Green v. Commissioner, Docket No. 1405-91.
| Decision Date | 07 April 1993 |
| Docket Number | Docket No. 1405-91. |
| Citation | 65 T.C.M. 2347 |
| Parties | John O. Green v. Commissioner. |
| Court | U.S. Tax Court |
John O. Green, pro se. William R. Leighton and James G. Macdonald, for the respondent.
Memorandum Findings of Fact and Opinion
By statutory notice of deficiency dated October 31, 1990, respondent determined a deficiency in petitioner's Federal income tax and additions to tax as follows:
Additions to Tax
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Year Deficiency Sec. 6653(b)(1) Sec. 6653(b)(2) Sec. 6654
1983 .................................. $294,971 $147,486 1 $18,051
1 50 percent of interest due on the portion of the underpayment due to
fraud
All section references are to the Internal Revenue Code in effect for the taxable year at issue. References to rule 6(e) are to rule 6(e) of the Federal Rules of Criminal Procedure. All other Rule references are to the Tax Court Rules of Practice and Procedure, unless otherwise indicated.
After concessions,1 the issues for decision are: (1) Whether petitioner's delivery of his 1983 tax return to an agent of the Internal Revenue Service (IRS) is sufficient to constitute a filing for purposes of section 6501, and if so, whether the 3-year statute of limitations under section 6501 bars assessment of tax in this case; (2) whether petitioner, a member of the Potawatomi Citizens Band Tribe of Oklahoma, is exempt from paying Federal income tax due to his Indian status; (3) whether respondent utilized grand jury matter in violation of rule 6(e) for civil audit purposes, including the preparation of the statutory notice of deficiency involved herein; (4) whether petitioner underreported his taxable income in 1983 as determined by respondent; (5) whether petitioner's understatement of tax is attributable to fraud under section 6653(b)(1) and (2); and (6) whether petitioner is liable for the addition to income tax for failure to pay estimated tax under section 6654.
Some of the facts have been stipulated and are found accordingly. The stipulation of facts, the supplemental stipulation of facts, and the second stipulation of facts are incorporated herein by this reference.
Petitioner resided in Austin, Texas, at the time he filed his petition in this case. He is an enrolled member of the Potawatomi Citizens Band Tribe of Oklahoma. His enrollment number is 3989. Petitioner has not been issued a certificate of competency by the Secretary of Interior.
Petitioner earned his undergraduate degree in accounting. He is not a certified public accountant. In approximately 1972, petitioner was employed by the IRS as a revenue agent. He served as a revenue agent for 9 months prior to becoming a special agent with the IRS. Petitioner was employed as a special agent with the IRS in Oklahoma City, Oklahoma, for approximately 6 years.
After leaving the IRS due to a physical disability, petitioner, who had earned a law degree while working as a special agent, began practicing law in Oklahoma City, Oklahoma. While practicing law, petitioner held himself out to the public as a tax lawyer, although he did not have any particular type of certification in tax law from the Oklahoma Bar. Petitioner incorporated his law practice and was the sole shareholder and employee of John O. Hornung, P.C. (the P.C.).
During 1983, three checks in the total amount of $2,409 were made payable to petitioner on the P.C.'s checking account. Petitioner's wife, Patti Janese Hornung Parker (Ms. Parker), drafted these checks payable to petitioner, signed the checks in her name, and then deposited the amounts in an Oklahoma account. The notation on the checks indicated "salary" from January through March, a time during which petitioner was not in Oklahoma. Petitioner did not receive the proceeds from any of the checks.
Petitioner and his law partner, Jay McCown (Mr. McCown), were shareholders of Torque Master, Inc., along with other investors. Torque Master, Inc., was an Oklahoma corporation engaged in an oil drilling related operation. During 1983, three checks were made payable to petitioner from Torque Master, Inc., in the following amounts: $942.63, $3,664.07, and $11,889.25. The check in the amount of $11,889.25 was written on a Kemper Money Market Account.
During January 1983, petitioner separated from his wife. The couple divorced on October 9, 1984. In May 1983, petitioner executed a power of attorney to Ms. Parker. Ms. Parker prepared and filed her and petitioner's 1982 joint Federal income tax return. She also prepared and filed returns for petitioner's professional corporation, including a return for the 1983 taxable year. Ms. Parker requested an extension of time for filing petitioner's individual 1983 return. She did not actually file a 1983 Federal income tax return for petitioner. Ms. Parker filed a separate tax return in 1983. She did not include any amounts from the checks which she drew on the P.C.'s account as income.
In 1985, at petitioner's request, Ms. Parker mailed the 1983 tax return which she had prepared and her workpapers to petitioner's attorney, William Kirksey (Mr. Kirksey), in Jackson, Mississippi, where petitioner was being held in Federal custody. IRS Agent Bill Gibson (Agent Gibson) checked petitioner out of the Jackson city jail on February 14, 1985, and brought him to Mr. Kirksey's office. At that point, Agent Gibson was presented with the 1983 return, which Ms. Parker had prepared for petitioner.
Petitioner began preparing Robert and Linda Schaffer's (Mr. and Mrs. Schaffer) Federal income tax returns in approximately 1978. From 1976 until his death in October 1982, Mr. Schaffer was involved in the smuggling of illegal narcotics into the United States. Mr. Schaffer, a pilot, started by flying small, single-engine aircraft across the U.S. border into Mexico and bringing back marijuana. Several years later, the Schaffers moved to Oklahoma and they started flying from Florida to South America. Mrs. Schaffer was also a pilot, and although she did not actually accompany her husband on flights, she assisted Mr. Schaffer in the drug smuggling endeavors.
On October 18, 1982, Mr. Schaffer and his brother, Stanley Gene Schaffer, were flying a load of narcotics from South America to the United States to be dropped by parachute to an individual named Paul Gonzales. Both Mr. Schaffer and his brother were killed when the plane they were flying crashed somewhere in the State of Mississippi.
Mrs. Schaffer and Mr. Stanley Schaffer's wife, Donna Strange (Ms. Strange), were in an apartment in Florida on October 18, 1982. Paul Gonzales' father (Mr. Gonzales) went to the Florida apartment on the date of the crash and told Mrs. Schaffer and Ms. Strange that their husbands had been involved in a plane crash. Shortly after receiving news of the crash, Mrs. Schaffer contacted petitioner. Mrs. Schaffer then returned to Oklahoma City, Oklahoma. As of October 15, 1982, petitioner began representing Mrs. Schaffer with regard to the drug trafficking activities.
After Mrs. Schaffer returned to Oklahoma, petitioner and two of the Schaffers' friends, John Price and Billy Howell, flew a helicopter to Mississippi to inspect the crash site. Petitioner initially went to the crash site with Mr. Gonzales. Mr. Gonzales showed petitioner the wreckage while the bodies were still in the plane. Shortly thereafter, petitioner returned to the crash site with Mr. Price and Mr. Howell, removed Mr. Schaffer's body from the cockpit of the plane, and buried it.
Mrs. Schaffer and Ms. Strange received a total of $380,000 for the narcotics that were dropped during the flight in which their husbands were killed. Upon receiving the money, Mrs. Schaffer counted the money from the last flight and the money already in her home. Mrs. Schaffer then took the money and stored it at her home in a safe built into the floor of the basement. Mrs. Schaffer also had an additional $200,000 in the safe which was money accumulated from prior drug flights. Mrs. Schaffer had other money during the latter part of 1982 which was stored at her father-in-law's home.
Throughout the fall of 1982, Mrs. Schaffer was concerned about the $580,000 of drug money being stored in her home for three reasons: First, the airplane crash was being actively investigated; second, her deceased husband had previously been investigated by a grand jury; and third, she was concerned about a search warrant regarding her home. Petitioner was Mrs. Schaffer's attorney at this point, and Mrs. Schaffer sought petitioner's advice regarding what to do with the cash stored in her home. Petitioner advised Mrs. Schaffer to put the money in a safe-deposit box.
On December 3, 1982, petitioner and Mrs. Schaffer opened a safe-deposit box at the Southwestern Bank & Trust Co. in Oklahoma City, Oklahoma (the Southwestern Bank safe-deposit box). The safe-deposit box was styled "John Hornung Attorney Trustee for Linda Schaffer." Both petitioner and Mrs. Schaffer were authorized to enter the safe-deposit box. Mrs. Schaffer placed approximately $540,000 in the safe-deposit box. Prior to depositing the money, Mrs. Schaffer counted the money in an effort to account for the portion which belonged to Ms. Strange. Mrs. Schaffer and Ms. Strange were to split the proceeds from the last drug trafficking operation approximately 60 percent to Mrs. Schaffer and the remainder to Ms. Strange. Petitioner's own records indicated that on December 3, 1982, $500,000 was placed into the Southwestern Bank safe-deposit box.
During the latter part of 1982, Mrs. Schaffer's father-in-law wanted Mrs. Schaffer to move the money that she kept at his home. Mrs. Schaffer sought petitioner's advice regarding where to store the money. Petitioner advised her that she could store the money in a safe-deposit box...
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