Presley v. Commissioner
| Decision Date | 27 August 1979 |
| Docket Number | 5051-70,4720-71.,Docket No. 1867-70 |
| Citation | 38 TCM (CCH) 1301,1979 TC Memo 339 |
| Parties | Sam Presley, Sr., and Estate of Louise Presley, Deceased, Sam Presley, Sr., Administrator v. Commissioner. Sam Presley, Sr. v. Commissioner. |
| Court | U.S. Tax Court |
Roland J. Mestayer, Jr., for the petitioners. Frank Simmons, for the respondent.
Memorandum Findings of Fact and Opinion
The Commissioner determined the following deficiencies in and additions to the petitioners' Federal income taxes:
Addition to Tax
Sec. 6653(b)
Petitioner Year Deficiency I. R. C. 19541
Sam Presley, Sr., and Louise Presley .. 1962 $144,936.09 $ 72,468.05
1965 106,030.41 53,015.21
Sam Presley, Sr. ...................... 1963 194,092.17 97,046.09
1964 206,468.81 103,234.40
The parties have settled some of the issues: The issues remaining for decision are: (1) Whether the income tax returns signed and filed by Sam Presley, Sr., for 1963 and 1964 were joint Federal income tax returns of both Sam and Louise Presley; (2) whether Sam and Louise had unreported income from the operation of an illegal casino at the Sage Patch; (3) whether Sam and Louise were entitled to a deduction for Sam Presley's other gambling losses in 1962 and 1963 to the extent such losses exceeded his other gambling income; (4) whether Sam incurred other gambling losses in 1965 of at least $4,500; (5) whether Sam and Louise had unreported income from the operation of a bar and lounge at the Sage Patch; (6) whether Sam and Louise were entitled to deduct certain automobile expenses as business expenses for each of the years in issue; (7) whether Sam and Louise were entitled to deduct certain telephone expenses as ordinary and necessary business expenses for 1962, 1963, and 1964; (8) whether Sam and Louise were entitled to deduct certain travel expenses as ordinary and necessary business expenses while away from home for each of the years in issue; (9) whether Sam and Louise were entitled to a deduction for bad debts for 1964 and 1965; (10) whether Sam and Louise were entitled to claim a dependency exemption for Doris Presley, Sam's sister; (11) whether the estate of Louise Presley is relieved of liability for any of the deficiencies either because Louise qualified as an innocent spouse under the provisions of section 6013(e) or because for 1963 and 1964 the only deficiency notice in this case was a separate notice issued to Sam; and (12) whether the petitioners are liable for the additions to tax under section 6653(b) because a portion of the underpayment of taxes for each of the years in issue was due to Sam's fraud with intent to evade tax.
Some of the facts have been stipulated, and those facts are so found.
The original petitioners, Sam Presley, Sr., and Louise Presley, were husband and wife, and resided in Biloxi, Miss., at the time they filed their petitions in this case. They filed their Federal income tax returns for the years in issue with the District Director of Internal Revenue, Jackson, Miss. Since the filing of their petitions, Mrs. Presley has died, and her estate has been substituted as a party. Mr. Presley will sometimes be referred to as the petitioner or Sam, and Mrs. Presley, as Louise.
The petitioner was born in 1899. His formal education consisted of completing the first six grades of elementary school and part of the seventh grade. He became a professional gambler in 1933, and he continued in such occupation throughout the years in issue.
Issue 1. Joint Return
For 1962, 1965, and for many years prior to 1962, Sam and Louise filed joint Federal income tax returns. For 1967 through 1969, they filed joint Federal and State income tax returns. For 1963 and 1964, the Federal income tax returns filed by Sam listed the taxpayers as "Sam & Louise Presley." On such returns, the filing status box "Married filing joint return (even if only one had income)" was checked, and exemptions for both Sam and Louise were claimed. Both returns had been signed by Sam, and he also signed Louise's name to such returns after securing her oral permission to do so. At the time he signed her name to the 1963 tax return, Louise was ill. On the 1964 Federal income tax return, Sam indicated he had signed Louise's name by adding under her name "By S.P." Sam did not receive a written and signed power of attorney from Louise, and no such instrument was submitted with the 1963 or 1964 tax returns.
In his notice of deficiency, the Commissioner determined that Sam and Louise did not file joint Federal income tax returns for 1963 and 1964.
OpinionThe first issue for decision is whether Sam and Louise filed joint Federal income tax returns for 1963 and 1964. The Commissioner argues that Sam did not follow the requirements in the regulations relating to returns filed and prepared by agents and that, therefore, the returns were not joint. The petitioners argue that because Sam and Louise intended to file joint returns, and because Sam and Louise treated the 1963 and 1964 returns as joint returns, they are joint returns.
Under section 6012(a), Sam and Louise were required to file Federal income tax returns. Under the provisions of section 6013(a), they could elect to file a joint return. Section 1.6013-1(a)(2), Income Tax Regs., provides:
(2) A joint return of a husband and wife (if not made by an agent of one or both spouses) shall be signed by both spouses. The provisions of paragraph (a)(5) of § 1.6012-1, relating to returns made by agents, shall apply where one spouse signs a return as agent for the other * * *
For the years here at issue, section 1.6012-1(a)(5) provided in part:
(5) Returns made by agents. The return of income may be made by an agent if the person liable for the making of the return is unable to make it by reason of illness * * *. Whenever a return is made by an agent it shall be accompanied by the prescribed power of attorney, Form 935, except that an agent holding a valid and subsisting general power of attorney authorizing him to represent his principal in making, executing, and filing the income return, may submit a certified copy thereof in lieu of the authorization on Form 935. * * *
However, in 1973, such regulations were amended to provide in relevant part as follows:
Here, Sam testified that Louise was ill when he signed her name to the 1963 return, and that he secured her oral permission to sign both the 1963 and 1964 returns. However, he did not have, nor did he submit with such returns, a written power of attorney authorizing him to sign them. In addition, he did not submit with the tax returns the dated and signed statement required by the present regulations, explaining why he signed her name. Therefore, whether we look to the old or new regulations, Sam did not meet their requirements.
Yet, it has long been settled that the absence of the signature of one spouse does not prevent a return from being a joint return, where it is clear that the spouses intended to file a joint return. Estate of Temple v. Commissioner Dec. 34,083, 67 T.C. 143, 164 (1976); Estate of Campbell v. Commissioner Dec. 30,715, 56 T.C. 1, 12 (1971); Hennen v. Commissioner Dec. 24,658, 35 T.C. 747, 748 (1961). Whether Sam and Louise intended to file joint income tax returns for 1963 and 1964 is a question of fact to be resolved on the basis of all the facts and circumstances. Estate of Campbell v. Commissioner, supra. The petitioners bear the burden of proof on this issue, and based on all of the evidence, we conclude that they have met their burden.
The evidence establishes that both returns were filled out as joint returns, and that prior and subsequent to 1963 and 1964, Sam and Louise filed joint income tax returns. Sam acknowledges that he signed the returns, but it is undisputed that he secured Louise's oral permission to do so. Accordingly, we hold that the 1963 and 1964 returns were the joint Federal income tax returns of Sam and Louise Presley.
Issue 2. Unreported Casino Income
During the years in issue, Sam was the owner of a business, known as the Sage Patch, located on the Alabama-Mississippi State line. The front room of the Sage Patch was used as a bar and lounge, and the back room, which was completely separate from the front room, was used to operate an illegal gambling casino. The Sage Patch had toilet facilities, as well as a small room off the back room used as a business...
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