Jackson v. Commissioner, Docket No. 70811
| Decision Date | 23 December 1964 |
| Docket Number | 70814.,70813,Docket No. 70811,70812 |
| Citation | 23 TCM (CCH) 2022,1964 TC Memo 330 |
| Parties | W.R. Jackson, et al. v. Commissioner. |
| Court | U.S. Tax Court |
Carl A. Swafford, Richard P. Jahn, and William L. Taylor, for the petitioners. George W. Calvert and David E. Mills, for the respondent.
Memorandum Findings of Fact and Opinion
Respondent determined deficiencies in petitioners' income taxes and additions to tax under section 293(b) of the Internal Revenue Code of 1939 as follows:
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Addition to
tax under
Docket Calendar Sec. 293(b)
No. Petitioner Year Kind of Tax Deficiency I.R.C. 1939
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70811 W.R. Jackson ........... 1941 Income $ 7,037.52 $ 3,992.75
1942 Income 12,709.34 6,354.67
1943 Income 194,893.84* 98,418.14
1944 Income 44,969.77 22,484.89
1945 Income 10,531.13 5,265.57
1946 Income 211.16 105.58
1947 Income 165.63 82.82
70812 William R. Jackson and 1948 Income 226.16 113.08
Alice J. Jackson ..... 1949 Income 402.96 201.48
70813 Cleveland Chair Company 1942 Income -0- 32.08
1942 Declared Value
Excess Profits 219.63 114.10
1942 Excess Profits 2,517.49 1,211.67
1943 Declared Value
Excess Profits 19,920.18 9,960.09
1943 Excess Profits 152,459.13 76,229.57
1944 Declared Value
Excess Profits 2,480.08 1,229.54
1944 Excess Profits 34,842.66 17,480.59
1945 Declared Value
Excess Profits 779.38 341.81
1945 Excess Profits 15,511.15 7,265.17
70814 Alice Jewell Jackson ... 1941 Income 2,290.96 880.71
1942 Income 7,236.29 3,618.15
1943 Income 155,416.01* 76,821.33
1944 Income 36,242.25 18,121.12
1945 Income 8,106.89 4,053.45
1946 Income 211.38 105.69
1947 Income 215.84 107.92
* Income and victory tax
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At the trial respondent conceded that there were no deficiencies in taxes due from either W. R. Jackson or Alice Jewell Jackson for the calendar year 1941.
The issues for decision are:
(1) Whether the Federal income tax returns filed by W.R. Jackson and Alice Jewell Jackson for the years 1942, 1943, 1944, and 1945, by W.R. Jackson and Alice Jewell Jackson for the years 1946 and 1947, by Cleveland Chair Company for 1942 and the declared value excess profits tax returns and excess profits tax returns filed by Cleveland Chair Company for the years 1942, 1943, 1944, and 1945 were each false or fraudulent with intent to evade tax, so that the assessment or collection of a deficiency is not barred by the statute of limitations.
(2) Whether the partnership, Jackson Manufacturing Company, consisting of W.R. Jackson and Alice Jewell Jackson, and the corporation, Cleveland Chair Company, had unreported income in each of the years 1942, 1943, 1944, and 1945 as a result of understatement of gross sales; or whether there were additional purchases by each of these businesses in the full amounts by which sales were understated for which no deduction was taken in computing net income.
(3) Whether W.R. Jackson and Alice Jewell Jackson in each of the years 1942, 1943, 1944, and 1945 failed to report a portion of their distributable net income from the partnership, Jackson Manufacturing Company, because of understatement of net income of the partnership business on the partnership's return of income for each of those years.
(4) Whether W.R. Jackson and Alice Jewell Jackson received income from the Cleveland Chair Company, a corporation, in each of the years 1942, 1943, 1944, and 1945 which was not reported on their Federal income tax returns.
(5) Whether W.R. Jackson and Alice Jewell Jackson each failed to report interest income on their individual income tax returns for each of the years 1942, 1943, 1944, 1945, 1946, and 1947; and whether William R. Jackson and Alice Jewell Jackson failed to report interest income on their joint income tax returns for the years 1948 and 1949.
(6) Whether there is a deficiency in income tax due from W.R. Jackson for each of the years 1942 through 1947, from Alice Jewell Jackson for each of the years 1942 through 1947, and from William R. Jackson and Alice Jewell Jackson for the years 1948 and 1949; and a deficiency in declared value excess profits tax and excess profits tax due from the Cleveland Chair Company for each of the years 1942 through 1945, a part of which is due to fraud with intent to evade tax.
Some of the facts have been stipulated and are found accordingly.
William R. Jackson and Alice Jewell Jackson, husband and wife who resided in Chattanooga, Tennessee until 1944 or 1945, and thereafter resided in Cleveland, Tennessee, timely filed separate income tax returns with the district director of internal revenue at Nashville, Tennessee for each of the years 1942 through 1947 and joint Federal income tax returns with the same district director of internal revenue for each of the years 1948 and 1949. Each of these returns was prepared by a certified public accountant or a lawyer from records and information furnished to him by William R. Jackson or Alice Jewell Jackson.
The Cleveland Chair Company, a Tennessee corporation, timely filed its corporate Federal income tax, excess profits tax, and declared value excess profits tax returns for each of the years 1942 through 1945 with the district director of internal revenue at Nashville, Tennessee. Each of these returns was prepared by a certified public accountant from the books and records of the corporation which were furnished to him. The Cleveland Chair Company was organized in 1915, and in early 1942 W.R. Jackson and Alice Jewell Jackson purchased the stock of this corporation, the stock so purchased being issued 55 percent to W.R. Jackson and 45 percent to Alice Jewell Jackson.
W.R. Jackson (hereinafter referred to as Jackson) was born on a farm near Cleveland, Tennessee, in 1906. He was the third oldest in a family of six. After having worked a short while in Cleveland, Ohio, Jackson went to Chattanooga, Tennessee, in 1925 or 1926 and began to do work as a furniture upholsterer. In 1933 Jackson started in business as a sole proprietor under the name of Jackson Upholstery Company, repairing and refinishing furniture.
In 1931 Jackson married Alice Jewell. Alice Jewell Jackson (hereinafter referred to as Alice) was working in a hosiery mill in Chattanooga, Tennessee at the time she married Jackson. Her father had died when she was quite young and for a number of years prior to her marriage to Jackson she had been the sole support of herself, her mother, and younger brothers and sisters. Alice continued to work in the hosiery mill for a while after she married Jackson and she also assisted Jackson in his business.
Jackson went into bankruptcy in 1933 but subsequently paid off his creditors. Jackson has been in some type of business activity of his own ever since he started the Jackson Upholstery Company.
In 1936 Jackson and another organized the Jackson Manufacturing Company as a partnership. This partnership was dissolved before the end of 1936, and from that time until June 30, 1941, Jackson operated the Jackson Manufacturing Company as a sole proprietorship. Jackson Manufacturing Company was in the business of making new furniture, primarily living room suites and upholstered chairs.
Alice assisted Jackson in his business in such ways as receiving customers, doing filing, or general office work depending on where her services were most needed. On June 30, 1941, Jackson gave a 45 percent interest in Jackson Manufacturing Company to Alice, and from that date until its incorporation on January 1, 1946, Jackson Manufacturing Company was operated as a partnership, Jackson being a 55 percent partner and Alice a 45 percent partner. Alice continued to perform substantially the same type of work for the partnership that she had performed while her husband operated the business as a sole proprietorship. One of the reasons that Jackson gave a partnership interest in Jackson Manufacturing...
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