Spanos v. United States, 8963.

• Decision Date: 23 September 1963
• Docket Number: No. 8963.,8963.
• Citation: 323 F.2d 108
• Parties: Maria SPANOS, Appellant, v. UNITED STATES of America, Appellee.
• Court: U.S. Court of Appeals — Fourth Circuit

323 F.2d 108 (1963)

Maria SPANOS, Appellant, v. UNITED STATES of America, Appellee.

No. 8963.

United States Court of Appeals Fourth Circuit.

Argued June 7, 1963.

Decided September 23, 1963.

Donald N. Rothman, Baltimore, Md. (Irving Shulbank, Kalman R. Hettleman, and Gordon, Feinblatt & Rothman, Baltimore, Md., on brief), for appellant.

Robert J. Golten, Attorney, Department of Justice (Louis F. Oberdorfer, Asst. Atty. Gen., Lee A. Jackson and Joseph Kovner, Attorneys, Department of Justice, Joseph D. Tydings, U. S. Atty., and Robert W. Kernan, Asst. U. S. Atty., on brief), for appellee.

Before HAYNSWORTH and BOREMAN, Circuit Judges, and LEWIS, District Judge.

HAYNSWORTH, Circuit Judge.

By an action in the District Court, Mrs. Spanos sought the recovery of all, or some, of the tax, interest, and penalties assessed to her, but arising out of the income of her deceased husband and his fraudulent failure to file a timely return. She contends, in the first instance, that the tardy filing of a joint return with her husband was an ineffective election and without legal consequence. In the second instance, she contends that fraud penalties, assessed because of her husband's fraudulent failure to file a timely return, should not have been assessed to her when she was innocent of any fraud, had no taxable income, and the tardy joint return, in which she joined, was entirely free of fraud. The District Court denied her all relief, except for a small amount of interest admittedly overpaid. We agree that Mrs. Spanos was liable for the tax and interest, but conclude that, under the circumstances, the fraud penalty was improperly assessed to her.

It was stipulated that the plaintiff's husband fraudulently failed to file a timely income tax return for 1955, a return which was due to have been filed on April 15, 1956. On July 2, 1956, however, a joint return for 1955, duly signed by husband and wife, was filed, showing a tax liability of $6,635.96. After audit, the amount of the tax, as shown on the joint return, was accepted without change.

No part of the tax was paid when the return was filed and, nothing having been paid upon the admitted tax liability, there was a deficiency assessment in the amount of the tax liability, plus another $5,589.94 in penalties and interest.

Meanwhile, the husband had died on September 25, 1956. In May 1960, the widow paid $12,225.90, which included an overpayment of interest in the amount of $43.61, the recovery of which the District Court allowed.

It was also stipulated that the plaintiff, Mrs. Spanos, had no taxable income of her own during the year 1955, that she was entirely innocent of participation in her husband's fraudulent failure to file a timely return for that year, and that she associated herself with his tax obligations respecting that year only by joining in the tardy joint return filed on July 2, 1956, which has been found to be not only free of fraud but accurate and correct.

The District Court in its opinion¹ dealt very effectively with plaintiff's first contention that a joint return belatedly filed is an ineffective election and imposed no legal obligations upon her. Since no previous election to file a single return had been made by the husband, and since the Commissioner had taken no steps to establish the husband's tax liabilities on the basis of a single return for 1955, there is no rule of law which makes the filing of a joint return for that year a nugatory act. Surely, there is no rule that every joint return which, for whatever reason, is not filed before midnight on the due date is wholly ineffective to entitle husband and wife to the income splitting advantage of the joint return.

For the reasons clearly set forth in its discussion of this contention, we conclude that the District Court correctly held that Mrs. Spanos, when she joined in the filing of the tardy joint return, became jointly and severally liable with her husband for the tax liability disclosed by the return, and for all interest and penalties arising out of that filing which might thereafter be assessed.

In this Court, the plaintiff makes a supplemental contention, based upon the provisions of § 6013(b) of the Internal Revenue Code. That Section permits the filing of a joint return after the filing date has passed, though separate timely returns had been filed. It imposes certain conditions upon the right, belatedly, to reverse such an election, however. Among those conditions is a requirement that the tax shown to be due by the tardy joint return must have been paid in full at or before its filing. The plaintiff contends that the same requirement should be imposed here, but § 6013(b) is clearly inapplicable, because neither husband nor wife had filed any return for 1955 until the joint return was filed, and they made no previous inconsistent election.

We think, however, that the penalty for fraudulent failure to file a timely return, which accrued on April 15, 1956, was improperly assessed to the innocent wife who did no more than join in the signing and filing of an accurate, joint return, untainted with fraud, more than two months later.

When the District Court considered this question, it had before it a memorandum opinion of the Tax Court in Cirillo v. Commissioner, 20 T.C.M. 956 (1961), in which the Tax Court had resolved the precise question in favor of the innocent wife and against the contention of the Commissioner. The District Judge was not persuaded by the reasoning of the Tax Court, and he reached a contrary conclusion. Subsequently, however, the Cirillo case was reviewed by the Court of Appeals for the Third Circuit, and the decision of the Tax Court on this point was affirmed. Cirillo v. Commissioner, 3 Cir., 314 F.2d 478. The lucid analysis of this question by the Court of Appeals for the Third Circuit is entirely applicable here:

"Finally, the Commissioner asks us to reverse the Tax Court\'s holding that Martha Cirillo, unlike her husband, is not liable for fraud penalties. The Commissioner argues that the wife\'s action in joining her husband in filing nonfraudulent delinquent returns for the years in question was sufficient to make her too liable for the fraud penalties.

"Earlier cases have decided that a wife who is a party to a fraudulent joint return may be held liable for the fraud penalties assessed on account of her husband\'s fraud in preparing that return, notwithstanding that she herself had no income, did not entertain any fraudulent intent, and, indeed, did not know that the return was fraudulent. Estate of Ginsberg v. Commissioner, 5th Cir., 1959, 271 F.2d 511; Furnish v. Commissioner, 9th Cir., 1958, 262 F.2d

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