Human Engineering Institute v. Commissioner
| Decision Date | 13 April 1978 |
| Docket Number | Docket No. 528-68,529-68. |
| Citation | 1978 TC Memo 145,37 TCM (CCH) 619 |
| Parties | Human Engineering Institute v. Commissioner. Joseph S. Kopas and Mary E. Kopas v. Commissioner. |
| Court | U.S. Tax Court |
Joseph S. Kopas and Mary E. Kopas (Officers), for the petitioner in Docket No. 528-68 and pro se in Docket No. 529-68. Buckley D. Sowards, for the respondent.
Memorandum Findings of Fact and Opinion
These consolidated cases were assigned to and heard by Special Trial Judge Murray H. Falk pursuant to Rules 180 and 182, Tax Court Rules of Practice and Procedure. His report was filed and served upon the parties on December 23, 1977. Subsequently, the petitioners filed exceptions thereto. Respondent filed no exceptions but did file a reply to petitioners' exceptions. Before we take action on the Special Trial Judge's report, we believe some observations are in order.
This case has had a long and tortuous history, which has not been confined to proceedings before this Court.1 Most of petitioners' efforts have involved unsuccessful challenges to the jeopardy assessments' validity — a challenge which they again assert in their exceptions to the Special Trial Judge's report. At the trial before the Special Trial Judge, they renewed this attack, relying on Shapiro v. United States 76-1 USTC ¶ 9266, 424 U.S. 614 (1976), and Laing v. United States 76-1 USTC ¶ 9164, 423 U.S. 161 (1976). Neither of these cases offers petitioners any solace. Whatever the reach of Shapiro in respect of alleged arbitrary jeopardy assessments, this is a matter over which this Court has no jurisdiction, as the Supreme Court itself recognized. See 424 U.S. at 630, n. 12; California Associated Raisin Co.v. Commissioner Dec. 487, 1 B.T.A. 1251 (1925). See also Durovic v. Commissioner 73-2 USTC ¶ 9728, 487 F. 2d 36, 40 (7th Cir. 1973). Compare section 7429, Internal Revenue Code of 1954 (). Laing decreed that a deficiency notice must be issued within 60 days after the making of a jeopardy assessment, a requirement that was satisfied in this case.2 That case is, therefore, also inapplicable herein.
A part of petitioners' attack on the jeopardy assessment (which is also renewed in petitioners' exceptions) was for the purpose of obtaining the release of funds to pay counsel and accountants' fees.3 This issue was thoroughly considered by this Court in Human Engineering Institute v. Commissioner Dec. 32,181, 61 T.C. 61 (1973), and decided adversely to petitioners. In so ruling, the Court was fully aware of the burden placed on the trial court in relegating the potential constitutional issue to a post-trial determination. Consequently, as the record herein clearly reveals, the Court has made every effort to afford petitioners the maximum opportunity to present their evidence.
Closely related to the problem of representation of petitioners is their complaint about the long period of time which this litigation has consumed. In the earlier stages, it is clear from the record that the delays were largely attributable to actions by petitioners and their prior counsel, including the fact that petitioners themselves withdrew an offer in compromise before respondent had taken final action thereon. See Human Engineering Institute v. Commissioner, supra at 61-63. In the latter stages of these proceedings, much of the delay was due to the careful efforts by the Court to afford petitioners every opportunity to present their case (including making a deputy trial clerk available for three weeks in Cleveland, Ohio, to mark over 3,000 exhibits for identification). We also note that the record shows that petitioners, despite their protestations of lack of ability to defend themselves, exhibited considerable talent in their questioning of witnesses and their own testimony at the trial.
Petitioners also assert that we should declare the deficiency notices void on the ground that they are arbitrary and unreasonable. This we have previously held we will not do; the most that we may do in the event that we find a deficiency notice arbitrary and unreasonable is to shift the burden of proof to respondent,4 but we have repeatedly indicated that we will take such a step only in the most extreme situations. See Greenberg's Express, Inc. v. Commissioner Dec. 32,640, 62 T.C. 324, 328 (1974); Human Engineering Institute v. Commissioner, supra at 66 and cases cited thereat.
Unfortunately for petitioners, the circumstances of this case do not, in our opinion, justify such action. Based upon our examination of the entire record, including the transcript and the deemed stipulated facts (see Strachan v. Commissioner Dec. 28,503, 48 T.C. 335 (1967)),5 coupled with petitioners' failure to submit any significant evidence in support of their position,6 we cannot say that respondent's determinations were arbitrary and unreasonable. Compare Helvering v. Taylor 35-1 USTC ¶ 9044, 293 U.S. 507 (1935), the leading case on this point, where it was only after a full trial that the Supreme Court concluded that there was sufficient evidence that the respondent's deficiency notice was without rational foundation and arbitrary.
Against the foregoing background and after a thorough consideration of the entire record herein, the briefs of the parties, and petitioners' exceptions to the Special Trial Judge's report, we conclude and decide that the report, which is hereinafter set forth, should be adopted as the opinion of the Court.
FALK, Special Trial Judge:
Respondent determined deficiencies in petitioners' Federal income taxes and additions thereto as follows:
The following issues are presented for our decision:
1. Whether petitioner Human Engineering Institute failed to qualify as a tax exempt organization under section 101(6) of the Internal Revenue Code of 1939 for the year 1953 and under section 501(c)(3) of the Internal Revenue Code of 19547 for each of the years 1954 through 1962, inclusive;
2. Whether the statute of limitations bars the assessment of a deficiency in respect of petitioner Human Engineering Institute for each of the years 1953 through 1962, inclusive;
3. Whether petitioner Human Engineering Institute had taxable income in the amounts determined by respondent for each of the years 1953 through 1962, inclusive;
4. Whether petitioner Human Engineering Institute is liable for the 50 percent addition to tax for fraud for each of the years 1953 through 1962, inclusive;
5. Whether the statute of limitations bars the assessment of a deficiency in respect of petitioners Joseph S. Kopas and Mary E. Kopas for each of the years 1953 through 1962, inclusive;
6. Whether petitioners Joseph S. Kopas and Mary E. Kopas are liable for the 50 percent addition to tax for fraud for each of the years 1953 through 1962, inclusive;
7. Whether petitioners Joseph S. Kopas and Mary E. Kopas' gross income should be increased in the amounts determined by respondent for each of the years 1953 through 1962, inclusive;
8. Whether petitioners Joseph S. Kopas and Mary E. Kopas are entitled to deductions for business expenses, charitable contributions, interest, and taxes paid or incurred in excess of the amounts allowed by respondent for the years 1953 through 1962, inclusive; and
9. Whether petitioners Joseph S. Kopas and Mary E. Kopas are entitled to a dependency exemption deduction in respect of their son Robert for the year 1961.
Pursuant to our Orders herein entered September 5, 1975, and September 23, 1975, in accordance...
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