Marshall v. Comm'r of Internal Revenue , Docket No. 6302-79.
| Citation | 85 T.C. 267,85 T.C. No. 13 |
| Decision Date | 13 August 1985 |
| Docket Number | Docket No. 6302-79. |
| Parties | SPURGEON MARSHALL AND ESTATE OF THELMA MARSHALL, DECEASED, SPURGEON MARSHALL, COMMUNITY SURVIVOR, Petitioners v. COMMISSIONER OF INTERNAL REVENUE, Respondent |
| Court | United States Tax Court |
OPINION TEXT STARTS HERE
HELD, allegations deemed admitted under Rule 90(c) were sufficient to sustain respondent's deficiency determination, and respondent's motion for summary judgment on that issue is granted. HELD FURTHER, allegations deemed admitted under Rule 90(c) were sufficient to satisfy respondent's burden of proving fraud, and respondent's motion for summary judgment on that issue is granted. WARD A. BUSEY, for the petitioners.
THOMAS G. NORMAN, for the respondent.
This matter is before the Court on respondent's motion for summary judgment pursuant to Rule 121 1
Respondent determined deficiencies in and additions to petitioners' Federal income tax as follows:
+--------------------------------+
¦ ¦ ¦Additions to tax¦
+----+----------+----------------¦
¦Year¦Deficiency¦sec. 6653(b) ¦
+----+----------+----------------¦
¦1974¦$14,801.01¦$7,400.51 ¦
+----+----------+----------------¦
¦1975¦9,314.21 ¦4,657.10 ¦
+--------------------------------+
Respondent's motion for summary judgment raises the following issues: 1) whether petitioners underreported income from the operation of a Gulf service station during the years in issue; and 2) whether petitioners are liable for additions to tax for fraud under section 6653(b).
This matter has been before the Court on four occasions: on February 2, 1983, at which time the Court was advised by respondent's counsel, speaking for both parties, that the case was ‘close to settlement‘—the trial was therefore continued generally; on February 28, 1984, at which time petitioners' counsel (making his only physical appearance in this case) advised the Court that he, petitioners' counsel, was unable to locate his client but would keep trying—the case was again continued generally; on May 2, 1984, at which time the Court was advised that respondent's counsel was unable to make contact with petitioners' counsel—the case was again continued; and on October 22, 1984, at which time respondent argued this motion for summary judgment which had been filed with the Court on June 22, 1984, and served on petitioners on June 26, 1984, along with notice setting respondent's motion for hearing in Houston, Texas, on October 22, 1984. No appearance by or on behalf of petitioners was made, and respondent again advised the Court that he was unable to make contact with petitioners' counsel. The Court received no communication from petitioners' counsel or petitioners in response to the notice of hearing. Likewise, petitioners did not respond in writing to respondent's motion for summary judgment.
On May 14, 1979, petitioners Spurgeon Marshall and Thelma Marshall, husband and wife, filed a petition disputing the income tax deficiencies and additions to tax for fraud set forth in the notice of deficiency. 2 On July 12, 1979, respondent timely filed an answer denying petitioners' assignment of errors and affirmatively alleging that part of petitioners' underpayment of tax for 1974 and 1975 was due to fraud. Petitioners did not file a reply denying the affirmative allegations of fraud in respondent's answer.
On May 11, 1983 and March 30, 1984, respondent served requests for admissions on petitioners' counsel. The admissions requested were the following:
1. During each of the taxable years 1974 and 1975, petitioners operated Marshall Gulf Service, a retail establishment located at 1401 Lockwood, Houston, Texas 77020.
2. During the taxable years 1974 and 1975, petitioners operated Marshall's Tire Service, a retail establishment located at 1401 Lockwood, Houston, Texas 77020.
3. During the years 1974 and 1975, the principal source of income of Marshall Gulf Service was from the sale of gasoline.
4. During the years 1974 and 1975, the petitioners reported their income on the basis of the cash method of accounting.
5. During the years 1974 and 1975, the petitioners purchased the gasoline sold by Marshall Gulf Service from the Gulf Oil Corporation.
6. During the years 1974 and 1975, the petitioners maintained daily sales records on which they recorded an amount stated to be the dollar amount of daily sales for Marshall Gulf Service.
7. The daily sales records maintained by the petitioners for Marshall Gulf Service for the years 1974 and 1975 omitted substantial amounts of receipts.
8. During the years 1974 and 1975, the petitioners used documents captioned ‘Paid Out Slip‘ on which were recorded amounts stated to have been paid to Gulf Oil Corporation (Gulf) for the gasoline delivered to Marshall Gulf Service.
9. The paid out slips filled out by the petitioners for Marshall Gulf Service for the years 1974 and 1975 understated the amounts paid to Gulf Oil Corporation for gasoline.
10. The daily sales records and the paid out slips were given to the bookkeeper for Marshall Gulf Service for the preparation of monthly profit and loss statements. These amounts were subsequently used for the preparation of the petitioners' tax returns for the years 1974 and 1975.
11. On their income tax returns for the years 1974 and 1975, the petitioners reported gross receipts as follows: 1974 - $340,944.48 and 1975 - $504,703.60.
12. On their income tax returns for the years 1974 and 1975, the petitioners reported costs of goods sold for Marshall Gulf Service as follows: 1974 - $320,176.76 and 1975 - $481,600.38.
13. On their income tax returns for the years 1974 and 1975, the petitioners reported purchases for Marshall Gulf Service as follows: 1974 - $317,418.56 and 1975 - $481,404.26.
14. During the years 1974 and 1975, the Gulf Oil Corporation delivered totals of 1,663,649 and 1,488,394 gallons of gasoline, respectively, to petitioners' place of business.
15. The actual purchases of the gasoline delivered to petitioners' place of business during the years 1974 and 1975 were in the following dollar amounts: 1974 - $668,222.57 and 1975 - $686,353.80.
16. During the years 1974 and 1975, petitioners sold gasoline at an average price of not less than $.04 per gallon more than their cost.
17. During the years 1974 and 1975, the gross receipts from petitioners' Marshall Gulf Service were: 1974 - $737,476.73 and 1975 - $746,085.86.
18. On their federal income tax returns (Forms 1040) for each of the years 1974 and 1975, the petitioners understated their gross receipts from Marshall Gulf Service by at least $396,532.25 for 1974 and by at least $241,382.36 for 1975.
19. On their federal income tax returns (Forms 1040) for each of the years 1974 and 1975, the petitioners understated their cost of goods sold.
20. Petitioners knowingly understated their gross receipts for the years 1974 and 1975.
21. Petitioners knowingly understated their cost of goods sold the years 1974 and 1975.
22. Petitioners knowingly maintained false records of receipts for the years 1974 and 1975.
23. Petitioners knowingly maintained false records of purchases for the years 1974 and 1975.
24. Petitioners knowingly had their income tax return for the year 1974 prepared from false records maintained by petitioners.
25. Petitioners knowingly had their income tax return for the year 1975 prepared from false records maintained by petitioners.
26. During the years 1974 and 1975, petitioners made payments for personal items out of the cash receipts of Marshall Gulf Service without first reporting the cash so expended as part of the gross receipts of Marshall Gulf Service.
27. The petitioners' fraudulently and with intent to evade tax, omitted from their income tax returns for the taxable years 1974 and 1975, gross receipts of $396,478.25 and $241,382.06, respectively.
28. The petitioners' fraudulently, and with intent to evade tax, understated their purchases on their income tax returns for the years 1974 and 1975 in the amount of $350,754.01 and $204,947.54, respectively.
29. Petitioners fraudulently, and with intent to evade tax, omitted from their income tax returns for the years 1974 and 1975 taxable income in the amounts of $37,724.24 and $27,832.54, respectively.
30. A part of the underpayment of tax required to be shown on petitioners' income tax returns for the taxable years 1974 and 1975 is due to fraud.
Petitioners failed to respond to either set of request for admissions.
Respondent's motion for summary judgment requests that we sustain the deficiencies and additions to tax for fraud set forth in the notice of deficiency. In his motion, respondent contends that because petitioners failed to respond to the request for admissions served on March 30, 1984, the allegations contained therein are deemed admitted under Rule 90(c). 3 Respondent concludes that the facts deemed admitted under Rule 90(c) are sufficient to sustain his deficiency determination as well as satisfy his burden of affirmatively proving fraud.
For reasons set forth below, we grant respondent's motion for summary judgment.
Under Rule 121, a summary adjudication may be made ‘if the pleadings, answers to interrogatories, depositions, admissions, and any other acceptable materials, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that a decision may be rendered as a matter of law.‘ Rule 121(b). The party opposing the motion cannot rest upon the allegations or denials in his pleadings, but must ‘set forth specific facts showing that there is a genuine issue for trial.‘ Rule 121(d). The moving party, however, bears the burden of proving that there is no genuine issue of material fact, and factual inferences will be read in a manner most favorable to the party opposing summary judgment. Jacklin v. Commissioner, 79 T.C. 340, 344 (1982); Espinoza v. Commissioner, 78 T.C. 412, 416 (1982).
The first issue for decision is whether we should grant respondent'...
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