Green v. Commissioner , 11 B.T.A. 185 ( 1928 )

E. M. GREEN, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

Green v. Commissioner

Docket No. 28981.

United States Board of Tax Appeals

11 B.T.A. 185; 1928 BTA LEXIS 3855;

March 23, 1928, Promulgated

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The respondent's determination of deficiencies approved for lack of evidence, and the penalties for failure to file returns approved.

George M. Stanton, Esq., for the petitioner.

A. S. Lisenby, Esq., and J. E. Marshall, Esq., for the respondent.

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TRAMMELL

This is a proceeding for the redetermination of income taxes for the years 1919, 1920, 1921, 1922, and 1923, in the amounts of $1,355.14, $19,552.27, $2,795.12, $5,032.77 and $286, respectively, which amounts include the 25 per cent penalty for failure to file returns.

The error alleged for the years 1919, 1920, 1921, and 1922, is that the respondent improperly determined the amount of taxable income by including therein the gross bank deposits made by petitioner, and for 1923, that the respondent erred in determining the amount of net taxable income, without assigning any specific error.

The action of the respondent in imposing 25 per cent penalty was not assigned as error.

FINDINGS OF FACT.

The petitioner and his wife are residents of Augusta, Ga.

During the years involved the petitioner was engaged in the business of operating a small grocery store and meat market in the City of Augusta, and in the illicit sale of whiskey. In 1923 his grocery store and meat market was burned.

During the years involved the petitioner bought whiskey in Florida and transported it by automobile to Cincinnati, Ohio, where he disposed of it. He also at various times purchased quantities of whiskey in Savannah, Ga. and Charleston, S.C., for sale at Cincinnati. The illicit sale of whiskey was the petitioner's principal business. He kept no books of account relating to that business, and had no records except his check book and bank book showing deposits. He deposited part of the proceeds from this business in the First National Bank of Cincinnati, also in the Exchange National Bank of Augusta and the Citizens & Southern Bank of Augusta, and retained a portion in cash upon his person for use in meeting current expenses, paying fines, for himself and those who were employed by him in this business, and the purchase of whiskey. He also sold whiskey in Augusta.

During the years involved the petitioner incurred and paid fines and attorney's fees in connection with prosecutions for violation of the National Prohibition Act. One or two of his automobiles were confiscated on account of having been used in the illegal transportation of liquor.

The respondent determined the net income of the petitioner for 1919, 1920, 1921, 1922, and 1923 to be, respectively, $14,072.20, $67,589.86, $21,635.90, $32,514.03 and $7,967.50, and allowed the petitioner the personal exemption provided in section 216(c) of the Revenue Acts of 1918 and 1921.

The petitioner was convicted twice in the Federal courts and six or eight times in other in Augusta, Waycross, Jacksonville, and other places.

The petitioner did not keep a record of the number of trips he made in selling whiskey but estimated that he handled about five or six automobile loads of whiskey a year in addition to that handled by employees. The petitioner in his store in Augusta had a clerk who sold whiskey at that place while the petitioner was away.

OPINION.

TRAMMELL: It is the contention of the petitioner that the net income determined by the respondent for the years involved was erroneous, in that the respondent had considered the bank deposits as being income without deduction for expenses incurred in connection with the business, fines paid for conviction for violation of the National Prohibition Act, and other expenditures made by the petitioner in carrying on that business, including attorney's fees, and the respondent did not allow for the cost of whiskey sold.

The respondent determined the income by taking the bank deposits from the Augusta banks and did not include any income as shown by the deposits in the Cincinnati bank nor any amount which the petitioner retained in cash and paid out for personal living expenses or for other purposes. The respondent made adjustments in the total deposits on account of transfers of money from one account to another and for the repayment of loans and redeposits. It is not necessary for us to determine here whether the petitioner is entitled to any deductions with respect to fines for conviction for violation of the Federal Prohibition Act or for expenses incurred in carrying on his illegal business, because we have no evidence from which we could determine what these expenditures amounted to.

The testimony relating to deductions claimed was indefinite and uncertain, no definite amounts being stated, nor was there testimony as to the years in which the expenditures were made. There is some testimony with respect to a loss by theft of $1,250, but we are not advised as to whether that occurred during the years here involved.

The burden is upon the petitioner to establish the correct income for the years involved. ; ; ; .

The petitioner undertook to show the taxable income for the years involved by showing his increase in net worth between the beginning of 1919, and the ending of the year 1923, but even if this method were correct, it would not enable the Board to determine the correct net income for any particular taxable year. In any event, it would only show the income for the entire period of years.

We do not consider that this method properly reflects income for the respective years for the further reason that it does not take into consideration personal living expenses or other unallowable deductions the amount of which is not shown in the record.

From a consideration of all the evidence we are unable to determine that the respondent's determination of the deficiencies was erroneous and they are therefore approved.

The petitioner did not at any time file any returns for the years involved. The penalty imposed by the respondent for failure to file return is therefore approved.

Judgment will be entered for the respondent.