Burd ex rel. Fogel v. Commissioner

*734 The respondent determined deficiencies, penalties and interest against the petitioner as follows:

Petitioner asks redetermination and as cause therefor alleges the following errors: The Commissioner erred in computing the income taxes of the petitioner for the taxable years 1922 and 1923 in that in computing said tax the Commissioner included in gross income the sum of the bank deposits made by petitioner during said years without any allowance whatsoever for sums withdrawn by petitioner representing transfers of capital assets or legal deductions from the gross income; whereas the Commissioner in computing said tax should have allowed as a deduction from said gross income the amounts shown by the petitioner to have been capital transactions or legal deductions*2332 from gross income. It is further alleged by the petitioner that during the years 1922 and 1923 he was the secretary and treasurer of the Penn Distilling Co., a corporation, and that practically all of the bank deposits made in his name belonged to the Penn Distilling Co. and not to him.

Petitioner does not contest the deficiency, penalty, and interest for 1919, and does not allege that the action of the respondent in imposing penalties constituted error.

FINDINGS OF FACT.

Petitioner filed no returns for 1919 to 1923, both inclusive.

The petitioner Benjamin R. Fogel is an individual and resides in Philadelphia, Pa. He was sometimes known by the name of Robert Burd and it was under the latter name that the deficiencies, penalties, and interest herein were determined against him.

*735 During the year 1919, petitioner was a toolmaker in the employ of the Government at the Navy Yard in Philadelphia, at a salary of $1,800 a year. He received other income of $2,820.54 during that year. In 1920 and 1921 he was engaged in a commission business handling butter and eggs. For those years he made no returns and no deficiencies were determined.

During 1922 and until*2333 May or June, 1923, petitioner was the secretary and treasurer of the Penn Distilling Co., a corporation, which was engaged in distilling industrial alcohol. He was the custodian of the company's funds and deposited them in the Southwark National Bank, Philadelphia, Pa., in his own or his assumed name, to his own credit and mingled them with his funds. As the petitioner made no returns for 1922 and 1923, and did not make satisfactory disclosures to the investigating revenue agent, respondent determined deficiencies based on his bank deposits.

In 1923 he purchased 17 two-family residences in the name of his wife, but the consideration was not shown. In the same year he bought the residence in which he resides for $8,200, property at 717 South 56th Street for $9,100, property at 721-3 South 56th Street for $3,000, property 4810 to 4842 Sansom Street for $216,000, and 4720 Chestnut Street for $50,000. In addition he was half-owner with his brother of certain real estate on North 12th Street, which they purchased for $50,000 and sold at a profit. The properties were all located in Philadelphia. Other sources of income were a salary of $50 per week and a profit of approximately*2334 $6,000 in real estate transactions during 1923. Prior to 1920 petitioner and his brother were interested in a garage business, which in 1920 was transferred to their wives, through a third party. It was rented out at $500 monthly and sold in 1922 or 1923.

Most of the property purchased was mortgaged, but substantial down payments were made on all.

OPINION.

BLACK: In cases of this character, where the taxpayer makes no returns and refuses to make a statement to the investigating revenue agent, the Government must resort to any other information it may find and base its determination of income thereon. That was done in this case, resulting in the discovery of the bank deposits upon which the deficiencies are based. The Board has in a number of cases approved deficiencies determined from bank deposits of the taxpayer. ; ; .

The determination of the respondent is prima facie correct and the burden is upon the petitioner to establish his correct income for the *736 years involved. *2335 ;; ; ; .

The petitioner contends that the money deposited to his credit in bank really belonged to the Penn Distilling Co., with the exception of a possible 5 per cent thereof which represented his own funds, and that the most of the property purchased by him and put in his wife's name belonged to Herman D. Jaffe, a business associate. Beyond his mere indefinite statements at the hearing, there is not a scintilla of evidence to corroborate him. Jaffe did not testify. Jaffe was a real estate agent and interested in the Penn Distilling Co., and was under investigation by revenue agents at the same time petitioner was. No documentary evidence of any kind relative to the real estate transactions or bank account was introduced by petitioner. In his petition, petitioner does not assign as error that respondent taxed his bank deposits, but complains that respondent failed to make proper allowances for withdrawals and other legal deductions. On the hearing, *2336 he offered no sufficient evidence of withdrawals or deductions, but merely stated that he frequently deposited several thousand dollars one day and drew it out the next. Purposes and amounts were not given.

When we consider that petitioner kept his bank account under an assumed name, that he purchased property of the aggregate value of $340,000 in addition to the 17 two-family residences, and had it placed in his wife's name, and had his garage business transferred to her, in connection with his failure to make returns, and his refusal to make a statement to the revenue agent, it is plain that the purpose was to conceal the source of his income and evade taxes. Such a state of facts rarely happens, it is designed. .

We are not convinced by petitioner's testimony. He has failed to show what his correct income was for the years 1922 and 1923, and has admitted the deficiency for 1919. Under the circumstances the deficiencies, penalties, and interest as determined by respondent are approved.

Judgment will be entered under Rule 50.