Nachison v. Commissioner
| Decision Date | 10 March 1981 |
| Docket Number | Docket No. 14251-78. |
| Citation | 1981 TC Memo 113,41 TCM (CCH) 1079 |
| Parties | Harold Nachison v. Commissioner. |
| Court | U.S. Tax Court |
Kevin C. Reilly, for the respondent.
Memorandum Findings of Fact and Opinion
Respondent determined the following deficiencies and additions to tax in petitioner's Federal income taxes:
Addition to Addition to
Tax Section Tax Section
Year Deficiency 6653(b)1 6654(a)
1969 ... $ 9,153.40 $4,576.70 $173.78
1970 ... 7,296.03 3,648.01 228.16
1971 ... 6,096.00 3,048.00 195.07
1972 ... 6,224.00 3,112.00 —0—
1973 ... 18,082.00 9,041.00 295.80
Petitioner timely filed a petition with this Court on December 27, 1978. On March 2, 1979, respondent timely filed an answer wherein, inter alia, he made affirmative allegations of fact in support of the determined additions to tax under section 6653(b). Petitioner did not file a reply to that answer, and on May 8, 1979, respondent filed a motion under Rule 37(c), Tax Court Rules of Practice and Procedure,2 for an order that the undenied allegations set forth in paragraphs 6 and 7 of the answer be deemed admitted.
On May 14, 1979, the Court served upon petitioner a copy of respondent's motion together with a notice with respect thereto in which petitioner was informed that if he filed a proper reply as required by Rules 37(a) and (b) on or before May 29, 1979, respondent's motion would be denied, but if a reply was not filed by that date, the Court would act upon the motion at its own discretion at a hearing scheduled for June 13, 1979. Petitioner did not file a reply to the notice nor did he appear at the hearing. By order dated June 13, 1979, the Court ordered petitioner to show cause at a hearing scheduled for June 27, 1979, as to why respondent's motion should not be granted. No appearance was made by or on behalf of petitioner at this hearing. On June 27, 1979, the Court granted respondent's motion under Rule 37 and ordered that the undenied allegations contained in paragraphs 6 and 7 of the answer, excluding conclusory allegations of fraud, be deemed admitted.
Pursuant to Rule 70(a), respondent scheduled a discovery conference with petitioner for November 15, 1979, to cover matters not decided by the Court's order of June 27, 1979. At petitioner's request, the conference was rescheduled for December 10, 1979. Petitioner did not attend this conference.
Pursuant to Rule 91, stipulation of facts conferences covering areas not determined in the Court's order dated June 27, 1979, were scheduled for January 17, 1980, and rescheduled by request of petitioner for January 29, 1980, and then for February 5, 1980. Petitioner did not appear at any of these conferences.
By letter dated February 8, 1980, respondent notified petitioner that if he did not appear at a stipulation of facts conference scheduled for February 21, 1980, and did not appear at calendar call on March 10, 1980, respondent would move the Court to dismiss for lack of prosecution. On February 20, 1980, respondent spoke with petitioner by telephone and was advised by petitioner that he would attend the conference scheduled for the following day. Petitioner failed to attend that conference.
When this case was called from the calendar at New York, New York, on March 10, 1980, and again when the case was called for trial, there was no appearance by or on behalf of petitioner. Respondent thereupon moved pursuant to Rule 123(b) that the case be dismissed for lack of prosecution and that the Court sustain the deficiencies and additions to tax under section 6654(a) as set forth in the notice of deficiency. By order dated March 10, 1980, the Court granted respondent's motion. Accordingly, the only issue remaining for decision is whether any part of petitioner's underpayment of tax for the years in issue was due to fraud with intent to evade tax.
Most of the facts have been deemed admitted under Rule 37(c) and are found accordingly.
Harold Nachison (hereinafter petitioner) resided in Staten Island, New York, when he filed his petition in this case.
Petitioner was born in Albany, New York, on February 9, 1913. He attended New York State Teachers' College for approximately 18 months and graduated from City College, New York, New York, with a Bachelor of Laws (LL.B.) degree in 1936. Petitioner was admitted to the bar of the State of New York in 1940.
From 1937 to 1958, petitioner was employed as a fireman for the City of New York. During each of the years at issue, he received $2,940.48 as taxable pension income from the New York City Fire Department.
From 1958 through 1973, petitioner was a self-employed attorney specializing in real estate, construction and probate law which required an extensive knowledge of tax law. Petitioner also had real estate investments during this period and received income from that source.
During 1969 and 1970, petitioner was a partner in the law partnership of Robinson, Nachison and Nachison, located in Staten Island, New York. During those years, he received $22,839 and $19,606, respectively, as his distributive share of partnership income and salary from that firm.
During 1971, petitioner was a member of the law partnership of Nachison and Nachison. During that year, he received partnership distributions and salary from the firm in the respective amounts of $18,738 and $13,000.
During 1972 and 1973, petitioner was a member of the professional corporation Nachison and Nachison, P.C., and received a salary of $26,937 and $33,575, respectively. Nachison and Nachison, P.C., was incorporated on January 3, 1972, in the State of New York.
From 1969 through 1973, petitioner was a 50 percent shareholder in Aurelian Enterprises, a corporation engaged in the business of real estate investment. In 1969 and 1970, petitioner received income from Aurelian Enterprises of $130.30 and $307.89, respectively. Petitioner had losses from this corporation in 1971, 1972, and 1973 in the respective amounts of $653.25, $144.50 and $824.54.
During 1970, petitioner received $1,249.33 and $437.50 as long-term capital gain and mortgage interest income, respectively, from the sale of real property to Vineil Construction Company. Petitioner realized capital gain income on this sale of $624.66.
During the years at issue, petitioner received interest income from savings accounts in his name at West Side Federal Savings Bank and Community National Bank as follows:
Year Amount
1969 ............. $255.50
1970 ............. 163.96
1971 ............. 587.55
1972 ............. 196.73
1973 ............. 51.02
During 1972 and 1973, petitioner received mortgage interest income from various individuals and corporations in the respective amounts of $2,227.50 and $13,657.52.
During 1973, petitioner received $5,000 from Hamptman & Hamptman as a bankruptcy referral fee.
Petitioner failed to file both Federal and New York State personal income tax returns for each of the years 1969 through 1973. Previously, he had filed delinquent Federal income tax returns for the years 1959 through 1963. No tax payments, however, had accompanied any of those returns.
On June 17, 1969, petitioner filed a declaration of estimated tax for 1969 in which he estimated his Federal income tax liability to be $7,000. A payment of $2,351.50 accompanied this declaration.
For the years 1969 through 1973, petitioner caused partnership returns of income (Form 1065) and corporate income tax returns (Form 1120) for his law practice to be prepared by an accounting firm. The information shown on those returns was available to petitioner for preparing his personal income tax returns for those years. The partnership and corporate returns for 1970 through 1973 were signed by petitioner and filed with respondent.
Acting on an anonymous tip indicating petitioner had bragged that he did not file returns and was beating the government on his taxes, Special Agent David Rundlett (hereinafter Rundlett) of the Criminal Investigation Division of the Internal Revenue Service wrote a letter to petitioner in March 1974, stating that the Internal Revenue Service had no record of income tax returns being filed by him for 1971 and 1972. Petitioner did not respond to this letter.
In April 1974, Rundlett was formally assigned to investigate petitioner's tax liabilities for 1970, 1971, and 1972. The years 1969 and 1973 were later added to that investigation. On July 17, 1974, Rundlett interviewed petitioner at his law office and asked him whether he had filed returns for 1969 through 1973. Petitioner replied that he had personally prepared and filed those returns at the Andover Service Center and owed taxes of approximately $2,000 for each of the years in question. Although petitioner stated that he had retained copies of the returns at his home, he refused Rundlett's request to see them and verify their filing. He further stated that he would make those copies available to respondent at some later date. Petitioner never furnished copies of those returns to respondent.
On July 22, 1974, Rundlett again met with petitioner at his Staten Island office. At that meeting, petitioner admitted that he had earned substantial amounts of money prior to 1972, but arrogantly stated that it did not make any difference because the statute of limitations barred collection of any deficiencies for those years.
In August 1974, a power of attorney for Ira L. Tilzer, Esquire, to represent petitioner before the Internal Revenue Service was given to Rundlett. On October 23, 1974, Rundlett personally met with Tilzer and requested all financial records which would be necessary to prepare petitioner's tax returns for 1969 through 1973 or to verify his income and expenses. Acting on petitioner's directions, Tilzer...
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