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Schneider v. Comm'r of Internal Revenue (In re Estate of Schneider)

Tax Court of the United States.
Feb 25, 1958
29 T.C. 940 (U.S.T.C. 1958)

Opinion

Docket Nos. 54289-54296.

1958-02-25

ESTATE OF HARRY SCHNEIDER, DECEASED, MOLLY SCHNEIDER, ADMINISTRATRIX, AND MOLLY SCHNEIDER, EL AT.,1 PETITIONERS, V. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.2

Solomon M. Lowenbraun, Esq., and Phillip Leavitt, Esq., for the petitioners. Charles M. Greenspan, Esq., and John A. Dunkel, Esq., for the respondent.


Solomon M. Lowenbraun, Esq., and Phillip Leavitt, Esq., for the petitioners. Charles M. Greenspan, Esq., and John A. Dunkel, Esq., for the respondent.

1. Held, the returns of Harry Schneider were false and fraudulent and a part of each deficiency was due to fraud with intent to evade tax for each of the years 1944 through 1950.

2. Held, beneficiaries of various ‘Totten trusts' are liable as transferees, to the extent of trust assets individually received, for deficiencies and additions to tax determined against decedent for years 1944 through 1950.

3. Held, transferees of assets of decedent are liable to the extent of assets received for deficiencies and additions to tax determined against decedent for years 1944 through 1950.

Respondent determined deficiencies in income tax and additions to tax under section 293(b), I.R.C. 1939, in the joint returns of Harry Schneider and Molly Schneider for the taxable years 1948, 1949, and 1950.

In Docket No. 54289, the following deficiencies and additions to tax originally determined by the respondent against the Estate of Harry Schneider, deceased, Molly Schneider, administratrix, and Molly Schneider, petitioners, were put in issue:

+--+ ¦¦¦¦ +--+

Year Deficiency Addition to tax 1948 $749.02 $374.51 1949 4,388.74 2,194.37 1950 624.66 312.33

In an amended answer the respondent recomputed the deficiencies and additions to tax in Docket No. 54289 with the following result:

+--+ ¦¦¦¦ +--+

Year Deficiency Addition to tax 1948 $7,544.90 $3,722.45 1949 9,613.58 3,756.79 1950 482.36 241.18

Each of the following-named petitioners was determined by the respondent to be liable to the extent shown as a transferee of the assets of Harry Schneider. Respondent levied a jeopardy assessment against each of the alleged transferees.

+--+ ¦¦¦¦ +--+

Docket No. Petitioner Transferee liability 54290 Molly Schneider $36,930.71 54291 Katherine Schneider 20,051.06 54292 Ruth Schneider 18,196.35 54293 Manny Schneider 24,406.09 54294 Leo Schneider 23,943.18 54295 Jules Schneider 20,455.37 54296 Catherine Smith 46,704.97

Incidental to determining the transferee liability of the individual petitioners, respondent determined deficiencies and additions to tax for the years 1944 through 1947 in the individual returns of decedent in the following amounts:

+--+ ¦¦¦¦ +--+

Year Deficiency Addition to tax 1944 $11,753.54 $5,876.77 1945 21,160.29 12,102.18 1946 26,505.71 13,988.34 1947 28,985.20 15,856.16

There are three issues involved. First, whether Harry Schneider filed false and fraudulent income tax returns with intent to evade tax for each of the taxable years 1944 through 1950.

Second, whether the respondent correctly determined deficiencies in the individual income tax returns of Harry Schneider for the years 1944 through 1947, and in the joint returns of Harry Schneider and Molly Schneider for the years 1948, 1949, and 1950.

Third, whether petitioners Molly Schneider, Katherine Schneider, Ruth Schneider, Manny Schneider, Leo Schneider, Jules Schneider, and Catherine Smith are liable as transferees of the assets of Harry Schneider.

FINDINGS OF FACT.

Some of the facts were stipulated and are incorporated herein by this reference.

Harry Schneider (hereinafter referred to as decedent) graduated from Boston University School of Medicine in 1922 and was licensed to practice in that year. He married Mary (Molly) Gray (hereinafter referred to as Molly Schneider) on December 27, 1928. From 1934 until his death decedent maintained his personal resident at 200 East 16th Street, New York, New York. He died intestate April 20, 1951. Returns for the tax years in question were filed with the collector of internal revenue for the second New York district.

From 1922 until 1929 decedent was a general practitioner. In 1929 he began to specialize in obstetrics. By 1942 he had limited his practice to the specialities of obstetrics, gynecology, and related surgery.

From 1939 until 1951 Catherine Smith was employed by decedent as a nurse and secretary. During this period decedent never took a vacation. He maintained office hours Monday through Thursday, but frequently emergencies forced him to be in the office on Friday and Saturday. Decedent visited the clinic at Beth Israel Hospital three times a week, usually in the morning. Sometimes he was at the hospital 6 or 7 nights a week, at times all night along. Throughout the years 1944 and 1951, inclusive, there were four other doctors who substituted for decedent in case of illness or emergency.

In was usual procedure in the decedent's office to make out a patient card for each new patient who came in for obstetrical care. The patient's name, address, and other pertinent information were recorded on the face of the card (hereinafter sometimes called obstetrical card). The cards were filed alphabetically and segregated by years. There were approximately 200 such cards for each of the years 1945 and 1946. There were 205, 451, 422, and 278 cards for the years 1947, 1948, 1949, and 1950, respectively.

The fee charged was usually entered on the reverse side of the card in the upper lefthand corner, either by the decedent or Catherine Smith. The fees recorded on the cards during 1945 and 1946 varied from $75 to $100.

The records of United Medical Service, a prepayment medical care plan, indicate that in the years 1949 and 1950 payment was made to the decedent for 27 claims. In 17 of these claims the decedent's fee, as filed with the Medical Service, exceeded that recorded on decedent's patient cards. In some instances the differential was $25; in others, $50.

In addition to the obstetrical cards decedent maintained a file of gynecological cards for 1935 through 1951. These gynecological cards indicate that during the years 1944, 1945, 1946, 1947, 1948, 1949, and 1950 decedent received respectively 252, 222, 271, 301, 243, 235, and 153 visits from gynecological patients. Fees for gynecological consultation varied from $3 to $5, except in the case of an operation. One gynecological card indicates a fee of $1,000 for a Caesarian section. Other cards, reflecting various surgical procedures, show fees of $100, $75, and $50.

Decedent was associated only with the Beth Israel Hospital. The admissions register of the hospital shows every admission and every patient of every doctor. The admissions register, in conjunction with microfilmed patient records, establishes that approximately 644 individuals were admitted to the hospital in 1946 as patients of decedent. In 1947 there were 607 of decedent's patients admitted. There are no patient cards in his file for 430 of these 1947 cases. In both 1948 and 1949, 456 of decedent's patients were admitted. These figures do not include charity cases.

A large majority of the admissions were for pregnancy and delivery of a child; some were for legal abortions, gynecological operations, or other reasons. There were instances in which patients were admitted to the hospital for labor more than once during a given 30-day period.

On May 8, 1926, decedent opened savings bank account No. 1,487,575 in his own name with the Bowery Savings Bank, New York, New York. On December 7, 1945, the name of this account was changed to ‘Harry Schneider, in trust for Catherine M. Smith, friend.’

On December 28, 1942, he opened savings bank account No. 287,704 in his own name with the Union Square Savings Bank, New York, New York. On December 7, 1945, the name of this account was changed to ‘Harry Schneider, in trust for Catherine Marie Smith.’

On January 25, 1943, he opened in his own name account No. 1,536,228 with the Bank for Savings, New York, New York. On December 7, 1945, the name of this account was changed to ‘Harry Schneider, in trust for Catherine M. Smith.’

During 1944 and thereafter decedent opened numerous savings bank accounts in trust for various persons. In 1944 he deposited a total of $6,345 in these savings accounts; in 1945, $23,638; in 1946, $41,378; and in 1947, $42,817. These trust accounts were what are known in New York as ‘Totten trusts.’

At the time of his death, there were in existence 37 such accounts in 37 different banks, distributed in the following manner:

+--+ ¦¦¦¦ +--+

Number of accounts in trust for Balance of Name named accounts as individual as of Apr. 20, of Apr. 20, 1951 1951 Catherine Smith 11 $46,652.59 Leo Schneider 6 23,904.69 Emanuel (Manny) Schneider 5 21,372.14 Jules Schneider 6 20,455.37 Ruth Schneider 5 18,196.35 Samuel Schneider 1 2,666.50 Nathan Schneider 1 838.03 Madeline Schneider 1 755.42 Jeffrey Schneider 1 746.62 $135,587.71

These accounts accumulated interest, as follows:

+----------------+ ¦Year ¦Amount ¦ +------+---------¦ ¦1944 ¦$128.76 ¦ +------+---------¦ ¦1945 ¦295.12 ¦ +------+---------¦ ¦1946 ¦729.23 ¦ +------+---------¦ ¦1947 ¦1,549.57 ¦ +------+---------¦ ¦1948 ¦2,070.38 ¦ +------+---------¦ ¦1949 ¦2,517.90 ¦ +------+---------¦ ¦1950 ¦2,623.70 ¦ +----------------+

After each of the 11 accounts in trust for Catherine Smith was established, she was given possession of the passbook and she retained general possession of the books until after decedent's death, when she surrendered them to her attorney. She personally made no withdrawals from these accounts.

On October 1950 decedent turned over 26 savings bank passbooks to his brother Jules Schneider, instructing him that he should keep possession of the books and that Molly Schneider should not get possession of them. Jules retained possession of the books until after decedent's death, at which time he gave them to his attorney.

As a matter of banking practice in the State of New York, the beneficiary of a Totten trust cannot make withdrawals from the account during the lifetime of the settlor.

Between January 1, 1944, and April 20, 1951, decedent made 11 withdrawals totaling $13,767.66 from various of the trust accounts. Two of the withdrawals— $1,000 on November 12, 1948, from the Bank for Savings, and $3,600 on January 14, 1949, from the West Side Savings Bank— were made from accounts in trust for Catherine Smith. These withdrawals were noted in the bank books.

Following the death of Harry Schneider the balances of all accounts were withdrawn by the respective beneficiaries.

At the time of decedent's death there were six policies of insurance on his life, as follows:

+----+ ¦¦¦¦¦¦ +----+

Cash Amount Policy Beneficiary surrender paid at value death Apr. 20, 1951 New York Life Ins. Co., #8922872, issued Dec. Katherine $2,476.11 $4,064.85 1, 1925; annual premium $147.84. Schneider The Prudential Ins. Co. of America, #5848871, Katherine 1,667.55 5,211.17 issued May 26, 1927; annual premium $112. Schneider Equitable Life Assurance Society of the Katherine United States, #4,693,597, issued Mar. 10, Schneider 2,009.07 5,294.94 1928; annual premium $138.85. Penn Mutual Life Ins. Co. of Philadelphia, # Emanuel 1370835, issued Oct. 29, 1928; annual premium Schneider 1,850.31 3,018.66 $120.60. Massachusetts Mutual Life Ins. Co., #1057255, (Molly ) 1 10,205.07 issued Apr. 18, 1932; annual premium $713.50. Schneider 13,159.13 (Katherine ) 3,401.69 Schneider Massachusetts Mutual Life Ins. Co., #1057256, (Molly ) 1 6,087.05 issued Apr. 18, 1932; annual premium $401.55. Schneider 7,895.48 (Katherine ) 2,029.01 Schneider

During the years 1939 through 1942 decedent borrowed a total of $10,266 against these various life insurance policies. All the loans were repaid as of November 27, 1944.

When decedent died he held in co-ownership with Molly Schneider United States savings bonds having a total redemption value of $11,578.70. Some of these bonds were originally purchased by decedent in his name alone during 1943, 1944, and 1945 and were so held until February 1951. On February 6, 1951, they were put in co-ownership form in the names of Harry Schneider and Mary (Molly) Schneider, and were so held without change to the date of decedent's death; their redemption value at that time was $7,578.75.

Decedent and Molly Schneider had no children. Throughout the tax years in question they resided in a 3-room apartment. The apartment rental was $100 a month until 1947, and $115 a month thereafter. A maid was employed on a part-time basis. Decedent gave Molly Schneider $50 to $55 a week for household expenses. They did not own an automobile. Decedent claimed his mother, Katherine Schneider, as a dependent on each of his returns for 1944 through 1950.

Katherine Schneider lived with Manny Schneider and Ruth Schneider at 8240 Pettit Avenue, Elmhurst, Long Island, in a house purchased by decedent for the sum of $13,500 on October 30, 1947. Title to the house was taken by decedent and Molly Schneider as tenants by the entirety. It was purchased subject to a $7,000 mortgage.

Decedent filed individual Federal income tax returns for the taxable years 1944, 1945, 1946, and 1947. He filed joint returns with Molly Schneider for the years 1948, 1949, and 1950. Income was reported as follows:

+---+ ¦¦¦¦¦ +---+

Year Professional Interest Total income income 1944 $6,141.17 $56.00 $6,197.17 1945 7,177.70 62.00 7,239.70 1946 9,782.33 67.00 9,849.33 1947 8,356.20 114.00 8,470.20 1948 24,022.92 0 24,022.92 1949 20,471.41 0 20,471.41 1950 15,390.34 1 1,133.50 2 15,523.84

Investigation of the decedent's income tax liability for the years 1945, 1946, and 1947 made during his lifetime and covered by an agent's report made in August 1950 resulted in the following additions to income:

+---+ ¦¦¦¦¦ +---+

Estimated Increase due amount to to adjustment Net Year cover of adjustment personal errors in expenditures bookkeeping 1945 $5,000 $2,931.00 $7,931.00 1946 3,000 1,000.00 4,000.00 1947 3,000 4,523.78 7,523.78

A 5 per cent negligence penalty was imposed for the year 1945 for failure to keep proper records.

Additional taxes were paid by the decedent as a result of the investigations and were taken into consideration when deficiencies in the case at bar were determined. During these prior investigations conducted between 1948 and 1950 decedent repeatedly informed internal revenue agents that he had no bank account other than a checking account at the Corn Exchange Bank and Trust Company, and that this account represented all his taxable income. The agents never learned of the falsity of these statements during the course of their audit.

A similar investigation of decedent's tax liability for the years 1948 and 1949 conducted after his death resulted in a ‘no change’ report.

An investigation of decedent's income tax liability for the year 1950 was begun in the spring of 1953. The Federal estate tax return filed for decedent's estate was made available to the examining agent. The estate tax return disclosed the existence and ownership of savings bonds, savings bank accounts, and insurance policies not theretofore revealed. Thereupon, internal revenue agents began a detailed investigation of decedent's income tax liability for all preceding years. During the course of this investigation they circularized banks, examined the admissions records of Beth Israel Hospital, examined the decedent's patient cards, and made a net worth determination for 1944 and subsequent years. Statutory notices of deficiencies, additions to tax, and transferees' liability were issued under date of May 27, 1954.

Eighty-three of the 84 deposit slips used by decedent for making deposits in his checking account at the Corn Exchange Bank and Trust Company for the period January 4, 1947, through December 26, 1947, were found to show deposits of checks only. During the same period 71 deposits were made in various savings accounts. Four of these deposits contained checks. All other deposits were of currency.

At the trial respondent introduced a computation of decedent's net worth for the years 1944 through 1950, exclusive of deficiencies and additions to tax, as shown on the following page.

+---------+ ¦¦¦¦¦¦¦¦¦¦¦ +---------+

Year ended Dec. 31 Just prior to death on Apr.

1943 1944 1945 1946 1947 1948 1949 1950 20,1951 Assets Cash in savings $6,004.51 $11,698.27 $34,231.39 $76,338.62 $120,017.53 $132,035.43 $132,043.33 $135,322.03 $135,587.71 banks Cash in Corn Exchange Bank and 810.42 1,015.27 1,314.94 2,061.19 1,784.13 3,013.60 3,721.63 3,451.94 3,475.24 Trust Co. checking account United States savings 7,870.00 13,549.00 17,744.00 17,744.00 17,744.00 17,744.00 17,744.00 10,249.00 10,249.00 bonds—Series E and F (at cost) One-family house: 82-40 Pettit Ave., 13,500.00 13,500.00 13,500.00 13,500.00 13,500.00 Elmhurst, N. Y. (at cost) Loans receivable 400.00 2,900.00 2,900.00 2,900.00 2,900.00 Cash surrender values of life 16,215.90 17,610.59 19,108.96 20,662.68 22,271.64 23,927.81 25,584.59 27,310.22 28,468.77 insurance policies Dividend and interest 129.05 177.75 232.22 284.50 337.24 401.88 459.80 519.81 711.44 accumulations on insurance policies Office furniture and equipment (at 2,738.08 2,738.08 2,738.08 2,738.08 2,738.08 2,738.08 2,738.08 2,738.08 2,738.08 cost) Total assets 33,767.96 47,188.96 78,269.59 122,729.07 181,292.62 196,260.80 195,791.43 193,091.08 194,730.24 Liabilities Loans payable to life insurance 3,339.00 companies Mortgage payable on 7,000.00 6,879.88 6,759.76 6,639.66 6,639.66 house Reserve for depreciation—office 1,280.45 1,554.26 1,828.07 2,101.88 2,375.69 2,649.50 2,738.08 2,738.08 2,738.08 furniture and equipment Total liabilities 4,619.45 1,554.26 1,828.07 2,101.88 9,375.69 9,529.38 9,479.84 9,377.74 9,377.74 Net worth 29,148.51 45,634.70 76,441.52 120,627.19 171,916.93 186,731.42 186,293.59 183,713.34 185,352.50

All of the figures used in the net worth calculation were stipulated, with the exception of the opening and closing figures of the checking account in the Corn Exchange Bank and Trust Company. The opening figure for December 31, 1942, was unavailable. The balance of the amount on July 29, 1944, was substituted as an estimate based on the experience of the account for the remainder of 1944. The closing figure for December 31, 1950, was arrived at by resort to working papers showing a reconciliation of opening and closing balances.

Using net worth increases plus personal expenses, the respondent determined decedent's unreported income from profession for 1944 through 1947 as follows:

+----+ ¦¦¦¦¦¦ +----+

1944 1945 1946 1947 Net worth at Dec. 31 of each year $45,634.70 $76,441.52 $120,627.19 $171,916.93 Net worth at Jan. 1 of each year 29,148.51 45,634.70 76,441.52 120,627.19 Increase in net worth 16,486.19 30,806.82 44,185.67 51,289.74 Add -- Deductible and nondeductible expenditures: Income tax payments made 936.30 1,156.80 1,298.55 2,048.72 Life, health, and accident 1,571.40 1,571.40 1,571.40 1,472.90 insurance premiums Support of mother 2,000.00 2,000.00 2,000.00 2,000.00 Food, clothing, traveling, entertaining, and miscellaneous out-of-pocket 3,000.00 3,000.00 3,300.00 3,300.00 expenses Rent 1,200.00 1,200.00 1,200.00 1,245.00 Contributions 345.00 535.00 1,100.00 905.00 Interest on life insurance loans 180.00 Interest on mortgage 67.00 New York State income taxes paid 51.05 76.41 50.75 125.61 Gross medical expenses 150.00 1,365.95 150.00 150.00 Gross income to be accounted for 25,919.94 41,712.38 54,856.37 62,603.97 Less -- Gross income reported and nontaxable income received: Interest income 56.00 62.00 67.00 114.00 Net profit from profession 6,141.17 7,177.70 9,782.33 8,356.20 Depreciation of office furniture 273.81 273.81 273.81 273.81 and equipment Annual increases in cash surrender values of life 1,394.69 1,498.37 1,553.72 1,608.96 insurance Dividend and interest 48.70 44.47 52.28 52.74 accumulations on policies Portion of gross income accounted 7,914.37 9,056.35 11,729.14 10,405.71 for Unexplained increase in net worth 18,005.57 32,656.03 43,127.23 52,198.26 Less— Portion representing unreported 72.76 233.12 662.23 1,435.57 interest income Unreported income from profession 17,932.81 32,422.91 42,465.00 50,762.69

Amounts for the support of decedent's mother, for food, clothing, traveling, entertaining, and miscellaneous out-of-pocket expenditures were estimated by respondent for 1944 through 1947. Medical expenses were estimated for the years 1944, 1946, and 1947. Other amounts were determined from the stipulation or exhibits in evidence. Estimates of personal living expenses used in respondent's net worth computation covered all such expenses.

Transcripts of decedent's tax payments for the years 1922 through 1943 reveal that he filed taxable returns in only 3 years prior to 1944. These transcripts, tabulated in conjunction with the maximum net income commensurate with his reporting, are as follows:

+--+ ¦¦¦¦ +--+

Year Liability Maximum per return net income 1922 (1 ) $1,000 1923 (1 ) 1,000 1924 (1 ) 1,000 1925 (1 ) 1,500 1926 (1 ) 1,500 1927 (1 ) 1,500 1928 (1 ) 3,500 1929 (1 ) 3,500 1930 (1 ) 3,500 1931 (1 ) 3,500 1932 $9.68 2,742 1933 (2 ) 2,500 1934 (1 ) 2,500 1935 (2 ) 2,500 1936 (1 ) 2,500 1937 (2 ) 2,500 1938 (2 ) 2,500 1939 (2 ) 2,500 1940 (2 ) 2,600 1941 180.34 3,500 1942 307.88 3,200 1943 860.66 5,398

The cash surrender values on these policies are applicable to the policies as such, and to the beneficiaries thereof on a pro rata basis.

1Income from United States savings bonds.$1,000 net operating loss claimed.

1No record.2Nontaxable.

For the taxable years 1948, 1949, and 1950 respondent, in recomputing decedent's income, added interest income and increased professional income where omitted.

Respondent recalculated decedent's professional income for 1949 and 1950 on the basis of an estimated average fee of $100 per hospital patient and $10 per gynecological consultation. No additional professional income was included in the redetermination for 1950.

The Federal estate tax return for the Estate of Harry Schneider was filed July 11, 1952. The parties stipulated that the sum of $12,785.56 in assets passed to his estate and that the estate's liabilities, exclusive of income tax, totaled $32,545.60. This return revealed the existence of the savings bank trust accounts.

At the time of his death and prior to the transfer of the trust accounts totaling $135,587.71, decedent's adjusted net worth was $185,352.50, exclusive of back taxes. Simultaneously, considering only the years 1944, 1945, 1946, and 1947, he owed deficiencies and additions to tax totaling $114,479.79.

In the course of determining the liability of the several alleged transferees respondent determined deficiencies and additions to tax in decedent's returns as follows:

+--+ ¦¦¦¦ +--+

Year Deficiency Addition to tax 1944 $11,753.54 $5,876.77 1945 21,160.29 12,102.18 1946 26,505.71 13,988.34 1947 28,985.20 15,856.16 1948 749.02 374.51 1949 4,388.74 2,194.37 1950 624.66 312.33

By amended answer respondent altered the deficiencies determined and additions to tax for the years 1948, 1949, and 1950, in Docket No. 54289. These changes are set forth in the opening statement above.

On brief the respondent recomputed deficiencies and additions to tax as follows:

+--+ ¦¦¦¦ +--+

Year Deficiency Addition to tax 1944 $8,263.68 $4,131.84 1945 15,487.34 9,265.71 1946 22,766.89 12,118.93 1947 27,387.89 15,057.51

On brief the respondent reduced transferee liability asserted in Docket Nos. 54290 to 54296, inclusive, to the following amounts:

+--+ ¦¦¦¦ +--+

Docket Petitioner Transferee No. liability 54290 Molly Schneider 1 $16,292.12 54291 Katherine Schneider 20,001.66 54292 Ruth Schneider 18,196.35 54293 Manny Schneider 24,390.80 54294 Leo Schneider 23,904.69 54295 Jules Schneider 20,455.37 54296 Catherine Smith 46,652.59 1An alternate claim of $7,578.75 representing the redemption value of United States savings bonds placed in coownership on February 6, 1951, was made in Docket No. 54290.

Decedent, Harry Schneider, filed false and fraudulent income tax returns for each of the years 1944, 1945, 1946, 1947, 1948 1949, and 1950 with intent to defraud the Government of taxes due. Some part of the deficiency for each of such years is due to fraud with intent to evade tax.

The statute of limitations does not bar the assessment and collection of any amounts found to be due in accordance with these findings and opinion.

OPINION.

VAN FOSSAN, Judge:

1.Proceedings of the following petitioners were consolidated for trial: Molly Schneider, Docket No. 54290; Katherine Schneider, Docket No. 54291; Ruth Schneider, Docket No. 54292; Manny Schneider, Docket No. 54293; Leo Schneider, Docket No. 54294; Jules Schneider, Docket No. 54295; Catherine Smith, Docket No. 54296. 2.In Docket Nos. 54290, 54291, and 54293, incidental to the determination of the liability of the petitioners as transferees, a question is presented as to whether the payment of the proceeds of certain insurance policies on the life of the decedent to the petitioners constituted a transfer of assets by the decedent within the meaning of the term ‘transferee,‘ as used in section 311, I.R.C. 1939. This question is presently before the Supreme Court of the United States. Accordingly, the present findings of fact and opinion is limited to the disposition of Docket Nos. 54289, 54292, 54294, 54295, and 54296. The three cases involving the insurance question will be subject to a subsequent opinion.

Internal Revenue Code of 1939.SEC. 275. PERIOD OF LIMITATION UPON ASSESSMENT AND COLLECTION.Except as provided in section 276—(a) GENERAL RULE.— The amount of income taxes imposed by this chapter shall be assessed within three years after the return was filed, and no proceeding in court without assessment for the collection of such taxes shall be begun after the expiration of such period.SEC. 276. SAME— EXCEPTIONS.(a) FALSE RETURN OR NO RETURN.— In the case of a false or fraudulent return with intent to evade tax or of a failure to file a return the tax may be assessed, or a proceeding in court for the collection of such tax may begun without assessment at any time. SEC. 293. ADDITIONS TO THE TAX IN CASE OF DEFICIENCY.(b) FRAUD.— If any part of any deficiency is due to fraud with intent to evade tax, then 50 per centum of the total amount of the deficiency (in addition to such deficiency) shall be so assessed, collected, and paid, in lieu of the 50 per centum addition to the tax provided in section 3612(d)(2).29 T.C.

SEC. 272. PROCEDURE IN GENERAL.(e) INCREASE OF DEFICIENCY AFTER NOTICE MAILED.— The Board shall have jurisdiction to redetermine the correct amount of the deficiency even if the amount so redetermined is greater than the amount of the deficiency, notice of which has been mailed to the taxpayer, and to determine whether any penalty, additional amount or addition to the tax should be assessed—if claim therefor is asserted by the Commissioner at or before the hearing or a rehearing.

RULE 32. BURDEN OF PROOF.The burden of proof shall be upon the petitioner, except as otherwise provided by statute, and except that in respect of any new matter pleaded in his answer, it shall be upon the respondent.

SEC. 1119. PROVISIONS OF SPECIAL APPLICATION TO TRANSFEREES.(a) BURDEN OF PROOF.— In proceedings before the Tax Court the burden of proof shall be upon the Commissioner to show that a petitioner is liable as a transferee of property of a taxpayer, but not to show that the taxpayer was liable for the tax.

SEC. 311. TRANSFERRED ASSETS.(a) METHOD OF COLLECTION.— The amounts of the following liabilities shall, except as hereinafter in this section provided, be assessed, collected, and paid in the same manner and subject to the same provisions and limitations as in the case of a deficiency in a tax imposed by this chapter (including the provisions in case of delinquency in payment after notice and demand, the provisions authorizing distraint and proceedings in court for collection, and the provisions prohibiting claims and suits for refunds):(1) TRANSFEREES.— The liability, at law or in equity, of a transferee of property of a taxpayer, in respect of the tax (including interest, additional amounts, and additions to the tax provided by law) imposed upon the taxpayer by this chapter.(f) DEFINITION OF ‘TRANSFEREE.’— As used in this section, the term ‘transferee’ includes heir, legatee, devisee, and distributee.


Summaries of

Schneider v. Comm'r of Internal Revenue (In re Estate of Schneider)

Tax Court of the United States.
Feb 25, 1958
29 T.C. 940 (U.S.T.C. 1958)
Case details for

Schneider v. Comm'r of Internal Revenue (In re Estate of Schneider)

Case Details

Full title:ESTATE OF HARRY SCHNEIDER, DECEASED, MOLLY SCHNEIDER, ADMINISTRATRIX, AND…

Court:Tax Court of the United States.

Date published: Feb 25, 1958

Citations

29 T.C. 940 (U.S.T.C. 1958)