Hosking v. Comm'r of Internal Revenue

• Decision Date: 19 August 1974
• Docket Number: Docket No. 8360-71.
• Citation: 62 T.C. 635
• Parties: LOUIS RICHARD HOSKING, PETITIONER v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT
• Court: U.S. Tax Court

62 T.C. 635

LOUIS RICHARD HOSKING, PETITIONER

v.COMMISSIONER OF INTERNAL REVENUE, RESPONDENT

Docket No. 8360-71.

United States Tax Court

Filed August 19, 1974.

Louis Richard Hosking, pro se.

Gerald W. Leland, for the respondent.

Held, election made at the trial to compute tax by income averaging is proper, and such computation is to be used in computing deficiency even though overpayment is barred because no return was filed, no tax paid after issuance of notice of deficiency or 2 years before its issuance, and no proper claim for refund filed.

SCOTT, Judge:

Respondent determined a deficiency in petitioner's income tax for the calendar year 1968 in the amount of $2,023.15.¹

The issues for decision are:

(1) Whether petitioner is entitled to compute his taxable income for the calendar year 1968 pursuant to the income averaging provisions of sections 1301-1305, I.R.C. 1954,² and

(2) If petitioner is entitled to use the income averaging provisions, whether he is entitled to a refund for any overpayment of tax for the calendar year 1968.

FINDINGS OF FACT

Some of the facts have been stipulated and are found accordingly.

Petitioner was a resident of St. Paul, Minn., at the time of the filing of his petition in this case. He lodged with the Internal Revenue Service Center, Kansas City, Mo., an Internal Revenue Service Form 1040, ‘U.S. Individual Income Tax Return,‘ dated March 16, 1969.

During the year 1968 petitioner was employed by Barton Contracting Co., Osseo, Minn., as a cost accountant and timekeeper. For that year petitioner was compensated for his services in the amount of $10,500.08, exclusive of any reimbursed or unreimbursed travel expenses from which the amount of $1,810.51 was withheld for Federal income tax.

Petitioner's taxable income for the calendar years 1964, 1965, 1966, 1967, and 1968 was in the amounts of $857.07, $1,918.06, $1,167.68, $4,152.77, and $8,900, respectively.

The only information shown on the Form 1040 lodged by petitioner with the Internal Revenue Service was his name, address, social security number, signature, the date of March 16, 1969, the figure of $128.40 on line 23 of the form, which stated, ‘If payments (line 21) are larger than tax (line 16), enter Overpayment’ and on line 25 of the form, which stated, ‘Subtract line 24 from 23. Apply to: ( ) U.S. Savings Bonds, with excess refunded or (x) Refund only, ‘ and a checkmark and the figure $128.40 in the ‘Refund only’ column. Petitioner did not attach Internal Revenue Service Form Schedule G, ‘Income Averaging’ to the Form 1040 which he filed for the taxable year 1968, nor did he check the box on line 12a of that form indicating that his tax was determined from Schedule G.

At the trial on October 1, 1973, petitioner affirmatively elected to use the income averaging provisions for the year 1968. Using the income averaging method based on his taxable income for the calendar years 1964 to 1968, inclusive, petitioner presented at the trial his mathematical computations of his tax for 1968 on an Internal Revenue Service Form Schedule G, ‘Income Averaging.’ His tax determined under this method was in the amount of $1,621.02 to which was added a tax surcharge of $121.58. Having had the amount of $1,810.51 withheld, petitioner determined he had overpaid his total tax liability of $1,742.60 by the amount of $67.91.

Respondent in his notice of deficiency dated September 14, 1971, explained that petitioner had taxable income in the amount of $10,500 from wages received during 1968 which was partly offset by the maximum allowable standard deduction of $1,000 and the personal exemption of $600, resulting in a net taxable income for 1968 of $8,900. The statutory deficiency based on this amount of taxable income was calculated to be in the amount of $2,023.15, no credit for tax withheld having been claimed on the return as filed. Respondent, however, in the deficiency notice showed an unclaimed prepayment credit for tax withheld in the amount of $1,810.51 and determined the deficiency in payment due by petitioner for the year 1968 to be $212.64. Respondent in the notice of deficiency further stated as follows:

If a petition to the United States Tax Court is filed against the deficiency proposed herein, the basis for the overpayment claimed on your return should be made a part of the petition to be considered by the Tax Court in any redetermination of your tax liability. If a petition is not filed, the claim for refund will be disallowed and official notice will be issued by certified mail in accordance with section 6532(a)(1) of the Internal Revenue Code.

In his petition to the Court, petitioner claimed that respondent had erroneously determined he was liable for the net deficiency of $212.64 and that he was entitled to a refund of $128.40.

OPINION

The first issue is whether petitioner is entitled to the benefits of computing his tax for 1968 by the income averaging method provided for in sections 1301 to 1305 inclusive; Respondent admits that a proper computation of petitioner's income for 1968 under these provisions results in a total tax for the year 1968 of $1,742.60 as compared to a tax of $2,023.15 computed without the benefit of these provisions. However, respondent contends that petitioner's election to use the income averaging provisions for 1968 made for the first time at the trial of this case was untimely. If we decide that petitioner's election was timely, the question arises whether we should find that petitioner would be entitled to a refund of any resulting overpayment under the provisions of section 6512(b).

Section 1304(a)³ provides that a taxpayer must choose to income-average and that such choice ‘may be made or changed at any time before the expiration of the period prescribed for making a claim for credit or refund of the tax * * * for the taxable year.’ Section 1,1304-1, Income Tax Regs., provides:

Sec. 1.1304-1—Choice of income averaging by taxpayer.

(a) Choice by taxpayer. The income averaging provisions apply to a taxable year only if the taxpayer chooses to have the benefits of income averaging for such taxable year. The taxpayer shall signify his choice by making his return for the computation year on Form 1040 and attaching Schedule G, Income Averaging, thereto. The taxpayer may make or change his choice of such benefits at any time before the expiration of the period (including extensions thereof) prescribed in section 6511 for making a claim for credit or refund of the tax imposed by chapter 1 of the Code for such taxable year.

Respondent argues that petitioner, having made no return, is barred from making an election to income-average for the first time at the trial. He contends the period within which petitioner could have elected under section 1304(a) and section 6511(a)⁴ prescribing the time for filing of a claim expired on April 15, 1971, 2 years after the withheld tax was deemed paid under section 6513 as the Form 1040 filed by petitioner for the year 1968 lacked the information necessary to constitute a ‘return’ within the meaning of the Code, relying on Commissioner v. Lane-Wells Co., 321 U.S. 219 (1944); United States v. Porth, 426 F.2d 519 (C.A. 10, 1970).

While he has not favored us with a brief, petitioner apparently contends that to have disclosed the information required by Form 1040 would have constituted an unconstitutional invasion of his privacy and a violation of his rights under the fifth amendment against self-incrimination so that the Form 1040 he filed should be considered an adequate return and that his election to income-average which he made at trial of this case was effective.

It is well settled that the requirement that taxpayers shall prepare and file their tax returns, as established by the Code and respondent's regulations thereunder, does not violate a taxpayer's privilege against self-incrimination under the fifth amendment. United States v. Sullivan, 274 U.S. 259 (1927); Kasey v. Commissioner, 457 F.2d 369, 370 (C.A. 9, 1972), affirming 54 T.C, 1642 (1970). It is further well settled that the requirement of filing ordinary and reasonable returns and the inspection of returns under the limited circumstances as provided for under section 6103 do not violate a taxpayer's constitutional protection against unreasonable search and seizure under the fourth amendment. Flint v. Stone Tracy Co., 220 U.S. 107 (1911); Hubbard v. Mellon, 5 F.2d 764 (C.A.D.C. 1925). See also Calif. Bankers Assn. v. Shultz, 416 U.S. 21 (1974).

A return must contain sufficient data from which respondent can compute and assess the liability with respect to a particular tax of a taxpayer. Commissioner v. Lane-Wells Co., 321 U.S. 219 (1944); Marko Durovic, 54 T.C. 1364, 1387-1388 (1970), affirmed on this issue and reversed and remanded in part 487 F.2d 36 (C.A. 7, 1973). Petitioner here did not disclose in the Form 1040 that he filed for the year 1968 his gross income, elections, deductions, exemptions, net income, or credits for that year. His only disclosure other than his name, address, social security number, and date was that he had overpaid the amount of $128.40 which he desired refunded. This information falls far short of that necessary to be shown on a return to enable respondent to compute and assess petitioner's tax. John H. Houston, 38 T.C. 486, 491-492 (1962). Consequently the Form 1040 filed by petitioner did not constitute a return within the meaning of the Code. Not having filed a return, petitioner under section 6511 would be required to file any claim for refund of tax which was withheld from his wages within 2 years from the time the tax was paid, which under section 6513(b)(1) was deemed to be on April 15, 1969. Petitioner's election at the trial was subsequent to April 15, 1971, 2 years after the payment of the withheld tax.

Since petitioner did not elect to use income averaging within 3 years after his return was filed, as he filed no return, or 2 years after the...