Medlin v. Commissioner

• Decision Date: 29 July 2003
• Docket Number: Docket No. 2615-98.
• Citation: 86 T.C.M. 141
• Parties: Walter L. Medlin v. Commissioner.
• Court: U.S. Tax Court

86 T.C.M. 141

T.C. Memo. 2003-224

Walter L. Medlin v. Commissioner.

Docket No. 2615-98.

United States Tax Court.

Filed July 29, 2003.

David D. Fussell and Mark L. Horwitz, for the petitioner.

James F. Kearney, Benjamin A. de Luna, and Robert W. Dillard, for the respondent.

MEMORANDUM FINDINGS OF FACT AND OPINION CONTENTS

                GENERAL FINDINGS OF FACT .......................................................   144
                General Legal Principles .......................................................   148
                I.   Items of Income ...........................................................   149
                     A. Rents Received From Island Livings, Inc. in 1988 .......................   149
                          FINDINGS OF FACT .....................................................   149
                          OPINION ..............................................................   149
                     B. Schedule C Gains From Property Sales ...................................   149
                        1. Florida Fruit Belt Subdivision (OS-06) ..............................   149
                           FINDINGS OF FACT ....................................................   149
                           OPINION .............................................................   150
                        2. Susan's Lakefront Estate (OS-03) ....................................   151
                           FINDINGS OF FACT ....................................................   151
                           OPINION .............................................................   151
                        3. High Plains Property (OS-35) ........................................   151
                           FINDINGS OF FACT ....................................................   152
                           OPINION .............................................................   152
                        4. Silver Lake (OS-1.4) ................................................   153
                           FINDINGS OF FACT ....................................................   153
                           OPINION .............................................................   154
                        5. East Lake Vista (OS-47) .............................................   154
                           FINDINGS OF FACT ....................................................   154
                           OPINION .............................................................   156
                        6. Grissom Parcels (OS-1.3) ............................................   158
                           FINDINGS OF FACT ....................................................   158
                           OPINION .............................................................   159
                        7. Arrowhead Lakes Subdivision (OR-2), Angel-Royse Property (OS-39) ....   160
                           FINDINGS OF FACT ....................................................   160
                           OPINION .............................................................   161
                        8. Prather Ranch Property (OR-01) ......................................   162
                           FINDINGS OF FACT ....................................................   162
                

                           OPINION .............................................................   163
                        9. Citrus County Property ..............................................   165
                           FINDINGS OF FACT ....................................................   165
                           OPINION .............................................................   166
                     C. Miscellaneous Items of Schedule C Income ...............................   166
                           FINDINGS OF FACT ....................................................   167
                           OPINION .............................................................   167
                     D. Schedule E Income ......................................................   167
                           FINDINGS OF FACT ....................................................   167
                           OPINION .............................................................   167
                     E. Unidentified Deposits ..................................................   167
                        1. Deposit on March 12, 1985, of $59,000 ...............................   167
                           FINDINGS OF FACT ....................................................   167
                           OPINION .............................................................   168
                        2. Deposit on September 16, 1986, of $84,521.63 ........................   169
                           FINDINGS OF FACT ....................................................   169
                           OPINION .............................................................   169
                        3. Deposit on April 9, 1987, of $67,740 ................................   170
                           FINDINGS OF FACT ....................................................   170
                           OPINION .............................................................   171
                        4. Deposit on July 8, 1988, of $140,000 ................................   171
                           FINDINGS OF FACT ....................................................   171
                           OPINION .............................................................   172
                        5. Other Deposits ......................................................   173
                           FINDINGS OF FACT ....................................................   173
                           OPINION .............................................................   173
                     F. Deductions Claimed by Petitioner .......................................   173
                        1. Schedule C Real Estate Business Deductions ..........................   173
                           FINDINGS OF FACT ....................................................   173
                           OPINION .............................................................   174
                        2. Personal Residence Interest .........................................   174
                           FINDINGS OF FACT ....................................................   174
                           OPINION .............................................................   174
                        3. Orange Grove, Cattle, and Ferrari Activities ........................   174
                           FINDINGS OF FACT ....................................................   174
                           OPINION .............................................................   175
                     G. Self-employment Tax ....................................................   177
                           FINDINGS OF FACT ....................................................   177
                           OPINION .............................................................   177
                II.  Additions to Tax for Fraud ................................................   178
                     A. Underpayment of Tax Required To Be Shown on a Return ...................   179
                        1. Underpayment for 1985 ...............................................   179
                

                        2. Underpayment for 1986 ...............................................   181
                        3. Underpayment for 1987 ...............................................   181
                        4. Underpayment for 1988 ...............................................   182
                        5. Conclusion ..........................................................   183
                     B. Fraudulent Intent ......................................................   183
                        1. Clear and Convincing Evidence of Fraud ..............................   183
                        2. Portion of Underpayment Not Attributable to Fraud ...................   186
                     C. Section 6653(b)(2) Addition to Tax for 1985 ............................   188
                III. Statute of Limitations for Assessment .....................................   189
                Appendix A .....................................................................   189
                Appendix B .....................................................................   193
                Appendix C .....................................................................   194
                Appendix D .....................................................................   196
                

RUWE, Judge:

Respondent determined deficiencies in petitioner's Federal income taxes and additions to tax as follows:

                Additions to Tax
                                 ----------------------------------------------------------------------
                                       Sec.                               Sec
                Year   Deficiency   6653(b)(1)     Sec. 6653(b)(2)   6653(b)(1)(A)     Sec. 6653(b)(1)(B)
                1985   $ 86,533      $43,736     50% of the                __                  __
                                                 Interest Due on
                                                 $87,471
                1986    165,732        --                --            $124,340      50% of the
                                                                                     Interest Due on
                                                                                     $165,787
                1987    309,456        --                --             232,092      50% of the
                                                                                     Interest Due on
                                                                                     $309,456
                1988    64,910        51,021             --               --                --
                

After concessions,¹ the issues for decision are: (1) Whether petitioner had unreported income from various real estate transactions, from commissions, interest, rents, and unidentified deposits for the years in issue; (2) whether petitioner is liable for additions to tax for fraud under section 6653(b);² and (3) whether assessment of the alleged deficiencies is barred by the statute of limitations. For convenience and clarity, general findings of fact are discussed first followed by a statement of general legal principles applicable to this opinion; separate findings of fact and opinion are then set forth for each item of unreported income. Finally, we discuss whether the additions to tax for fraud apply and whether assessment is barred by the statute of limitations.

GENERAL FINDINGS OF FACT

Some of the facts have been stipulated and are so found. The stipulation of facts and the attached exhibits are incorporated herein by this reference. At the time of filing the petition, petitioner resided in Kissimmee, Florida.

Since the 1960s through the present, petitioner has been engaged in the business of buying and selling real estate, as...