Court Opinion

ID: 9446514
Source: CourtListenerOpinion
Date Created: 2023-08-03 21:57:10.172953+00
Date Added: 2024-06-11T17:30:40.972086
License: Public Domain

PER CURIAM.
The taxpayers in this case have petitioned for a further hearing upon certain issues which they feel were left unclear by our opinion of November 19, 1958, or alternatively for clarification of that opinion. For reasons about to be stated the petition will be denied.
The taxpayers urged here that they had adduced evidence in the Tax Court which negated all possible sources of taxable income. When we declined to decide this issue, it was on the sole ground that such a “determination is properly the function of the trier of fact and not of an appellate court.” There was no implication in this holding how we viewed the evidence, for we refused to weigh it; nor did we dispute that if the taxpayer in a net worth case chooses to assume, and sustains, the burden of negating by a preponderance of the evidence all possible sources of taxable income, he has, of logical necessity, proved the Commissioner to be in error and is entitled to prevail. Cf. United States v. Massei, 1958, 355 U.S. 595, 78 S.Ct. 495, 2 L.Ed.2d 517.
In our first opinion in this case, Thomas v. Commissioner of Internal Revenue, 1 Cir., 1956, 232 F.2d 520, we held that the rule of Holland v. United States, *6461954, 348 U.S. 121, 75 S.Ct. 127, 99 L.Ed. 150, that the Commissioner must prove a likely source of taxable income, was applicable to a civil net worth case. The recent second opinion of this court adhered to the first but reversed because of the qualification required by the intervening decision of the Supreme Court in United States v. Massei, 1958, 355 U.S. 595, 78 S.Ct. 495, 2 L.Ed.2d 517, that the Commissioner, having failed to prove the existence of a likely source of taxable income, might, as a substitute or alternative, prove the nonexistence of all likely sources of nontaxable income. But this burden of negating is not so broad as it sounds, for although this case has been in litigation before the Tax Court and us for five and one-half years, the only source of nontaxable income which the taxpayers have contended accounts for taxpayers’ increases in net worth, as we said, was a substantial cash gift from Mrs. Thomas’ father. It follows that in this case only that source needs to have been negated. Indeed, we do not expect that our decision will ever require the Commissioner to disprove the entire catalogue of nontaxable receipts, see, e. g., Internal Revenue Code 1954, §§ 101-120, 26 U.S.C.A. §§ 101-120, since the burden of allegation may be separated from the burden of proof. See Sampson v. Channell, 1 Cir., 1940, 110 F.2d 754, 757, 128 A.L.R. 394, certiorari denied 1940, 310 U.S. 650, 60 S.Ct. 1099, 84 L.Ed. 1415. The Tax Court may require as a rule of procedure that in future cases the taxpayer by reply must join the issues of fact with respect to the nonexistence of a nontaxable source although the burden of proof is upon the Commissioner. See Tax Court Rules 14(b), 15, 26 U.S.C.A. § 7453; cf. Preferred Accident Insurance Co. of New York v. Grasso, 2 Cir., 1951, 186 F.2d 987, 23 A.L.R.2d 1234; Kahnweiler v. Phenix Insurance Co. of Brooklyn, 8 Cir., 1895, 67 F. 483, certiorari denied 1895, 163 U.S. 691, 16 S.Ct. 1202, 41 L.Ed. 311.
If the Tax Court finds that the Commissioner has sustained the burden of negating by a preponderance of the evidence the alleged gift, it will of course reach other proceedings not inconsistent .with our opinions, which it considered unnecessary on the first remand, particularly a finding of the cash on hand at the commencement and termination of each of the tax years involved.
An order will be entered denying the petition for rehearing.