Moriarty v. Commissioner , 18 T.C. 327 ( 1952 )

Joseph V. Moriarty alias Michael and/or Michel Pitcher alias Joseph Petrick, Petitioner, v. Commissioner of Internal Revenue, Respondent

Moriarty v. Commissioner

Docket No. 16758

United States Tax Court

18 T.C. 327; 1952 U.S. Tax Ct. LEXIS 193;

May 19, 1952, Promulgated

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">*193 Decision will be entered under Rule 50.

Held: 1. Petitioner realized taxable income in the amounts determined by respondent.

2. Petitioner's failure to file income tax returns was not due to reasonable cause and was due to willful neglect.

3. The deficiencies determined are due to fraud with intent to evade tax.

Edward Baumgarten, Esq., for the petitioner.

Francis X. Gallagher, Esq., for the respondent.

Van Fossan, Judge.

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VAN FOSSAN

">*327 The respondent determined deficiencies in income tax and additions to the tax because of fraud and failure to file income tax returns. By amended answers to the petition the respondent increased the determinations to the following amounts:

		50 per cent	25 per cent
Year	Tax	penalty	penalty
1935	$ 246.34	$ 123.17	$ 61.58
1936	1,326.23	663.12	331.56
1937	1,625.34	812.67	406.34
1938	1,098.98	549.49	274.75
1939	784.13	392.07	196.03
1940	328.02	164.01	82.01
1941	833.06	416.53	208.27
1942	5,915.98	2,957.99	1,479.00
1943	976.56	488.28	244.14
1944	2,098.26	1,049.13	524.57
1945	149,760.99	74,880.50	37,440.25
1946	14,314.83	7,157.42	3,578.71

The issues in this proceeding are whether">*194 the petitioner realized taxable income in the years in question and, if so, the amount thereof, also, whether any deficiency or part thereof is due to fraud with intent to evade tax, and whether petitioner failed to file income tax returns because of willful neglect.

">*328 FINDINGS OF FACT.

Joseph V. Moriarty, the petitioner, is an individual residing in Jersey City, New Jersey, who filed no income tax returns for the taxable years 1935 to 1946, inclusive. On July 9, 1946, a deputy attorney general of the State of New Jersey, assigned to law enforcement in regard to gambling, conducted a raid on the petitioner's residence, pursuant to a search warrant, for gambling paraphernalia. Numbers slips and evidences of baseball and horse race bets were found there. A considerable amount of money was discovered in a box in the house, and a woman identified as Eleanor Moriarty, petitioner's sister, was discovered attempting to dispose of numbers slips. The petitioner appeared and stated that he was the person wanted by the authorities, not his sister. While the search was being continued the petitioner was seen attempting to climb a ladder to the roof while carrying a large quantity">*195 of cash in his arms. Part of the money fell to the floor, the bundles of bills splitting open. An investigator participating in the raid chased the petitioner to the roof of the building and fired a shot in the air. Petitioner stopped running and was brought back into the house.

The gambling evidence, together with an adding machine and a radio, was seized by the authorities. Two men, who entered the building carrying numbers slips and horse race bets, were taken to the court house along with the petitioner and the gambling evidence. There the cash was counted and petitioner stated that the money was his. The cash found in the residence totaled approximately $ 27,000. Several thousand numbers slips were seized in the raid and a group of slips representing one day's business totaled $ 1,507.64. The petitioner has been tried several times but has never been convicted of violating the law with respect to gambling. His sister, Eleanor Moriarty, however, was convicted.

During 11 of the 12 years in question, net additions were made to at least 50 separate savings accounts in 20 different banks. These accounts were either in petitioner's name individually or as trustee for a member">*196 of his family or in an alias of petitioner. The net deposits, after withdrawals and clearing exchanges from other accounts had been offset, together with the interest credited to these accounts during these years, were as follows:

Year	Net deposits	Interest
1935	$ 4,714.00	$ 15.28
1936	14,714.05	156.98
1937	16,460.00	441.83
1938	12,400.00	691.45
1939	9,450.00	923.89
1940	3,667.00	1,010.45
1941	4,127.93	836.63
1942	14,576.00	1,044.37
1943	1,000.00	1,098.22
1944	5,000.00	1,191.71
1945	182,358.82	2,099.24
1946		3,649.76

">*329 In 1947, following the commencement of an investigation by the respondent, approximately $ 135,000 was withdrawn from these accounts before a jeopardy assessment was made by respondent.

During the years 1935 through 1946 the petitioner had other income not reflected in the deposits and realized aggregate taxable net income in the following amounts:

Year	Net income
1935	$ 6,229.28
1936	16,371.03
1937	18,448.93
1938	14,591.45
1939	11,873.89
1940	6,677.45
1941	6,964.56
1942	18,120.37
1943	4,598.22
1944	8,191.71
1945	186,458.06
1946	33,435.76

All, or some part of, the deficiency in income tax for each ">*197 of the years 1935 to 1946, inclusive, is due to fraud with intent to evade tax. The failure to file an income tax return for each of the years in question was not due to reasonable cause and was due to willful neglect.

OPINION.

Respondent determined deficiencies in petitioner's income tax, together with fraud and delinquency penalties, for the years 1935 to 1946, both inclusive, and by amended pleadings, claimed additional deficiencies and penalties for each of the years. No tax returns were filed by petitioner for any of such years. The petitioner called no witnesses and presented no evidence, contenting himself with relying on his position that the determinations by respondent were arbitrary and that, under the rule of , the entire burden of proof rests on respondent.

There is no merit in petitioner's contention as to the burden of proof. Under the pleadings, the burden of proof rests as follows: The burden of disproving the deficiencies in tax and to negative the delinquency penalties for all the years as first determined by respondent, rests on petitioner. The burden of proving the additional amounts of deficiencies">*198 affirmatively alleged by amended answer, together with the additional delinquency penalties so alleged, and the entire burden of proving fraud, rests on the Government.

We have no evidence which would require us to hold that the respondent's determinations were arbitrary and , is not available as a defense.

There being no countervailing evidence, the presumption of correctness accorded respondent's original determinations as to the amounts of deficiencies, dictates that respondent's findings must be sustained. The same is true as to the original determinations of delinquency penalties. There is no evidence that the failure to file tax returns was due to reasonable cause and not due to willful neglect.

">*330 Looking next to the matter affirmatively pleaded by respondent, again we have no countervailing evidence, while respondent submitted competent evidence to prove the additional amounts. Accordingly, respondent is sustained as to the additional deficiencies and the additional penalties for the delinquency.

As to the issue of fraud, looking at the entire record, respondent has again presented ample evidence to carry">*199 his burden. Such evidence is clear and convincing. Petitioner having failed to present any evidence in exculpation, we have found as a fact that the petitioner was guilty of fraud as to all of the years.

Decision will be entered under Rule 50.