Lusk v. Commissioner of Internal Revenue

Decision Date31 January 1958
Docket NumberNo. 11730.,11730.
Citation250 F.2d 591
PartiesWilliam LUSK, Petitioner, v. COMMISSIONER OF INTERNAL REVENUE, Respondent.
CourtU.S. Court of Appeals — Seventh Circuit

William Lusk, pro se.

Charles K. Rice, Asst. Atty. Gen., S. Dee Hanson, Atty., Tax Division, U. S. Dept. of Justice, Washington, D. C., Lee A. Jackson, I. Henry Kutz, Attorneys, Dept. of Justice, Washington, D. C., for respondent.

Before DUFFY, Chief Judge, and FINNEGAN and LINDLEY, Circuit Judges.

DUFFY, Chief Judge.

This appeal from the Tax Court involves the alleged liability of taxpayer, William Lusk, for deficiencies in income taxes for the years 1942 to 1947, inclusive. Fraud penalties were assessed for the years 1942 through 1945, and negligence penalties were assessed for the years 1946 and 1947. Taxpayer's divorced wife Lillian, did not join in the petition for a review of the Tax Court's decision.

In this case we are confronted with an unfortunate situation. Taxpayer is a layman, apparently with little formal education. He acted as his own attorney before the Tax Court although he was several times advised to employ an attorney. He had discharged his accountants some time prior to the Tax Court hearing because, he asserts, they charged $1,000.00 per month "just for conferences." He has the physical handicap of deafness. It is apparent from the record that at various times in the Tax Court proceeding, he did not fully realize just what was going on. Certainly he was not in a position to effectively conduct his part of the proceeding but, of course, it was his decision to appear as his own counsel.

Taxpayer also acted as his own attorney in this Court. We permitted him to file a long typewritten brief. We also permitted him to file a typewritten reply brief which was thirty-two pages in excess of the limit prescribed by Rule 17 (4) (e) of this Court, 28 U.S.C.A. On taxpayer's motion, we dispensed with oral argument. We have carefully examined the record as well as the extensive briefs filed.

During the taxable years here involved, the Lusks resided in Cicero, Illinois. Lusk was engaged in the business of selling automobiles, boats, motor cycles and farm machinery under the name of Cicero Boat and Motor Cycle Sales. In 1946 the name of the business was changed to "Outdoor Equipment Sales." At no time during the years in question did Lusk have more than one employee who, apparently, did no bookkeeping. He also operated a small farm in Wayne County, Illinois, about 270 miles distant from Cicero. This farm was purchased by taxpayer in 1938 for the sum of $4,000.00, and he spent $1,200.00 improving and furnishing it. In 1943 he acquired an additional twenty acres adjoining the original farm for $2,500.00 and spent $300.00 for improvements.

In 1937, taxpayer purchased a home in Cicero, Illinois, for $5,250.00. Prior to 1942, $2,000.00 had been spent on furnishings. During the taxable years $250.00 was spent in fixing a room in the basement which was thereafter rented.

Taxpayer rented a safe deposit box at the Cicero State Bank in August of 1937. He suggests he had a loss of confidence in the safety of bank deposits. Taxpayer's principal complaint seems to be that the Government, in computing taxes based on the net worth theory, did not credit him at the beginning of the period here in question with the amount of currency he had in his deposit box. He admits that over the years he used currency of large denominations but offers the unique explanation that such was necessary because his small-sized bank deposit box was not large enough to hold the amount of currency he owned, if it were in small denominations.

Taxpayer claims that funds used by him for investment in stocks and other property resulted from thirty years of hard work and saving; that he lived frugally and did not smoke, drink, gamble or have other extravagant habits. He pointed out that he operated his farm and used farm products to lighten his living expenses; that he did his own mechanical work and was able to live with a minimum of expenditures.

Claiming that taxpayer kept inadequate records to reflect his true income for the years 1942 through 1945, the Commissioner, by use of the excess expenditures and net worth methods, computed taxpayer's taxable income for those years and assessed deficiencies. The income tax was fixed at $46,060.19 and the additions, including fraud penalties, at $23,029.61. However, the income for the years 1946 and 1947 were computed by the Commissioner on a different basis. Taxpayer's records for those years consisted of bills, invoices, sales slips, a so-called police book to record purchase and sales of used cars, and consecutively numbered adding machine slips showing sales. On the basis of such records the Commissioner determined taxpayer's net income for 1946 and 1947 to be $19,817.18, and determined that taxpayer's under-stated net income was $11,662.44. The income tax for these two years was fixed at $2,790.15 and negligence penalties of $139.51 were assessed.

Taxpayer insists that exactly the same kind of records were kept in the period of 1942 through 1945 as in the following two years, but that the agents and other representatives of the Treasury Department never requested the production of such records. During the Tax Court proceeding, taxpayer moved to have the Court consider newly discovered evidence which included the records above described for the period from 1942 through 1945. The motion was denied. Undoubtedly, this motion was not timely made but this incident again indicates the great handicap the taxpayer placed upon himself by insisting on acting as his own attorney.

Taxpayer complains that under duress he signed waivers extending time for the assessment of income taxes for the years 1946 and 1947, because of the threats of the agents to "pull a figure out of the sky" if he refused to sign. Taxpayer claims that after his signature on one of these waivers he added the words "This is not my free and voluntary act."

There is some indication both in the findings of the Tax Court and in the brief of Government counsel here that the approach made was not entirely objective. Both the findings and the brief state that the taxpayer "received oil royalties and rental income * * *." This statement, although technically correct, is misleading because the record shows the "oil royalties" consisted of a $24.00 payment each year on a lease for possible future drilling, and as far as we can ascertain the "rental income" was the amount received by renting a basement room.

The Tax Court made the following finding: In 1943, taxpayer acquired a building in Cook County, Illinois, for $450.00, and made improvements thereto at a cost of $600.00. In 1944 he purchased a frame building in...

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18 cases
  • Rosenbaum v. Commissioner
    • United States
    • U.S. Tax Court
    • February 24, 1983
    ...income. (2) Failure to report income from dividends and gain on sale of securities. See Lusk v. Commissioner 57-2 USTC ¶ 10,023, 250 F. 2d 591 (7th Cir. 1957) affg. a Memorandum Opinion of this Court Dec. 21,006(M); Parsons v. Commissioner Dec. 27,196, 43 T.C. 378 (1964). Rosenbaum made inv......
  • J.H. Rutter Rex Mfg. Co., Inc. v. C.I.R.
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    • September 7, 1988
    ...(E.D.Mo.1967), aff'd 411 F.2d 1164 (8th Cir.1969); Willhoit v. Commissioner, 308 F.2d 259, 262-3 (9th Cir.1962); Lusk v. Commissioner, 250 F.2d 591, 595 (7th Cir.1957), cert. denied, 357 U.S. 932, 78 S.Ct. 1376, 2 L.Ed.2d 1375 Taxpayer's claims of fraud and deception are also unconvincing. ......
  • Marcello v. CIR
    • United States
    • U.S. Court of Appeals — Fifth Circuit
    • August 29, 1967
    ...the tax an amount equal to 5 per cent of the underpayment." 19 Gibbs v. Tomlinson, 5 Cir. 1966, 362 F.2d 394; Lusk v. Commissioner of Internal Revenue, 7 Cir. 1957, 250 F.2d 591, cert. den., 357 U.S. 932, 78 S.Ct. 1376, 2 L.Ed.2d 1375; Boynton v. Pedrick, 2 Cir. 1955, 228 F.2d 745; David Co......
  • Ferguson v. Commissioner
    • United States
    • U.S. Tax Court
    • March 29, 2004
    ...States [54-2 USTC ¶ 9714], 348 U.S. at 137; Webb v. Commissioner, supra at 379; Lusk v. Commissioner [57-2 USTC ¶ 10,023], 250 F.2d 591, 594 (7th Cir. 1957), affg. [Dec. 21,006(M)] T.C. Memo. 1955-119; Schwarzkopf v. Commissioner [57-2 USTC ¶ 9816], 246 F.2d 731, 734 (3d Cir. 1957), affg. a......
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