Stewart v. Commissioner

1978 T.C. Memo. 400, 37 T.C.M. 1657, 1978 Tax Ct. Memo LEXIS 112
United States Tax Court·Decided October 5, 1978·No. Docket No. 4780-73.·Unpublished

Opinion

HAROLD L. AND ESTHER S. STEWART, Petitioners v. COMMISSIONER OF INTERNAL REVENUE, Respondent
Stewart v. Commissioner
Docket No. 4780-73.
United States Tax Court
T.C. Memo 1978-400; 1978 Tax Ct. Memo LEXIS 112; 37 T.C.M. (CCH) 1657; T.C.M. (RIA) 78400;
October 5, 1978, Filed
Earl G. Stokes, for the petitioners.
William E. Saul, for the respondent.

DAWSON

MEMORANDUM FINDINGS OF FACT AND OPINION

DAWSON, Judge: Respondent determined a deficiency of $ 1,326 in petitioners' Federal income tax for the year 1969 and an addition to tax under section 6653(a) 1 in the amount of $ 66.

At the trial respondent conceded that the petitioners are entitled to a business expense deduction of $ 1,085.11 for "ice, bait and fuel" rather than the amount of $ 840 allowed in the notice of deficiency. He also conceded the negligence penalty of $ 66. Thus, the issues remaining for decision*113 are: (1) Whether petitioners can invoke equitable considerations to attack the presumption of correctness which attaches to respondent's notice of deficiency and satisfy their burden of proof by presenting oral testimony that their tax returns were true and correct and based on some books and records kept by their tax return preparer; and (2) whether petitioners are entitled to various business expenses, depreciation and itemized deductions in excess of the amounts allowed by the respondent.

FINDINGS OF FACT

A few facts have been stipulated and are so found.

Harold L. Stewart and Esther S. Stewart (petitioners) are husband and wife whose legal residence was in Eureka, California, when they filed their petition in this case. Their joint Federal income tax return for 1969 was filed with the Internal Revenue Service Center at Ogden, Utah.

Harold L. Stewart (petitioner) is engaged in commercial fishing in Eureka, California. In 1969 he operated a fishing vessel known as F. V. Washington. His gross business receipts in 1969 were $ 13,625.98. On his Federal income tax return he claimed various "costs" totaling $ 5,871.91, and business deductions totaling $ 3,965.04, which*114 included depreciation in the amount of $ 1,658.34.

Petitioners had their Federal income tax return for 1969 prepared by Theodore Watkins. All receipts and documentation were returned to petitioner except those which were overlooked or those pertaining to depreciation. Mr. Watkins' work papers and schedules were retained by him. On November 11, 1971, while Mr.Watkins was in San Francisco, respondent's agents, acting pursuant to an administrative summons, entered Mr. Watkins' ranch and offices at Garberville and seized 22 file cabinets and cardboard boxes. Some of petitioners' records were among those seized. An inventory of the seized records was subsequently made by respondent's agents for the limited purpose of possible prosecution of Mr. Watkins. Certain records were microfilmed by respondent's agents, but apparently no complete record of all the documents was ever made by the respondent. On or about January 17, 1972, the seized records were returned to the custodian for the Ted Watkins Tax Service at the Garberville Ranch. Petitioners were later audited by the Internal Revenue Service along with other clients of Ted Watkins.

Petitioners have previously refused to produce*115 their books and records to respondent's agents, relying on the Fourth and Fifth Amendments to the Constitution of the United States as their reason for not producing them. Only recently have the petitioners claimed that they did not have the books and records necessary to substantiate the business expenses and itemized deductions claimed on their Federal income tax return for 1969.

The following table reflects the business expenses and depreciation claimed by petitioners as well as those allowed by respondent and those remaining in dispute:

Business Expenses

ClaimedAllowed
onbyAmount
ReturnRespondentIn Dispute
Ice, Bait and Fuel$ 1,300.84$ 1,085.11 $ 215.73
Provisions1,202.00900.00302.00
Gear and Maintenance2,674.462,000.00674.46
Utilities and Telephone187.5093.0094.50
Dues, Port Expenses &
Travel507.11250.00257.11
Depreciation1,658.340

Free access — add to your briefcase to read the full text and ask questions with AI

Stewart v. Commissioner, 1978 T.C. Memo. 400, 37 T.C.M. 1657, 1978 Tax Ct. Memo LEXIS 112 (tax 1978).

1978 T.C. Memo. 400 (Stewart v. Commissioner) — published by Counsel Stack Legal Research, free access to 12M+ legal documents.

Related

Helvering v. Taylor
293 U.S. 507 (Supreme Court, 1935)
Shapiro v. Thompson
394 U.S. 618 (Supreme Court, 1969)
United States v. Janis
428 U.S. 433 (Supreme Court, 1976)
Halle v. Commissioner of Internal Revenue
175 F.2d 500 (Second Circuit, 1949)
Van Antwerp v. United States
92 F.2d 871 (Ninth Circuit, 1937)
Cohan v. Commissioner of Internal Revenue
39 F.2d 540 (Second Circuit, 1930)
Jefferson v. Commissioner
50 T.C. 963 (U.S. Tax Court, 1968)
Figueiredo v. Commissioner
54 T.C. 1508 (U.S. Tax Court, 1970)
Rose v. Commissioner
55 T.C. 28 (U.S. Tax Court, 1970)
Suarez v. Commissioner
58 T.C. 792 (U.S. Tax Court, 1972)
Human Engineering Institute v. Commissioner
61 T.C. No. 7 (U.S. Tax Court, 1973)
Greenberg's Express, Inc. v. Commissioner
62 T.C. No. 40 (U.S. Tax Court, 1974)
Roberts v. Commissioner
62 T.C. No. 89 (U.S. Tax Court, 1974)
Estate of Emerson v. Commissioner
67 T.C. 612 (U.S. Tax Court, 1977)
Halle v. Commissioner
7 T.C. 245 (U.S. Tax Court, 1946)
United States v. Saladoff
233 F. Supp. 255 (E.D. Pennsylvania, 1964)