Pert v. Commissioner
| Decision Date | 24 March 1997 |
| Docket Number | Docket No. 13783-94.,Docket No. 13784-94. |
| Citation | 73 T.C.M. 2426 |
| Parties | Harvey M. Pert, Transferee v. Commissioner. Kathleen M. Pert, f.k.a. Kathleen M. Riffe, Transferee v. Commissioner. |
| Court | U.S. Tax Court |
B. Gray Gibbs, St. Petersburg, Fla., for the petitioners. Michael A. Pesavento, for the respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
Kathleen M. Pert (Mrs. Pert), formerly known as Kathleen M. Riffe, was married to Timothy C. Riffe (Mr. Riffe) until he died, and later married to Harvey M. Pert (Mr. Pert). Mr. Riffe and Mrs. Pert filed joint income tax returns from 1986 to 1989.
Respondent determined that Mrs. Pert is liable as a transferee of the assets of Mr. Riffe for his and Mrs. Pert's unpaid income tax and interest and Mr. Riffe's additions to tax from 1986 to 1989. Respondent also determined that Mr. Pert is liable for Mr. Riffe's and Mrs. Pert's income tax and Mr. Riffe's additions to tax as a successor transferee of the assets of Mr. Riffe, or as a transferee of the assets of Mrs. Pert.
Tax Period Fees and Assessed Payments Unpaid
Ending Tax Collection Costs Interest Made Balance
1986 ........................ $37,342 $ 12 $25,158 $43,976 $18,5241
1987 ........................ 19,991 12 12,885 0 32,888
1988 ........................ 14,684 0 6,574 5,000 16,260
_______
Total Unpaid Income Tax Liability ............................. $67,672
1 Respondent determined these amounts without explaining apparent math discrepancy
Mr. Riffe's Unpaid Additions to Tax
Tax Substantial
Period Fraud Understatement Negligence Accuracy Total
1986 ........................ $42,869 $ 9,335 0 $ 0 $52,204
1987 ........................ 0 4,998 7,443 0 12,441
1988 ........................ 0 3,205 734 0 3,939
1989 ........................ 0 0 0 3,819 3,819
_______ _______ _______ _______ ________
Total $42,869 $17,538 $ 8,177 $ 3,819 $72,403
Mr. Riffe's unpaid income tax from 1986 to 1989 is $140,075. Mr. Riffe's liability is larger than Mrs. Pert's liability because it includes additions to tax and penalties pursuant to a stipulated decision for 1987 and closing agreements for 1986, 1988, and 1989.
In Pert v. Commissioner [Dec. 50,999], 105 T.C. 370, 377, 380 (1995), we held that petitioners could not dispute the tax liabilities of Mr. Riffe and Mrs. Pert because she signed closing agreements for 1986, 1988, and 1989 and agreed to a stipulated decision for 1987. We also held that the statute of limitations does not bar respondent from assessing transferee liability against petitioners for 1986. Id. at 379.
We must decide the following issues:
1. Whether Mrs. Pert is liable as a transferee of Mr. Riffe's assets for his unpaid income tax and additions to tax for 1986, 1987, 1988, and 1989. We hold that she is.1
2. Whether respondent failed to prove the value of the property transferred from Mr. Riffe's estate to Mrs. Pert, as petitioners contend; the value of assets transferred is $399,535, as respondent contends; or the value is some other amount. We hold that the value of assets transferred is $399,535.
3. Whether Mr. Pert is liable as a successor transferee of Mr. Riffe's assets for Mr. Riffe's unpaid income tax and additions to tax for 1986, 1987, 1988, and 1989. We hold that he is.
4. Whether Mr. Pert is liable as a transferee of Mrs. Pert's assets for Mrs. Pert's unpaid income tax for 1986, 1987, 1988, and 1989. We hold that he is.
5. Whether respondent failed to prove the value of the assets that Mrs. Pert transferred to Mr. Pert from Mr. Riffe's estate, as petitioners contend; the value is $222,206, as respondent contends; or the value is some other amount. We hold that the value of assets transferred to Mr. Pert is $126,112.
6. Whether respondent properly credited tax payments that Mrs. Pert made on June 27 and December 11, 1991. We hold that respondent did.
7. Whether we should enter decision in Mrs. Pert's favor because the U.S. Bankruptcy Court for the Middle District of Florida discharged Mrs. Pert's liability as a transferee in a previously filed bankruptcy. We hold that we should not.
Unless otherwise noted, section references are to the Internal Revenue Code of 1986 as in effect during the years in issue. Rule references are to the Tax Court Rules of Practice and Procedure.
Mr. and Mrs. Pert lived in Palm Harbor, Florida, when they filed their petitions.
Mr. Riffe died on February 11, 1991. Decedent and Mrs. Pert had timely filed joint Federal individual income tax returns for 1986, 1987, 1988, and 1989.
During 1986, 1987, 1988, and 1989, Mr. Riffe owned businesses known as West Coast Pest Control and West Coast Florida Pressure Cleaning. West Coast Pest Control sprayed pesticides on lawns. West Coast Florida Pressure Cleaning used a pressure cleaning process to wash cars for car dealers. Mr. Riffe owned the car wash business before he married Mrs. Pert. Mrs. Pert worked long hours in both businesses and ran the car wash business. Mr. Riffe was the sole owner of occupational licenses for both of these businesses. He had sole signature authority over the bank accounts for the businesses.
Mr. Riffe's and Mrs. Pert's joint income tax returns for 1986, 1987, 1988, and 1989, include Schedules C for the car wash business in Mr. Riffe's name. They reported on their 1988 return that the business paid Mrs. Pert $13,800 in wages. Their 1989 return also included a Schedule C for Mr. Riffe's lawn spraying business.
On October 23, 1987, Mr. Riffe leased safe deposit box 276 solely in his name from Barnett Bank of Pinellas County (Barnett Bank). He was the only person listed on the signature card and the only person authorized to open safe deposit box 276. He opened safe deposit box 276 more than 300 times from 1987 to 1991.
On January 14, 1991, Mr. Riffe leased safe deposit box 204 from First Gulf Bank (safe deposit box 204). He was the only person listed on the signature card and the only person authorized to open safe deposit box 204. He opened it three times before he died.
Mr. Riffe also leased a safe deposit box solely in his name from North Carolina National Bank (NCNB).
On February 27, 1989, Mr. Riffe's grandparents gave him Lot 30, College Hill, Florida. Mr. Riffe was the sole owner of Lot 30, College Hill, until he died. He was the sole owner of Lot 3, Block 95, Town of Sutherland, Florida, from November 20, 1989, until he died.
On January 16, 1991, Mr. Riffe deposited $350,000 at the Barnett Bank. Several days later, he withdrew $325,000 and bought five cashier's checks for $65,000, which he deposited in accounts at Citizens and Southern Bank (C&S), NCNB, Sun Bank of Tampa Bay, Florida Bank of Commerce, and First Gulf Bank.
Mr. Riffe died in a boating accident in a 22-foot Aqua Sport boat near his home on February 11, 1991. He was the sole owner of the boat. When he died, Mr. Riffe and Mrs. Pert lived in a residence at Lot 28, College Hill. The total balance in his six bank accounts (see par. B-3, above) was $115,358 when he died.
Detective John Barna (Barna), an experienced narcotics investigator with the Pinellas County, Florida, Sheriff's office, began to investigate Mr. Riffe's financial activities shortly after Mr. Riffe died. On February 15, 1991, 4 days after Mr. Riffe died, Barna obtained a search warrant for safe deposit box 204. In it were two sealed bags with $132,000 in cash primarily in denominations of $50s and $100s bundled by paper straps. The Pinellas County Sheriff's office searched only safe deposit box 204.
Mr. Riffe died testate. Mrs. Pert was the personal representative and sole beneficiary of Mr. Riffe's estate. Donald F. Kaltenbach (Kaltenbach) represented Mrs. Pert in her capacity as personal representative of Mr. Riffe's estate. He had previously represented hundreds of personal representatives of estates and was familiar with documents filed in probate proceedings.
Early in the probate proceedings, Mrs. Pert and Kaltenbach knew that respondent was investigating the tax liabilities of Mr. Riffe and Mrs. Pert. On February 28, 1991, Revenue Agent Joe Elliott (Elliott) questioned Mrs. Pert about her assets, the business operations of West Coast Pest Control and West Coast Florida Pressure Cleaning, how she derived income from the businesses, and her cash on hand. Mrs. Pert denied that she or Mr. Riffe had a cash hoard or any large sums of cash on hand. Mrs. Pert told Elliott that she had to borrow money from friends and family because she had no funds and she had no signature authority over any of the business bank accounts. Kaltenbach was present when Elliott interviewed Mrs. Pert on February 28, 1991. On March 1, 1991, Elliott went to Mrs. Pert's residence to get books and records to start an income tax audit.
On March 20, 1991, Kaltenbach and Mrs. Pert deposited $115,358 at Peoples State Bank (acct. no. 105209804) for Mr. Riffe's estate to pay estate bills. The $115,358 came from Mr. Riffe's six bank accounts.
On April 16, 1991, the Pinellas County...
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