Court Opinion

ID: 4480665
Source: CourtListenerOpinion
Date Created: 2020-01-16 21:14:27.787084+00
Date Added: 2024-06-11T15:03:34.675777
License: Public Domain

Scott, J., dissenting: The majority opinion concludes that “the problem here before us centers on the method for establishing the amounts, not the source of such unreported' income.” In my view the question is not one of “method” but is whether petitioners have shown that the determination of respondent is erroneous. The fact that respondent has determined the tax liability of a taxpayer by the net worth method does not relieve that taxpayer of showing error in respondent’s determination. Estate of W. D. Bartlett, 22 T.C. 1228, 1232 (1954). In my view the majority opinion places on respondent not only the burden of establishing fraud by clear and convincing evidence but also the burden of establishing petitioners’ tax liability. I also disagree with the reliance in the majority opinion on Thomas A. Talley, 20 T.C. 715 (1953), for the proposition that respondent’s use of the net worth method must be rejected where “the taxpayer’s books and records were ‘sufficiently accurate and complete for the computation of income.’ ” This Court has pointed out in a number of cases that the net worth method is not a method of accounting but rather is a way of showing that the income disclosed on the taxpayer’s return is incorrect. Estate of George L. Cury, 23 T.C. 305, 333 (1954). The net worth method may be used where a taxpayer’s books are too incomplete to permit any computation of income therefrom or as evidence to show that books which appear to be accurately kept are not in fact an accurate record of a taxpayer’s income. H. A. Hurley, 22 T.C. 1256, 1261 (1954), affd. 233 F. 2d 177 (C.A. 6, 1956). I have not reviewed the entire record in this case and would accept the opinion of the trial judge as to whether the evidence produced by petitioners was sufficient to overcome the presumption of correctness of respondent’s determination and whether the preponderance of the evidence of record showed a tax liability in an amount less than that determined by respondent if the majority opinion dealt with these questions. If the intended holding of the majority opinion was that of the basis of all the evidence of record petitioners’ tax liability was less than the amount determined by respondent, it does not precisely so state. The opinion does contain statements which might be interpreted to place the burden of proof of the tax liability as well as of fraud on respondent, and, therefore, I respectfully dissent. Withey, /., agrees with this dissent.