Martin v. Commissioner
| Citation | 22 TCM (CCH) 101,1963 TC Memo 26 |
| Decision Date | 30 January 1963 |
| Docket Number | Docket No. 89302. |
| Parties | Alexander H. Martin, Jr., Dorothy A. Martin v. Commissioner. |
| Court | United States Tax Court |
Alexander H. Martin, Jr., pro se, 33 Auburn Ave., Columbus, Ohio. James C. Bright, Esq., for the respondent.
Memorandum Findings of Fact and Opinion
The Commissioner determined deficiencies in income tax and additions to tax against the petitioners for years and in amounts as follows:
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1953 1954 1955 1956
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Deficiencies ................... $2,825.45 $1,780.60 $900.58 $672.47
Additions to tax
Sec. 294(d)(1)(A), I. R. C. 1939 254.09 152.55 .......
Sec. 293(a), I. R. C. 1939...... 141.27 ...... .......
Sec. 6653(a), I. R. C. 1954..... ...... 89.03 45.03 33.62
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The issues for decision are:
1. Whether the petitioners derived unreported gains from sales of real estate, in the amounts of $7,425 in 1953; $3,000 in 1954; and $1,300 in 1955.
2. Whether the petitioners derived unreported interest income, in the amounts of $523.55 in 1953; $1,289.98 in 1954; $830.12 in 1955; and $579.86 in 1956.
3. Whether the petitioners' failure to file declarations of estimated tax for the years 1953 and 1954 was due to reasonable cause and not due to willful neglect within the meaning of section 294(d)(1)(A) of the 1939 Code.
4. Whether any part of the petitioners' deficiencies in income tax for the years 1953 through 1956, was due to negligence or intentional disregard of rules and regulations but without intent to defraud, within the meaning of section 293(a) of the Internal Revenue Code of 1939, and section 6653(a) of the Internal Revenue Code of 1954.
5. Whether assessment of deficiencies for the several years 1953, 1954, 1955, and 1956, is barred by the statutes of limitation.
All other issues raised by the pleadings were conceded by the petitioners, either at the trial or on their briefs.
Separate findings of fact and a separate opinion as to each of the above issues are hereinafter set forth.
Petitioners, Alexander H. Martin, Jr., and Dorothy A. Martin, are husband and wife. For each of the taxable years involved, they filed a joint Federal income tax return with the district director of internal revenue at Cleveland, Ohio.
Alexander, during the years 1953 and 1954 and also until August 1955, was employed as a claims investigator for the Industrial Commission of the State of Ohio. And also, throughout all the years involved, he engaged in practice as an attorney at law, operated as a licensed real estate broker, and made numerous purchases and sales of real estate.
During the years 1953, 1954, and 1955, Alexander and his wife purchased and resold seven parcels of real estate, as follows:
1. Real estate transactions in 1953.
(a) Under the terms of a deed which was dated March 17, 1953, title to certain real property located at 1621 East 93rd Street, Cleveland, was acquired in the name of the wife, Dorothy, from Louis Mallama. The total consideration for said property was $23,500. Thereafter this property was sold by petitioners to Bernice Pettus for $25,000; and title thereto was transferred to Bernice by a general warranty deed dated March 30, 1953. This transaction resulted in a gain of $1,500 to the petitioners.
(b) Alexander purchased real property located at 1347 East 117th Street in Cleveland, from Richard and Mary H. Tintera; and he received a deed therefor which bore the date of August 6, 1953. The total consideration for this property was $9,000. Prior to receiving said deed, he and his wife sold this property to Sammie and Corene Laury for $10,500 under a land contract dated June 15, 1953.1 Said transaction resulted in a gain to petitioners of $1,500.
(c) Under date of July 10, 1953, title to certain real property located at 8804 Birchdale, Cleveland, was transferred to Alexander by Nicholas and Emma Sabetta. The total consideration for this property was $8,075. On August 6, 1953, Alexander and his wife sold this property to Rather Grier for $10,000 under a land contract. This transaction resulted in a gain to the petitioners of $1,925.
(d) Alexander and his wife acquired title to real property located at 1615 East 73rd Street, Cleveland, from Thomas G. and Edith V. Spanos, under the provisions of a deed dated March 12, 1953. The total consideration for this property was $17,000. Petitioners thereafter sold said property to Eugene F. and Clara Robinson for $18,000 under a land contract dated April 15, 1953; and this transaction resulted in a gain to petitioners of $1,000.
(e) In 1953, Alexander purchased from David McLean the real property located at 1223 East 112th Street, Cleveland, for a total consideration of $9,000. Thereafter, he and his wife sold said property to Johnnie and Lizzie Edwards under a land contract dated September 30, 1953, for a total price of $10,500. This yielded a gain to petitioners of $1,500.
2. Real estate transaction in 1954.
Under a deed dated March 27, 1954, Alexander acquired title to the real property located at 6113 Quimby Avenue, Cleveland, from Nicholas and Doris Rosin. The total consideration for said property was $9,500. Thereafter, during the year 1954, Alexander and his wife sold this property to Grady Collins for a total consideration of $12,500, resulting in a gain to petitioners on the sale of $3,000.
3. Real estate transaction in 1955.
In a deed dated November 6, 1953, Mildred Kaselonis transferred to Alexander the title to real property located at 11310 Primrose Avenue, Cleveland. The total consideration for said property was $8,700. Subsequently, on August 8, 1955, Alexander and his wife entered into a land contract with Willie Purefoy regarding said property, under which they sold the property to Purefoy for a price of $10,000. This resulted in a gain to petitioners from said sale of $1,300.
Many of the land contracts and the documents pertaining to the purchases and the sales of the above-mentioned properties were not introduced into evidence; and thus, the record is incomplete as to many of the details pertaining thereto.
Petitioners, in their joint income tax returns for the years 1953, 1954, and 1955, did not report their gains from any of the above-stated real estate transactions. Furthermore, they made no election, either in said returns or subsequently, to report any of their gains from these transactions on the installment basis.
The Commissioner determined that the petitioners derived gains, taxable as ordinary income, from these transactions as follows: $7,425 in 1953; $3,000 in 1954; and $1,300 in 1955 (being the same amounts which we have found that they derived). And he further determined that petitioners had not, included any of said gains in their joint Federal income tax returns for said years.
OpinionThe petitioners contend as to this issue that the above-stated seven real estate transactions were merely "financing devices" which they used to obtain financing for the persons to whom they sold the properties. The evidence herein does not however support such contention.
The petitioners, in their attempt to support said contention, have relied principally upon self-serving statements and conclusions, made by Alexander in the course of his testimony; and also upon certain of the deeds, land contracts and mortgages that were employed in connection with the above-mentioned transactions. But the testimony of three other witnesses, including that of Sammie Laury and Willie Purefoy who had purchased certain of said properties, is in direct conflict with said testimony of Alexander. And we, after considering and weighing all of the evidence, have resolved this conflict of testimony against the petitioners.
Also, the above-mentioned deeds, land contracts and other instruments received in evidence, do not support or even tend to support, petitioners' said contention; but rather tend to refute the same. These instruments all indicate that petitioners executed them as principals; and they do not suggest in any way that petitioners were acting in any other capacity. Also, notwithstanding that Alexander was a capable businessman who was experienced in the handling of numerous real estate transactions, he failed to present any cancelled checks, receipts, memoranda or other documents which either tend to indicate, or give any support to the above-mentioned contention that the transactions involved were merely "financing devices."
Since petitioners did not elect to report their gains from said sales on the installment basis, such gains are includable in their incomes for the respective years in which the sales were made.
We sustain the Commissioner's determinations as to this issue.
Five of the above-mentioned real estate sales by petitioners were made under land contracts. These five sales involved the properties located at 1621 East 93rd Street, 1347 East 117th Street, 1615 East 73rd Street, 1223 East 112th Street, and 11310 Primrose Avenue. Said land contracts all provided for the payment of interest to the petitioners on the unpaid balance thereof at the annual rate of 6 percent.
The Commissioner, in his notice of deficiency herein, determined that petitioners had received interest income on these land contracts, which they did not report in their income tax returns, as follows: $523.55 in 1953; $1,289.98 in 1954; $830.12 in 1955; and $579.86 in 1956.
OpinionThe petitioners presented no evidence which tends to establish error in the Commissioner's determinations that they received unreported interest income in the above-stated...
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