred from relitigating the issue presented in the instant case under the doctrine of collateral estoppel.’ On the same day, November 15, 1965, petitioner filed a ‘Reply In Opposition To Respondent's Motion’ in which petitioner, in effect, argues that because he was not allowed access to alleged Federal Bureau of Investigation and/or Internal Revenue Service files he was unable to prove his right to the operating loss deduction in the proceeding involving his 1958 tax liability and should be given the opportunity to do so in this proceeding. Petitioner also made reference to the fact that in the prior proceeding the Court found that he was a cash basis, rather than an accrual basis, taxpayer and that the income reported on his 1959 return was not taxable income to him in 1959 if he was a cash basis taxpayer.
At a pretrial conference on this case held on November 15, 1965, it developed that petitioner wanted to file an amendment to his petition to raise the issue of whether he was required to report his income on the cash or accrual basis in 1959. Leave was granted to petitioner to file an amendment to his petition, and on...
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...Lines, Inc., 17 T.C. 764 (1951), affirmed on this issue 200 F.2d 844 (C.A. 2, 1952); Charles M. Bernuth, 57 T.C. 225 (1971); Walter Wilson Flora, 47 T.C. 410 (1967).6 However, petitioner reminds us that appeal in this case will lie to the Second Circuit, and notes that in Zdanok v. Glidden ......
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