In re Fisk's Estate

• Decision Date: 16 April 1953
• Docket Number: No. 11685.,11685.
• Citation: 203 F.2d 358
• Parties: In re FISK'S ESTATE. FISK v. COMMISSIONER OF INTERNAL REVENUE.
• Court: U.S. Court of Appeals — Sixth Circuit

203 F.2d 358 (1953)

In re FISK'S ESTATE FISK v. COMMISSIONER OF INTERNAL REVENUE.

No. 11685.

United States Court of Appeals Sixth Circuit.

April 16, 1953.

Robert W. Tripp, Detroit, Mich., Robert W. Tripp, Detroit, Mich., Albert W. Dimmers, Hillsdale, Mich., on the brief, for petitioner.

George F. Lynch, Washington, D. C., Charles S. Lyon, Ellis N. Slack, Robert N. Anderson, and Walter Ackerman, Jr., Washington, D. C., on the brief, for respondent.

Before ALLEN, MARTIN and MILLER, Circuit Judges.

ALLEN, Circuit Judge.

The sole question presented is whether the Tax Court erred in imposing a penalty under Internal Revenue Code, Section 3612 (d) (1), 26 U.S.C.A. § 3612(d) (1), for failure to file an estate tax return within the time prescribed by law. The return was due July 21, 1947. It reached the collector's office July 22, 1947.

Respondent stated in open court that it did not rely upon the existence of "willful neglect" under the statute. The Tax Court held that the petitioner did not show that the failure to file within the time prescribed by law was due to a "reasonable cause" and therefore sustained the Commissioner in imposing the 5% penalty. The finding of the Tax Court on the facts is as follows:

"The evidence on this phase of the case is meager. We know that petitioner turned the preparation and filing of the estate tax return over to an attorney. How long before the due date that was done is not shown. The attorney had had but a limited experience with tax matters, but he did consult respondent\'s regulations before preparing and mailing the return. No explanation is offered as to why mailing was put off until the due date. The most we can say is that possibly the attorney assumed that if he mailed the return on the due date it would be treated as having been timely filed."

We think the addition of the penalty constituted error as a matter of law. The question of the existence of reasonable cause is in the first instance one of fact for the Tax Court, Commissioner v. Lane-Wells Co., 321 U.S. 219, 225, 64 S.Ct. 511, 88 L.Ed. 684, which must decide whether the elements which constitute reasonable cause are present in a case. What elements must be presented to constitute reasonable cause is a question of law. Hatfried, Inc., v. Commissioner, 3 Cir., 162 F.2d 628, 635; Haywood Lumber & Mining Co. v. Commissioner, 2 Cir., 178 F.2d 769. Reasonable cause means nothing more than the exercise of ordinary business care and prudence. Haywood Lumber & Mining Co. v. Commissioner, supra; Orient Investment & Finance Co., Inc., v. Commissioner, 83 U.S.App.D.C. 74, 166 F.2d 601, 3 A.L.R.2d 612; Southeastern Finance Co. v. Commissioner, 5 Cir., 153 F.2d 205. Various courts have held as a matter of law that reliance upon an attorney or an accountant for making out and filing of tax returns constitutes reasonable care. Cf. Dayton Bronze Bearing Co. v. Gilligan, 6 Cir., 281 F. 709, certiorari denied 258 U.S. 619, 42 S.Ct. 272, 66 L.Ed. 794; Haywood Lumber & Mining Co. v. Commissioner, supra; Orient Investment & Finance Co., Inc., v. Commissioner, supra. The Tax Court has repeatedly decided that reliance upon counsel constitutes reasonable cause for failure to timely file necessary tax returns. The C. R. Lindback Foundation v. Commissioner, 4 T.C. 652; Brooklyn & Richmond Ferry Co., Inc., v. Commissioner, 9 T. C. 865; Safety Tube Corporation v. Commissioner, 8 T.C. 757; Diana McFadden Houk, 6 T.C.Memo. 649.

In Hatfried, Inc., v. Commissioner, supra, where it appeared that the only possible conclusion on the record was that the failure to file a personal holding company return was made on an accountant's advice, the Third Circuit held that the finding that there was no reasonable cause was not sustained by substantial evidence. Whether we adopt the...