Goichman v. Commissioner
| Decision Date | 28 September 1987 |
| Docket Number | Docket No. 10042-83. |
| Citation | 54 TCM(CCH) 679,1987 TC Memo 489 |
| Parties | William A. Goichman v. Commissioner. |
| Court | U.S. Tax Court |
William A. Goichman, 2040 Ave. of the Stars, Los Angeles, Calif., pro se. Steven M. Roth, for the respondent.
Respondent determined deficiencies in petitioner's Federal income tax and additions to tax as follows:
Addition to Tax
Year Deficiency Section 6653(h)1
1967 ...........$50,546.24 $25,273.12
1968 ........... 46,413.48 23,206.74
1969 ........... 57,476.80 28,738.40
The issues for decision are (1) whether the assessment and collection of any taxes and additions to tax for each of the years 1967, 1968 and 1969 are barred by the statute of limitations; (2) whether petitioner is liable for the addition to tax under section 6653(b) for each of the years in issue;2 (3) whether petitioner understated his taxable income for each of the years in issue in the amounts determined by respondent in accordance with the net worth method of reconstructing income; and (4) whether respondent's delay in issuing the statutory notice of deficiency constitutes a denial of petitioner's due process rights.
Some of the facts have been stipulated and are so found. The stipulation of facts and exhibits attached thereto are incorporated herein by reference.
Petitioner resided in Los Angeles, California, at the time the petition in this case was filed. Petitioner and his then wife, Beverly Goichman (Beverly) filed joint Federal income tax returns for the 1967, 1968 and 1969 taxable years. Petitioner and Beverly reported taxable income of $19,405.61 in 1967, $27,791.17 in 1968 and $17,895.70 in 1969. His occupation was listed as attorney on the returns, and her occupation was housewife.
Petitioner graduated from the University of Pennsylvania Law School in 1955. After graduation from law school, petitioner worked in the District Attorney's office of the City of Philadelphia. From April, 1956 to June, 1957, petitioner clerked with the Court of Common Pleas of Philadelphia County. He was appointed to the Pennsylvania Public Utility Commission in December, 1957. In 1957, he became a law partner of Max Daroff. From June, 1958 to March, 1960, petitioner and Martin M. Krimsky were law partners. Irwin N. Rosenzweig joined the law practice of petitioner and Krimsky in March, 1960. In 1963, petitioner left the partnership, and he became a sole practitioner. Petitioner's income tax return for 1964 lists a loss of $3,200 from the partnership of petitioner and Arnold Warren. The record does not indicate the nature of the partnership or the beginning and ending dates of the partnership.
Simon Levine, a certified public accountant, prepared the tax returns for the years 1960 through 1963 of the law partnership of petitioner, Krimsky and Rosenzweig. He also prepared the individual tax returns of petitioner and Beverly for the years 1961 and 1962. Levine prepared the individual returns based on the information provided by petitioner. Levine stated that the partnership returns would have shown how much income was distributable or taxable to each partner. At the time of this trial he no longer had copies of the partnership returns that he prepared. He was not contacted by the Internal Revenue Service (IRS) in 1971 or 1972; however, the partnership returns probably would have been disposed of by then.
Leonard Michaels, a certified public accountant, prepared the tax returns of petitioner and Beverly for the years 1966 through 1969 and the return of petitioner for 1970. During the years in question petitioner had two bank accounts: (1) a personal account; and (2) a trust account for his law practice, which Michaels took into account in preparing the returns. Petitioner would transfer fee income from the trust account to the personal account as cases were settled, and the total of the deposits in the personal account would equal petitioner's gross fee income. The gross receipts reported on petitioner's tax returns were based solely on the personal account deposits.
Petitioner represented Richard Schleinkofer, Raymond Keilman and Edward Flaxman in their separate personal injury lawsuits.3 Schleinkofer settled a negligence lawsuit against Keystone Insurance Company for $1,000. The settlement check, dated December 20, 1967, was payable to petitioner and Richard and Germaine Schleinkofer. Schleinkofer and his wife signed the settlement check and then received a check for $600 from petitioner. Petitioner endorsed the check making it payable to Goodbody and Company for payment into his brokerage account. Keilman settled for $2,250 a personal injury lawsuit involving Harleysville Insurance Company. The settlement check, dated December 17, 1967, was payable to petitioner and Keilman. Keilman signed the settlement check and received a check for less than $2,000 from petitioner. Petitioner endorsed the settlement check making it payable to Goodbody and Company. Flaxman settled a lawsuit involving Nationwide Mutual Insurance Company for $1,200. The settlement check, dated September 6, 1967, was payable to petitioner and Flaxman. Flaxman signed the settlement check and then received either cash or a check for his share of the settlement. Petitioner endorsed the settlement check making it payable to Goodbody and Company for payment into his brokerage account.
Petitioner and Beverly were married in 1956, separated in 1969 and divorced in 1973. They are the parents of three children: Jeffrey, born on August 13, 1957, Gail, born on November 27, 1959, and Daniel, born on August 31, 1962.
Beverly, who has a Bachelor of Science in Education degree, was a substitute teacher two or three times a week in 1957, but she did not teach after her oldest son was born in August, 1957. She also worked taking baby pictures at a department store before the birth of her oldest son. She sold cosmetics after the birth of her first child in August, 1957, and before the birth of her second child in November, 1959. She earned $50 per week as a cosmetics salesperson. In 1964, Beverly was a partner in a partnership that operated a thrift shop called the "Like New Shop." The 1964 joint income tax return of petitioner and Beverly reported her share of the partnership income as $883.50. She used her share of the partnership income to purchase a fur coat. She eventually gave her share of the partnership to the other woman with whom she worked.
Beverly and petitioner received wedding gits with a total value of $5,000 to $10,000. They received gifts from family members on special occasions. During the marriage of Beverly and petitioner, Beverly's father kept $5,000 to $6,000 for her; however, the money was sent back and forth between her and her father. Petitioner was the source of funds for household expenses, expenses of the children and charge account and mortgage payments. Petitioner provided the funds for the bank accounts and the stock purchases.
OpinionOn September 18, 1974, petitioner was indicted4 for willfully and knowingly attempting to evade taxes in the taxable years 1968 and 1969 in violation of section 7201.5 After a jury trial in the United States District Court for the Eastern District of Pennsylvania, petitioner was found guilty of violating section 7201 for 1968 and 1969. On October 29, 1975, petitioner filed post-trial motions for judgment of acquittal and for new trial. Petitioner's post-trial motions were denied on January 20, 1976. The judgment was affirmed by the United States Court of Appeals for the Third Circuit on November 22, 1976. United States v. Goichman 77-1 USTC ¶ 9115, 547 F.2d 778 (3d Cir. 1976), affg. 76-1 USTC ¶ 9470 407 F.Supp. 980 (E.D. Pa. 1976).
At a hearing on February 20, 1986, respondent's counsel attempted to explain why respondent did not issue a notice of deficiency to petitioner until April, 1983. Counsel stated that on January 31, 1978, petitioner advised the Philadelphia, Pennsylvania, district of the IRS that he was residing in Los Angeles, California, and that he would like his case, which involved the years 1967 through 1970, to be transferred from Philadelphia to Los Angeles. Counsel also stated that petitioner's case proceeded through IRS channels until 1980 after petitioner refused to agree to respondent's revenue agent's report in mid-1978. He stated that petitioner's case went to District Counsel in 1980, but that District Counsel would not approve the issuance of the notice of deficiency without reviewing the documents from petitioner's criminal tax case, and such documents were in the possession of the U.S. Attorney's office in Philadelphia. After receipt of the documents from petitioner's criminal case, the District Counsel in 1982 approved the issuance of the notice of deficiency.
On April 15, 1983, respondent issued a statutory notice of deficiency to petitioner and Beverly.6 Respondent determined deficiencies in petitioner's income and additions to tax for fraud for the taxable years 1967, 1968 and 1969.
Petitioner has the burden of showing that respondent's deficiency determinations are incorrect. Respondent, however, has the burden of establishing by clear and convincing evidence the elements of fraud for the addition to tax under section 6653(b). Section 7454; Rule 142(b). This burden is met if it is shown that the taxpayer intended to evade taxes known to be owing by conduct intended to conceal, mislead or otherwise prevent the collection of taxes. Stoltzfus v. United States 68-2 USTC ¶ 9499, 398 F.2d 1002, 1004 (3d Cir. 1968); Castillo v. Commissioner Dec. 41,940, 84 T.C. 405, 409 (1985).
The existence of fraud is a question of fact to be determined upon consideration of the entire record. Kotmair v. Commissioner Dec. 43,122, 86 T.C. 1253, 1259 (1986). Fraud is never presumed. Beaver v. Commissioner Dec. 30,380, 55 T.C. 85, 92 (1970). Fraud...
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