Hoover v. Commissioner, Docket No. 2312-62
| Decision Date | 27 March 1968 |
| Docket Number | 2313-62,Docket No. 2312-62,2322-63,6192-66. |
| Citation | 1968 TC Memo 49,27 TCM (CCH) 226 |
| Parties | Eph H. Hoover, Jr., and Lucinda Hoover, et al. v. Commissioner. |
| Court | U.S. Tax Court |
Judson Harwood, 515 Nashville Bank & Trust Bldg., Nashville, Tenn., for the petitioners. Jack D. Yarbrough and Vallie C. Brooks, for the respondent.
Memorandum Findings of Fact and Opinion
Respondent determined deficiencies in petitioners' income taxes and additions to tax for the years and in the amounts as follows:
------------------------------------------------------------------------------------
Additions to tax
Docket No. Tax year Deficiency under Sec. 6653(b)2
------------------------------------------------------------------------------------
2312-62 ................ 1958 $158,658.98 $79,329.49
2313-62 ................ 1957 49,655.55 24,827.78
2322-63 ................ 1959 76,870.60 38,435.30
6192-66 ................ 1956 12,364.73 6,182.37
------------------------------------------------------------------------------------
By amendments to answers filed at the trial, respondent claimed increased deficiencies and additions to tax in the following amounts:
---------------------------------------------------------------------------------------------
Amount of Deficiency Addition to
increase in as tax
Docket No. Tax year deficiency increased as increased
----------------------------------------------------------------------------------------------
2312-62 ................ 1958 $11,352.75 $168,762.93 $84,381.47
2313-62 ................ 1957 4,500.00 52,655.55 25,327.78
2322-63 ................ 1959 1,961.42 78,178.21 39,089.11
-----------------------------------------------------------------------------------------------
A number of issues raised by the pleadings have been disposed of by agreement of the parties leaving for our decision the following:
(1) Whether assessment and collection of any deficiency for the year 1956 are barred by the statute of limitations. This requires a determination of whether petitioners Eph H. Hoover, Jr., and Johnnie B. Shannon (former wife of Eph H. Hoover, Jr.), for the year 1956, filed a false and fraudulent income tax return with intent to evade tax.
(2) Whether petitioner Eph H. Hoover, Jr., received income in each of the years 1957, 1958, and 1959 from amounts paid by Hoover Motor Express Company, Inc., and Auto Equipment & Supply, Inc., with moneys received from Hoover Motor Express Company, Inc., for the purpose of buying, maintaining, and operating race cars.
(3) Whether petitioners Eph H. Hoover, Jr., and Lucinda Hoover realized income in the year 1958 from the conveyance by Hoover Motor Express Company, Inc., of a freight terminal property to the former wife of Eph H. Hoover, Jr., for an amount less than the fair market value of the property, and, if so, the amount of income so realized.
(4) Whether petitioners Eph H. Hoover, Jr., and Lucinda Hoover received income from the payment by Hoover Motor Express Company, Inc., of salary and expenses of Fred Capshew in the years 1958 and 1959 because of services rendered and payments made by Fred Capshew for the benefit of petitioner Eph H. Hoover, Jr., and if so the amount of such income.
(5) Whether amounts paid by Hoover Motor Express Company, Inc., to Eph H. Hoover, Jr., during the years 1956 through 1959, designated as reimbursements of expenses were in fact income to petitioners.
(6) Whether all or any part of amounts paid by Hoover Motor Express Company, Inc., during the years 1956 through 1959 on invoices which it designated as "S-shop expenses" were payments made for the benefit of petitioner Eph H. Hoover, Jr., and for that reason constituted income to petitioners.
(7) Whether amounts received by petitioner Eph H. Hoover, Jr., from Hoover Motor Express Company, Inc., during the years 1956 through 1959, which were shown on the books of Hoover Motor Express Company, Inc., as liquor purchases for the use of its Sales Department and as reimbursements to its Chief Accounting Officer, were used to any extent for the benefit of Hoover Motor Express Company, Inc., in such a manner as not to constitute income to petitioners, and, if so, the amounts so used.
(8) Whether any part of petitioners' underpayment of tax for each of the years 1956, 1957, 1958, and 1959 is due to fraud within the meaning of section 6653(b).
Some of the facts have been stipulated and are found accordingly.
Eph H. Hoover, Jr., and Johnnie B. Shannon (former wife of Eph H. Hoover, Jr.), the petitioners in Docket Nos. 2313-62 and 6192-66, were both residents of Davidson County, Tennessee at the date of the filing of each of the petitions. Eph H. Hoover, Jr., and Lucinda Hoover, petitioners in Docket Nos. 2312-62 and 2322-63, are husband and wife and were residents of Davidson County, Tennessee at the date of the filing of each of the petitions. Eph H. Hoover, Jr. (hereinafter referred to as petitioner), has been married three times. During the years 1956, 1957, and part of 1958 he was married to Johnnie Billingsley Hoover. There were three children born of this marriage. Petitioner and Johnnie were divorced in 1958, and petitioner then married Mary Lucinda Parris Harper. For the calendar year 1956 petitioner and Johnnie filed a joint Federal income tax return on April 15, 1957,3 with the district director of internal revenue at Nashville, Tennessee. For the calendar year 1957 they filed a joint Federal income tax return with the district director of internal revenue at Nashville, Tennessee. For the calendar years 1958 and 1959 petitioner and Mary Lucinda filed joint Federal income tax returns with the district director of internal revenue at Nashville, Tennessee. Johnnie and Mary Lucinda are petitioners in these cases only by reason of having filed joint returns with petitioner Eph H. Hoover, Jr.
Hoover Motor Express Company, Inc. (hereinafter referred to as HME), is a common carrier of freight in interstate commerce subject to the jurisdiction of the Interstate Commerce Commission (hereinafter referred to as ICC). HME was founded by petitioner's father. It was incorporated under the laws of the State of Tennessee on May 27, 1930.
Petitioner was born on April 15, 1922, near Murfreesboro, Tennessee. He graduated from Central High School in Murfreesboro and during the years 1940 through 1942 attended Middle Tennessee State College. In 1942 petitioner became employed as the manager of the Murfreesboro terminal of HME and in 1950 became his father's assistant at the main terminal in Nashville. On March 6, 1950, after his father's death, petitioner was elected president of HME. From that date throughout the years here in issue petitioner was president of HME.
HME maintained its records and filed its Federal income tax returns on an accrual method of accounting. Its returns were filed with the district director of internal revenue at Nashville, Tennessee. HME filed annual reports as required by law with the ICC for the years ended December 31, 1956 through December 31, 1960.
During the years 1956 through 1960, the capital stock of HME (par value $100 per share) was held by petitioner, his three sisters, his stepmother and an aunt, except that in 1959 HME purchased the shares owned by the aunt. The ownership of the outstanding capital stock during the years 1956 through 1960 was as follows:
-----------------------------------------------------------------------------------------
Relationship Years and shares owned4
Name to petitioner 1956 1957 1958 1959 1960
-----------------------------------------------------------------------------------------
Eph H. Hoover, Jr......... 21 21 21 21 21
Miriam M. Cole............ Sister 19 19 19 19 19
Eleanor E. Derryberry..... Sister 19 19 19 19 19
Dorothy Milam ............ Sister 19 19 19 19 19
Ruth N. Garrett........... Stepmother 19 19 19 19 19
Matalee Pond ............. Aunt 2 2 2 0 0
__ __ __ __ __
Total ............................... 99 99 99 97 97
-- -- -- -- --
None of the shareholders other than petitioner was an officer during any of the years here in issue. Ruth N. Garrett worked 2 or 3 days a week, on the average, in the office of the Murfreesboro, Tennessee, terminal of HME. None of the other shareholders was employed by HME or otherwise rendered services to HME except as a director. The directors of HME during the years here involved were:
Eph H. Hoover, Jr...... 1956 through 1960
S. W. Barton........... 1956 through 1960
W. C. Hembree, Jr...... 1956 through 1960
Ruth N. Garrett........ 1956, 1959, 1960
Miriam M. Cole......... 1956, 1959, 1960
Eleanor E. Derryberry.. 1957, 1958
Dorothy Milam ......... 1957, 1958
S. W. Barton was also a vice president of HME during these years and W. C. Hembree, Jr., was secretary-treasurer and chief accounting officer.
In December 1959, all of the shareholders agreed to sell their stock to Ryder Systems, Inc. (hereinafter referred to as...
To continue reading
Request your trial