Mitchell v. Comm'r of Internal Revenue , Docket Nos.6740-66

Citation51 T.C. 641
Decision Date27 January 1969
Docket NumberDocket Nos.6740-66,6741-66.
PartiesANNE GOYNE MITCHELL, PETITIONER v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENTJANE ISABELL GOYNE SIMS, PETITIONER v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT
CourtUnited States Tax Court

OPINION TEXT STARTS HERE

Paul K. Kirkpatrick, Jr., for the petitioners.

Bruce A. McArdle, for the respondent.

1. Held, that under the community property laws of Louisiana a wife has a present, vested interest in the income of the community and is therefore under a duty to make either a single or a joint return, and is liable for the tax on one-half of community income; and this is so, even though the wife subsequently renounces the community of acquets and gains and takes nothing therefrom. Held, further, that wife's failure to file a return was without reasonable cause and her failure to pay the tax was negligent. Determined penalty for underpayment of estimated tax is mandatory since statutory exceptions are not applicable, and such determination is upheld.

2. Parties agree that a prior assessment against wife and her husband was invalid and void as against wife. Held, the thrust of sec. 6404, I.R.C. 1954, is permissive, not mandatory, and respondent was not required to abate void assessment before making determination herein.

3. Held, liability for tax on one-half of Louisiana community income is upon wife, and consequently her gratuitous transfer of her separate property to her sister, which transfer left her insolvent, makes the sister liable as a transferee.

FORRESTER, Judge:

In these consolidated cases respondent has determined the following deficiencies in identical amounts against Anne Goyne Mitchell, petitioner in docket No. 6740-66, and against Jane Isabell Goyne Sims, petitioner in docket No. 6741-66, as transferee of the assets of Anne Goyne Mitchell:

+-------------------------------------------+
                ¦        ¦          ¦        ¦       ¦      ¦
                +--------+----------+--------+-------+------¦
                ¦Year    ¦Income tax¦Sec.    ¦Sec.   ¦Sec.  ¦
                +--------+----------+--------+-------+------¦
                ¦        ¦          ¦6651(a) ¦6653(a)¦6654  ¦
                +--------+----------+--------+-------+------¦
                ¦        ¦          ¦        ¦       ¦      ¦
                +--------+----------+--------+-------+------¦
                ¦        ¦          ¦        ¦       ¦      ¦
                +--------+----------+--------+-------+------¦
                ¦1955    ¦$323.00   ¦$80.75  ¦$16.15 ¦0     ¦
                +--------+----------+--------+-------+------¦
                ¦1956    ¦1,267.73  ¦316.93  ¦63.39  ¦$35.49¦
                +--------+----------+--------+-------+------¦
                ¦1957    ¦453.00    ¦113.25  ¦22.65  ¦12.68 ¦
                +--------+----------+--------+-------+------¦
                ¦1958 1  ¦1,750.71  ¦425.02  ¦87.54  ¦47.00 ¦
                +--------+----------+--------+-------+------¦
                ¦1959 1  ¦871.34    ¦173.24  ¦43.57  ¦17.27 ¦
                +--------+----------+--------+-------+------¦
                ¦        ¦4,665.78  ¦1,109.19¦233.30 ¦112.44¦
                +--------+----------+--------+-------+------¦
                ¦        ¦          ¦        ¦       ¦      ¦
                +--------+----------+--------+-------+------¦
                ¦        ¦          ¦        ¦       ¦      ¦
                +-------------------------------------------+
                

1 For the years 1958 and 1959 credit has been allowed for $50.65 and $178.37, respectively. These amounts represent withholding from wages.

FINDINGS OF FACT
General

Some of the facts have been stipulated and are so found. The stipulation and exhibits attached thereto are incorporated herein by this reference.

Petitioner Anne Goyne Mitchell (hereinafter sometimes referred to as Anne) and petitioner Jane Isabell Goyne Sims (hereinafter sometimes referred to as Jane) each resided at Ruston, La., at the time of the filing of their respective petitions herein. Anne and Jane are sisters.

The issues for determination in docket No. 6740-66 are: (1) Whether Anne, on the basis of her interest in community property under Louisiana law, is liable for income taxes on a one-half portion of the community income for the taxable years 1955 through 1959, inclusive, and additions to the tax thereto under sections 6651(a),2 6653(a), and 6654; (2) whether joint and several assessments that were void and invalid against Anne for Federal income taxes and additions thereto for the years 1954 through 1959, and not abated by the respondent, prevented determination of the deficiency herein; and (3) whether Jane (docket No. 6741-66) is liable as Anne's transferee for the deficiencies determined against her.

For convenience and clarity, we shall deal with each of the above issues separately.

Issue 1. Liability for One-half of the Community Income

FINDINGS OF FACT

On or about September 22, 1946, Anne married Emmett L. Mitchell, Jr. (hereinafter sometimes referred to as Emmett). Anne and Emmett were divorced on October 11, 1962.

During the existence of the marriage between Anne and Emmett, all of the income realized by either party was community income. Throughout the marriage of Anne and Emmett, finances were a constant source of trouble and controversy. At no time during the course of their marriage did Anne see her husband's paycheck or know how much money he made. Although Anne and Emmett had a joint bank account, and although Anne, with some degree of risk, drew checks on this account, she was rarely aware of the balances therein.

Sometime in or after 1952, while Anne and Emmett were residing at Monroe, La., Emmett rented a post office box and retained the only key. Subsequent to the rental of the post office box, no mail was delivered to the Mitchell's home. When the Mitchells moved to Ruston, La., in 1956, Emmett again rented a post office box, and Anne was only aware of those bills and bank statements that Emmett chose to bring home. Emmett was financially irresponsible and Anne frequently attempted to bring to his attention those obligations she was aware of and that ‘needed to be taken care of in a financial way.’

Anne was aware of her husband's fiscal irresponsibility, and repeatedly questioned him each year about the preparation of income tax returns. She believed that Emmett would file returns because of the consequences if he did not, which she assumed ‘would be immediate,‘ but she was concerned about the returns being filed on time. Anne was led to believe that income tax returns were filed each year, because Emmett told her about getting help from Mr. Albritton, who was an accountant in Farmerville, Emmett's hometown; and securing the additional money allegedly needed to pay the taxes. Anne assumed not only that returns had been filed but that her signature had been affixed thereto by her husband. No income tax returns, however, were filed by either Anne or Emmett for the taxable years 1954 through 1959.

During 1955 and 1956 Anne was employed as a teacher by St. Paul's Methodist Church, receiving as a salary (her community one-half) $1,350 and $750, respectively. Her actual receipts in such years were $2,700 and $1,500.

As a result of Emmett's continuing financial irresponsibility, Anne and Emmett began living separate and apart in July 1960. On or about August 4, 1961, Anne filed suit for separation from bed and board against Emmett, praying that, under Louisiana law, she be allowed to accept the community of acquets and gains with benefit of inventory. She was granted a separation from bed and board a mensa et thoro, against Emmett by default, on or about September 14, 1961. On September 18, 1961, she renounced the community of acquets and gains formerly existing between herself and Emmett, and on or about October 11, 1962, she was granted a judgment of divorce a vinculo matrimonii.

Upon the dissolution of the community of acquets and gains between Anne and Emmett, she received neither a distribution of community property nor a property settlement. Respondent, in his notice of deficiency, determined deficiencies against Anne for one-half of the community income for the tax years 1955 through 1959, and additions thereto under sections 6651(a), 6653(a), and 6654.

OPINION

In the case before us we are asked to decide whether in Louisiana, a community property State, one spouse is liable for the tax on one-half of all the income of the community irrespective of whose efforts produced the income for the community. In other words, in the absence of joint returns must one Louisiana spouse report one-half of the community income even though such income was earned by the efforts of the other spouse.

We hold that each spouse in Louisiana is responsible for tax on one-half of the community income regardless of whose efforts produced it.

In 1930, the U.S. Supreme Court decided that the community property laws in the States of Washington, Arizona, Texas, and Louisiana ‘entitled (a husband and wife) to file separate returns each treating one-half of the community income as his or her respective income.'3 Poe v. Seaborn, 282 U.S. 101 (1930); Goodell v. Koch, 282 U.S. 118 (1930); Hopkins v. Bacon, 282 U.S. 122 (1930); Bender v. Pfaff, 282 U.S. 127 (1930).

In United States v. Malcolm, 282 U.S. 792 (1931), the Court of Appeals for the Ninth Circuit had requested instructions from the Supreme Court on the following questions of law:

1. Under the applicable provisions of the Revenue Act of 1928 must the entire community income of a husband and wife domiciled in California be returned and the income tax thereon be paid by the husband?

2. Has the wife, under Secs. 161(a) of the Civil Code of California such an interest in the community income that she should separately report and pay tax on one-half of such income?

In a per curiam opinion the Supreme Court answered the first question ‘no’ and answered the second question ‘yes,‘ citing Poe v. Seaborn, supra; Goodell v. Koch, supra; and Hopkins v. Bacon, supra.

Although Poe v. Seaborn and the related community property cases decided in 1930 stated that a husband and wife were entitled to file joint returns, it wasn't until our decision in Paul Cavanagh, 42 B.T.A. 1037 (1940), affd. 125 F.2d 366 (C.A. 9, 1942), that it was decided she had a duty to return one-half of the...

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31 cases
  • United States v. Mitchell
    • United States
    • U.S. Supreme Court
    • June 7, 1971
    ...for the tax on her share. He also ruled that this tax liability was not affected by her Art. 2410 renunciation. Mitchell v. Commissioner, 51 T.C. 641 (1969). On appeal, the Fifth Circuit reversed, holding that by the renunciation Mrs. Mitchell avoided any federal income tax liability on the......
  • UNITED STATES V. MITCHELL
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    ...penalty is mandatory, unless the petitioner can bring himself within one of the exceptions of section 6654(d). Mitchell v. Commissioner Dec. 29,424, 51 T.C. 641, 648 (1969), revd. 430 F. 2d 1 (5th Cir. 1970), 71-1 USTC ¶ 9451 revd. 403 U.S. 190 (1971); Estate of Ruben v. Commissioner Dec. 2......
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