Whitten v. Commissioner
| Decision Date | 14 July 1980 |
| Docket Number | Docket No. 3260-74. |
| Citation | 40 TCM (CCH) 625,1980 TC Memo 245 |
| Parties | F.O. Whitten, Jr., and Mary E. Whitten v. Commissioner. |
| Court | U.S. Tax Court |
J. Michael Rediker and Thomas A. Ritchie, 312N 23rd St., Birmingham, Ala., for the petitioners. Frank Simmons, for the respondent.
Memorandum Findings of Fact and Opinion
Respondent determined the following deficiencies in petitioners' income taxes:
Addition to tax
Sec. 6653(b)
Year Deficiency I.R.C. 1954
1967 ......... $ 50,078.26 $25,039.13
1968 ......... 68,358.34 34,179.17
1969 ......... 104,038.92 52,019.46
1970 ......... 21,811.53 12,193.22
1971 ......... 949.941
After concessions the isues remaining for decision are:
(1) Whether petitioners realized income from fees relating to the signing of divorce decrees during 1967, 1968, 1969, and 1970.
(2) Whether petitioners are liable for additions to tax for fraud for each of the years 1967, 1968, 1969, and 1970.
(3) Whether the statute of limitations bars assessment and collections of any deficiencies found to be owing for 1967 and 1968.
(4) Whether petitioner Mary Whitten is an innocent spouse entitled to relief from liability for the tax under section 6013(e), I.R.C. 1954.2
Some of the facts have been stipulated and are so found. The stipulation of facts, together with the exhibits attached thereto, are incorporated herein by this reference.
French O. Whitten and Mary E. Whitten, the petitioners herein, are husband and wife, whose residence was in Birmingham, Ala., at the time of the filing of their petition. Petitioners filed their joint Federal income tax returns for the years 1967 through 1971 with the Internal Revenue Service Center, Chamblee, Ga. Mary is a party to this action solely by reason of having filed joint returns for the years in issue; therefore, when we hereinafter refer to Whitten or petitioner, we will be referring solely to French.
From January 15, 1965, through January 15, 1971, Whitten was the Circuit Judge of the 30th Judicial Circuit of the State of Alabama, covering St. Clair and Blount Counties. St. Clair County has two courthouses, one in Pell City and the other in Ashville. Blount County has one courthouse located in Oneonta. In his capacity as a circuit judge, Whitten held court in all three courthouses in the 30th Judicial Circuit. From time to time, Whitten also presided by special designation as a circuit judge in matters pending in courts other than in the aforementioned cities. As circuit judge Whitten handled all the civil, criminal, equity, and Grand Jury dockets in the 30th Judicial Circuit.
As circuit judge, Whitten was empowered to appoint registers in chancery of the courts of St. Clair and Blount Counties. In that capacity, Whitten appointed Mary E. Gilliland as register in chancery in Oneonta, Blount County.
In December 1965 Mary E. Gilliland ceased to be register in chancery, and on December 28, 1966, she married Whitten and is the petitioner-wife herein. Mary never worked in the courthouse in Pell City.
In January 1965 Whitten appointed his sister, Ann Love, as register in chancery in Pell City and Ashville, St. Clair County. Ann Love continued to serve in that capacity until January 1971.
Included among the duties of the register in chancery was the obligation to record and index all decrees of divorce granted in that particular county. The decrees would be indexed alphabetically according to the names of both plaintiff and defendant.
During the period Whitten was a circuit judge, it was customary in Alabama not to require any trial or hearing in open court of uncontested divorces. In most of these cases the testimony was taken before some person appointed as commissioner for that purpose. It was not unusual for the secretary of the attorney who was the solicitor of the divorce complaint to act as commissioner. The record of an uncontested divorce generally consisted of a divorce complaint, or Bill of Divorce, containing sworn testimony of the complainant given before a commissioner, an Acceptance of Service of Process and Answer and Waiver of Respondent, and a Final Decree of Divorce. If children and property were involved, the file would sometimes also include a custody agreement and property settlement.
It was customary for the lawyer handling the uncontested divorce (1) to prepare all the papers, including the proposed divorce decree to be signed by the judge; (2) to carry the full record in the divorce case to the judge for his signature; (3) to see that the record, including the signed divorce decree, was filed in the register's office; and (4) to see that the appropriate filing fees or costs were paid to the register's office.
It was not customary in the 30th Judicial Circuit for the judge or his staff to file the divorce decree with the Register of Chancery nor to make a check of the records and indexes of the register's office to see whether divorce decrees had been properly filed and indexed or whether the court costs or filing fee had been paid. This was generally the obligation of the parties to the divorce or their attorneys.
During a 34-year period which ended in 1967, John Ike Griffith (Griffith) practiced law in Birmingham, Ala. In that year Griffith was disbarred. His disbarment was grounded upon the fact that Griffith represented to various courts in the State that the plaintiff or defendant in certain divorce proceedings was a bona fide resident of Alabama when in fact Griffith knew or had reason to believe that this was not the case. See In re Griffith, 219 So. 2d 357, 283 Ala. 527 (1969). However, he continued to hold himself out as a practicing attorney until sometime in 1970; his practice consisted solely of handling of uncontested divorces for out-of-State parties.
Frieda Sue Cook (Cook) was employed as secretary to Griffith from 1963 until May 1968. Shirley Bowman (Bowman) served in that position from 1968 through August 1970. Included among their duties as Griffith's secretaries were acting as commissioner and taking testimony from the parties to an uncontested divorce and typing up the various papers necessary for a complete disposition of a divorce case.
Based only on the evidence received during the course of the trial of this case, we make the following findings of fact. They are not intended to be conclusive with respect to any other case, such as that of Griffith, in which different evidence of the same arrangement and transactions might be presented.
Early in 1967 Griffith met with Whitten in Pell City.3 This meeting was arranged by a mutual friend. At this meeting an arrangement was reached to enter a joint undertaking to obtain divorces. Pursuant to this agreement, Griffith was to take testimony from his clients who were complainants in divorce proceedings, collect the legal fees and costs, and submit the papers to Whitten in proper form. Whitten, in turn, was to sign the completed divorce decrees and was to receive a part of the legal fee for each decree that he signed.
Initially, the paperwork was completed in Griffith's office; the completed forms were then taken by Cook to Whitten for signing. Sometime later the signed forms were delivered back to Griffith. Later the arrangement changed.
Under the new arrangement Whitten obtained standard, preprinted forms for divorce decrees,4 to which forms the signatures of Whitten and Ann Love4a would be affixed at the bottom. The remainder of the forms were left blank. The signed forms would then be delivered to Griffith's office where the necessary paperwork would be done. Once completed, the decrees would be returned to Whitten.
These divorce decrees were furnished by Whitten to Griffith in denominations of either 10, 20, or 40, and were then accounted for and filed by the secretary. They were always delivered in signed form; therefore, neither Griffith nor his secretaries ever witnessed Whitten sign his name to the decrees.
When clients came into the office seeking a divorce, Griffith would first meet with them to gather the necessary information. Griffith would then dictate the testimony to his secretary who would act as commissioner. The secretary would then type the information on standard forms, including those furnished by Whitten, and the completed forms would then be presented to the clients for signature. A gold impression of the seal of St. Clair County would then be embossed upon the divorce decree. If a mistake was made while typing a divorce decree, the secretary would write void across the face of the decree and retain this voided document for Whitten to inspect.
Upon completion of the proper forms, Griffith would receive his fee, which, according to him, varied between $275 and $465 per case. Of this fee, approximately 40 percent would be paid to the attorney who forwarded the case, approximately 50 percent was paid to Whitten as his fee, and Griffith retained the remaining 10 percent.5 Griffith dealt with his clients strictly on a cash basis and kept no financial records of his affairs. Due to the absence of records, it is impossible to determine the number of cases he handled at a particular fee within the above fee range. After completion of the papers and payment of the fee, the name of the client would be entered by the secretary onto an index (hereinafter clients list). A clients list was kept yearly by Griffith. These lists contained the name of the client followed by a 3-digit number (which apparently was the number assigned to the case) and the name of the court in which the divorce was purportedly obtained.
After the clients' names had been entered on the yearly list, the completed files were thereafter left in Griffith's private office. At this time Griffith would total the number of cases and place...
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