Roschuni v. Comm'r of Internal Revenue, Docket No. 58161.
| Decision Date | 31 March 1958 |
| Docket Number | Docket No. 58161. |
| Citation | 29 T.C. 1193 |
| Parties | ELLIOTT J. ROSCHUNI AND JUNE GILBERT ROSCHUNI, PETITIONERS, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. |
| Court | U.S. Tax Court |
OPINION TEXT STARTS HERE
Joseph Hartman, Esq., and Llewellyn A. Luce, Esq., for the petitioners.
W. Preston White, Jr., Esq., for the respondent.
1. Held, the amounts received by the petitioner June during the taxable years and claimed by petitioners to be loans from Gilbert System Hotels, Inc., constituted distributions of earnings and profits under section 115, I.R.C. 1939, of that corporation alone, but only to the extent of that corporation's earnings and profits available for the payment of dividends.
2. Held, the statute of limitations is not a bar to assessment of deficiencies for the taxable years 1947 and 1948, since the petitioners omitted at least 25 per cent of their gross income for each of those years. Sec. 275(c), I.R.C. 1939.
The respondent determined deficiencies in income tax against the petitioners as follows:
+----------------+
¦1947¦$21,399.64 ¦
+----+-----------¦
¦1948¦7,015.90 ¦
+----+-----------¦
¦1949¦39,082.19 ¦
+----+-----------¦
¦1950¦6,782.02 ¦
+----+-----------¦
¦1951¦16,148.70 ¦
+----------------+
Those parts of the deficiencies here in issue result directly or indirectly from respondent's determination that ‘the amounts * * * withdrawn by you from Gilbert System Hotels, Inc. during (the taxable years) constitute dividends paid from the combined surplus of the Gilbert chain of corporations * * * .’ The amounts so determined to have been dividends were as follows:
+----------------+
¦1947¦$41,083.55 ¦
+----+-----------¦
¦1948¦24,658.40 ¦
+----+-----------¦
¦1949¦83,485.12 ¦
+----+-----------¦
¦1950¦22,341.71 ¦
+----+-----------¦
¦1951¦38,531.77 ¦
+----------------+
FINDINGS OF FACT.
Some of the facts are stipulated. The stipulation and the exhibits annexed thereto are incorporated herein by this reference.
The petitioners, Elliott J. Roschuni and June Gilbert Roschuni, are husband and wife who were married March 29, 1947, and reside in Jacksonville, Florida. They filed their joint Federal income tax returns for the taxable years ended December 31, 1947 to 1951, inclusive, with the collector of internal revenue for the district of Florida.
The father of petitioner June, Hubert Gilbert, hereinafter referred to as the decedent, died intestate on April 25, 1945. His heirs at law were Ann Gilbert, wife, and June, both of whom were appointed as administratrices of his estate, hereinafter called the estate, by the County Judge's Court in and for Duval County, Florida, on June 30, 1945. They acted as such until January 27, 1947. Ann Gilbert by a later marriage became Ann Gilbert Moody.
By an agreement dated January 1, 1947, Ann transferred to June all of her interest in the estate in consideration for the sum of $100,000. As a result of this agreement, Ann resigned as administratrix of the estate, her resignation was accepted, and June was appointed sole administratrix by order of the County Judge's Court in and for Duval County, Florida, on January 28, 1947, and served in that capacity until November 15, 1954, when the estate was closed and she was discharged as administratrix.
During the years ended December 31, 1947 to 1951, inclusive, stock in the hereinafter-named corporations was owned as follows:
+-----------------------------------------------------------------------------+
¦ ¦Number ¦Number ¦Number ¦Total ¦
+---------------------------------------+--------+--------+-------+-----------¦
¦ ¦of ¦of ¦of ¦number of ¦
¦ ¦shares ¦shares ¦shares ¦ ¦
+---------------------------------------+--------+--------+-------+-----------¦
¦ ¦owned by¦owned by¦owned ¦shares ¦
¦ ¦ ¦ ¦by ¦ ¦
+---------------------------------------+--------+--------+-------+-----------¦
¦ ¦Estate ¦June G. ¦others ¦outstanding¦
¦ ¦of ¦ ¦ ¦ ¦
+---------------------------------------+--------+--------+-------+-----------¦
¦ ¦H. ¦Roschuni¦ ¦ ¦
¦ ¦Gilbert ¦ ¦ ¦ ¦
+---------------------------------------+--------+--------+-------+-----------¦
¦Gilbert System Hotels, Inc.—common ¦524 ¦10 ¦10 ¦544 ¦
+---------------------------------------+--------+--------+-------+-----------¦
¦Gilbert System Hotels, Inc.—preferred ¦170 ¦ ¦1 130¦300 ¦
+---------------------------------------+--------+--------+-------+-----------¦
¦Gilbert Hotel No. 2, Inc.—common ¦99 ¦1 ¦ ¦100 ¦
+---------------------------------------+--------+--------+-------+-----------¦
¦Gilbert Hotel System of Daytona, ¦30 ¦10 ¦2 10 ¦50 ¦
¦Inc.—common ¦ ¦ ¦ ¦ ¦
+---------------------------------------+--------+--------+-------+-----------¦
¦Gilbert Hotel No. 6, Inc.—common ¦34 ¦ ¦2 66 ¦100 ¦
+---------------------------------------+--------+--------+-------+-----------¦
¦Gilbert Hotel No. 10, Inc.—common ¦39 ¦1 ¦2 60 ¦100 ¦
+---------------------------------------+--------+--------+-------+-----------¦
¦Gilbert Hotel No. 26, Inc.—common ¦10 ¦ ¦ ¦10 ¦
+---------------------------------------+--------+--------+-------+-----------¦
¦552 West Peachtree Apartment Hotel, ¦100 ¦ ¦ ¦100 ¦
¦Inc.—common ¦ ¦ ¦ ¦ ¦
+---------------------------------------+--------+--------+-------+-----------¦
¦Gilbert Hotel No. 37, Inc.—common ¦40 ¦ ¦ ¦40 ¦
+---------------------------------------+--------+--------+-------+-----------¦
¦Osceola Mortgage & Investment Co., ¦250 ¦20 ¦3 20 ¦290 ¦
¦Inc.—common ¦ ¦ ¦ ¦ ¦
+---------------------------------------+--------+--------+-------+-----------¦
¦Osceola Mortgage & Investment Co., ¦500 ¦ ¦ ¦500 ¦
¦Inc.—preferred ¦ ¦ ¦ ¦ ¦
+---------------------------------------+--------+--------+-------+-----------¦
¦Total ¦1,796 ¦42 ¦296 ¦2,134 ¦
+-----------------------------------------------------------------------------+
FN1 Owned by seven individuals not related to the Gilberts.FN2 Owned by Gilbert System Hotels, Inc.FN3 Owned by June's half sister.
The respondent recognized that the above-listed 524 shares of the common stock of Gilbert System Hotels, Inc., hereinafter called Hotels, Inc., constituted an asset of the estate, and it was agreed for the purposes of Federal estate and other taxes that the value of this stock at the date of the decedent's death was $138.91 a share.
Hotels, Inc., located in Jacksonville, Florida, was a managing company acting on behalf of the above-listed separate corporations, most of which owned, or leased, and operated hotels. The executives of Hotels, Inc., were also the executive officers of the other Gilbert corporations. A separate set of books was kept for each hotel corporation. The hotel corporations were charged administration fees by Hotels, Inc., for handling all the bookkeeping and for supplies furnished. A separate account was maintained on the books of Hotels, Inc., showing the administrative fees received from each hotel corporation and its other income such as interest. The administrative expenses were also shown in this account. The operating expenses of each hotel corporation were shown on the books kept for that corporation. To recapitulate, each operating hotel corporation had account books maintained in the office of Hotels, Inc., showing income and operating expenses. The necessary information for the keeping of all these accounts was submitted by daily reports to Hotels, Inc.
The managing corporation, by having supervision of all accounts, could readily determine what each hotel corporation was paying out for expenses and what each hotel corporation was earning. This operation through a managing corporation was economical because it rendered unnecessary an individual bookkeeping system by each hotel and permitted a centralized procurement of supplies. The ownership of one hotel by one corporation was advisable because it limited liabilities which might arise as, for example, from a catastrophic fire.
All of the corporations employed a manager, W. W. Walker, Jr. When the decedent died, Walker took over the management of the entire hotel system. In January 1947, W. W. Walker entered into a contract with the several corporations (of which June was president and Walker was secretary) and June, personally and in her capacity as administratrix of the estate, whereby he took over the management of all of the hotels and corporations and became vice president and general manager of Hotels, Inc. The contract was to run from 1947 to 1957. The contract was modified by agreements dated November 8, 1947, and May 9, 1949.
Many difficulties arose under this contract and it was terminated by an agreement dated February 11, 1954. The termination agreement was approved by the county court of Florida which had jurisdiction of the estate.
During the taxable years the books of Hotels, Inc., reflected transactions with Gilbert Hotel No. 2, Inc., Gilbert Hotel No. 6, Inc., Gilbert Hotel No. 10, Inc., Gilbert Hotel No. 26, Inc., Gilbert Hotel No. 37, Inc., 552 West Peachtree Apartment Hotel, Inc., ...
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