Lawrence v. Comm'r of Internal Revenue
| Decision Date | 25 January 1957 |
| Docket Number | Docket No. 53929. |
| Citation | 27 T.C. 713 |
| Parties | ARTHUR L. LAWRENCE AND ALMA P. LAWRENCE, PETITIONERS, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. |
| Court | U.S. Tax Court |
OPINION TEXT STARTS HERE
Brockman Adams, Esq., for the petitioners.
John Potts Barnes, Esq., for the respondent.
1. STATUTE OF LIMITATIONS— SEC. 275(c)— 25 PER CENT OMISSION FROM GROSS INCOME— OMISSION EXPLAINED IN RETURN.— The 5-year period of limitations provided by section 275(c) applies where a taxpayer omitted from gross income shown on the return a capital gain, which omission represented more than 25 per cent of the gross income shown on the return. It is immaterial that the omission was explained on a separate sheet of paper attached to the return.
2. STATUTE OF LIMITATIONS— SEC. 275(c)— SEC. 275(e).— The 5-year period of section 275(c) is applicable even though the omitted amounted was a distribution in liquidation of a corporation and on that basis alone a 4-year period would have been allowed under section 275(e).
3. TAX COURT POLICY— CONSIDERATION OF REVERSAL BY COURT OF APPEALS.— The Tax Court, having national jurisdiction rather than a jurisdiction limited to only a portion of the Nation, when reversed on an issue by a Court of Appeals, must reconsider the point in the light of the reversing opinion and then decide whether to adhere to its original views or accept the views of the reversing court.
The Commissioner determined a deficiency of $2,931.14 in the income tax of the petitioners for 1948. The facts have been stipulated. The stipulation is adopted as the findings of fact.
The petitioners, husband and wife, filed a joint Federal income tax return for 1948 with the collector of internal revenue, Los Angeles, California, on May 31, 1949, an extension to that date for filing having been granted. The notice of deficiency was not mailed until May 10, 1954, after the 3-year period, and after the 4-year period but before the 5-year period for assessment and collection had expired. The only question for decision is whether section 275(c) applies, giving the Commissioner 5 years from the filing of the return within which to assess and collect the deficiency now admitted to be due.
Section 275(c) is as follows:
(c) OMISSION FROM GROSS INCOME.— If the taxpayer omits from gross income an amount properly includible therein which is in excess of 25 per centum of the amount of gross income stated in the return, the tax may be assessed, or a proceeding in court for the collection of such tax may be begun without assessment, at any time within 5 years after the return was filed.
The petitioners have admitted that the deficiency determined by the Commissioner is correct. The Commissioner, in determining that deficiency, included in income over $20,000 of capital gain which the petitioners had omitted from gross income on their return. It was not included in the computation of gross income on the return. Even the taxable one-half of that amount is substantially ‘in excess of 25 per centum of the amount of gross income stated in the return.’ The petitioners do not contend otherwise.
The petitioners contend that they disclosed the nature and amount of the now admitted additional income in a manner adequate to apprise the Commissioner in a statement made a part of the return. Arthur acquired a portion of the stock of Midway Peerless Oil Company in 1942 and that company was liquidated on December 15, 1948. The liquidation resulted in the capital gain now determined by the Commissioner and agreed to by the petitioners. The petitioners reported on their return a long-term capital gain of $8,567.38, one item of the computation of which was as follows:
The following appeared as a separate page of the return:
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