LaBelle v. Commissioner
| Decision Date | 13 February 1984 |
| Docket Number | Docket No. 9773-79. |
| Citation | 47 TCM (CCH) 1078,1984 TC Memo 69 |
| Parties | Nancy B. LaBelle v. Commissioner. |
| Court | U.S. Tax Court |
Theodore J. England, 500 Esplanade Drive, Oxnard, Calif., for the petitioner. Elaine T. Moriwaki, for the respondent.
Memorandum Findings of Fact and Opinion
Respondent determined a deficiency of $290,564.37 and additions to tax of $71,991.59 under section 6651(a)1 and $14,528.22 under section 6653(a) for the taxable year 1973. The issues are (1) whether petitioner intended to file a joint return for 1973, and (2) if the return is considered a joint return, whether petitioner qualifies as an innocent spouse under section 6013(e); (3) whether petitioner is liable for an addition to tax under 6651(a) for failing to file a timely return; and (4) whether petitioner is liable for an addition to tax under section 6653(a) for negligent underpayment of taxes.
Some of the facts have been stipulated and are so found. The stipulation of facts and attached exhibits are incorporated herein by this reference.
Petitioner resided in Santa Paula, California, at the time of filing the petition in the instant case.
During 1973, petitioner was employed by the Santa Paula School District to teach children with emotional learning handicaps, and has been employed in that capacity continuously from 1961 to November 1980.
Petitioner married Donald A. LaBelle (Donald) in January 1957. In 1965 or 1966, Donald purchased a used car lot in Santa Paula, California, and did business under the name Don LaBelle's Wholesale Center. Sometime between 1965 and 1971, Donald expanded the business and opened two other used car lots. In 1971, he purchased a new automobile dealership and began doing business under the name Steve Love's Chrysler-Plymouth. Although petitioner did the bookkeeping and taxes for the three used car lots, she did not participate in the new dealership.
In early 1973, petitioner separated from Donald and on August 9, 1973, an interlocutory judgment of dissolution of marriage was filed to dissolve their marriage. A marital settlement agreement signed by Donald and petitioner and dated June 25, 1973, was incorporated in the interlocutory judgment.
The marital agreement provided that the parties would file joint tax returns for taxable years prior to the year in which a final judgment of dissolution was obtained and that the parties would sign and deliver such other documents as may be necessary or desirable to accomplish the agreements provided therein. The agreement further provided that (a) Donald would file the petition for dissolution of marriage; (b) the settlement to petitioner would be $7,000 — paid in installment; the furniture and fixtures from the family residence; a $10,000 insurance policy and use of a car; and (c) Donald would retain the family residence and pay all community debts known to him at the time of the execution of said agreement.
The final judgment of dissolution of marriage was filed on January 9, 1974.
In March 1974, petitioner supplied Donald with her W-2 (Wage and Tax Statement) form from the Santa Paula School District showing a salary of $12,797, Federal taxes withheld of $1,998, and a list of deductions for 1973 so that he could file a return for 1973.
In June 1974, petitioner and Donald executed a power of attorney (Department of the Treasury, Internal Revenue Service Form 2848) appointing Peter J. Celeste, Esq. as her attorney-in-fact with respect to all Internal Revenue tax matters for the 1971, 1972 and 1973 tax years. At the time petitioner signed the power of attorney, she thought that the 1973 tax return had been filed. Petitioner did not separately file a tax return for 1973.
A Federal income tax return, Form 1040, was filed for 1973 with the Ventura, California, office of the Internal Revenue Service on June 5, 1975. The return was signed by Donald and petitioner's signature was entered by Mr. Celeste pursuant to the 1974 power of attorney. The return did not contain a signature in the preparer's signature line.
In August 1980, petitioner first became aware that the return had been filed late and without her signature. Until then, petitioner never inquired of Donald or the Internal Revenue Service as to whether such return had been filed.
The 1973 tax return reflected Schedule C expenses for Donald's automobile business (Steve Love's Chrysler-Plymouth) and included the following:
(a) Cost of goods sold
and/or operations ................ $2,071,997
(b) Salaries and wage
expenses ......................... 37,533
(c) Advertising expenses ................ 20,961
(d) Demonstration expenses .............. 8,743
(e) Travel and entertainment
expenses ......................... 7,336
In his statutory notice of deficiency, the Commissioner made the following adjustments:
(a) Decreased the cost of
goods sold (used
cars) by ......................... $447,137.71
(b) Decreased salary and
wage expense by .................. 4,800.00
(c) Decreased advertising
expenses by ...................... 4,700.00
(d) Decreased demonstrator
expense by ....................... 1,390.00
(e) Decreased travel and
entertainment
expenses by ....................... 4,768.00
(f) Allowed the standard
deductions and exemptions
not previously
claimed on the return
Opinion
The central issue for decision is whether petitioner and Donald filed a joint return for the 1973 tax year.
It is well settled that a determination of whether income tax returns are joint or separate returns of a husband and wife is a question of fact to be determined by all the evidence. Heim v. Commissioner Dec. 22,009, 27 T.C. 270 (1956), affd. 58-1 USTC ¶ 9202, 251 F. 2d 44 (8th Cir. 1958). The ultimate determination is the intent of the parties. O'Connor v. Commissioner 69-2 USTC ¶ 9453, 412 F. 2d 304 (2d Cir. 1969), affg. in part, revg. in part, and remanding with directions a Memorandum Opinion of this Court Dec. 28,586(M); Hennen v. Commissioner Dec. 24,658, 35 T.C. 747, 748 (1961).
We think it is clear that petitioner intended to file a joint return for the 1973 taxable year.
The marital settlement agreement signed by petitioner and Donald on June 25, 1973 provided that the tax returns for taxable years prior to the year in which a final judgment for dissolution was obtained would be filed as joint returns. The final judgment of dissolution of their marriage was filed on January 9, 1974. As her testimony indicates, petitioner then contemplated that Donald would file the return jointly. She therefore provided Donald with her W-2 form and all deductions which he needed to fill out the return and assumed that the return would be timely filed. In June 1974, upon Donald's request, petitioner signed a power of attorney which appointed Peter Celeste as her attorney-infact with respect to all Internal Revenue tax matters for the 1971, 1972, and 1973 tax years. Approximately 1 year later, a 1973 tax return containing Donald's signature and petitioner's signature which was entered by Mr. Celeste was filed with the Internal Revenue Service.
Petitioner conceded in her testimony that her signature on the power of attorney was genuine. She argues, however, that she signed the power of attorney upon Donald's representation that their prior years' tax returns were being audited and that they would probably get a refund. She claims that she was never advised that her execution of the power of attorney would entitle the attorney to sign the 1973 tax return on her behalf. Petitioner thus contends that her signature is not valid since it was procured by trickery. Dolan v. Commissioner Dec. 27,440, 44 T.C. 420 (1965). We are of the opinion that petitioner has failed to prove that her signature on the power of attorney was procured by trickery. She was an educated woman familiar with financial matters and should have been aware of its true nature.2
It is clear that petitioner intended to file a joint return and that she signed through an attorney does not alter this intent. Indeed, if an intent to file a joint return otherwise exists, it is not fatal that one spouse did not sign the return. Hennen v. Commissioner, supra. Where a husband filed a joint return without objection of the wife, who failed to file a separate return, it may be presumed that the joint return was filed with the consent of the wife. Howell v. Commissioner Dec. 16,390, 10 T.C. 859 (1948), affd. 49-1 USTC ¶ 9318, 175 F. 2d 240 (6th Cir. 1949). Here, the facts clearly establish that petitioner intended that Donald should file the joint return, and that is the only return filed by or on her behalf for that year. By petitioner's own admission, when Donald asked to sign the power of attorney, she thought that Donald had already filed a joint return for the 1973 tax year. There is thus no question that she then intended that the return be filed jointly. From that time until approximately 1 year later when the return was actually filed, there is no indication that petitioner altered her intention that a joint return be filed. And of course, the marital settlement agreement she signed provided for filing a joint return for 1973. Petitioner's testimony that she would not have signed a tax return which obligated her to pay $290,000 in taxes underscores the retrospective nature of petitioner's claim. We thus conclude that the return filed for the 1973 tax year was intended to be the joint return of petitioner and Donald.
Our conclusion that the return filed for 1973 was a joint return necessitates consideration of petitioner's contention that she was an innocent spouse entitled to protection from liability for the deficiency determined in 1973 by virtue of section 6013(e).
Section 6013(e)(1) requires that three conditions be satisfied to...
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