Court Opinion

ID: 4480628
Source: CourtListenerOpinion
Date Created: 2020-01-16 21:14:26.717644+00
Date Added: 2024-06-11T14:53:10.348108
License: Public Domain

Scott, /., concurring: On the basis of the facts found in this case, I agree with the conclusion reached in the majority opinion that respondent’s determination of an addition to tax for fraud for the taxable year 1959 should not be sustained. However, I do not agree with the statement in the majority opinion that the issue for the year 1959 is “whether the return filed can be considered fraudulent” or with the conclusion that because there was no fraud on the part of the executor and Mary Kahr in filing a return omitting a portion of Kahr’s 1959 income, it follows that there should be no addition to tax for fraud in that year. Section 6658(b), I.R.C. 1954, provides that if any portion of an underpayment of tax is due to fraud there shall be added to the tax an amount equal to 50 percent of the underpayment. This section does not require as does section 6501(c) (1), I.R.C. 1954, providing for an exception to the period of limitation for assessment of tax in case of fraud, that the return be fraudulent but requires only that a portion of the underpayment be due to fraud. In my opinion the issue here is not whether the return filed on behalf of Kahr by his executor was false and fraudulent 'but is whether any part of the underpayment resulting from a part of Kahr’s 1959 income not being included in the income reported on the return was due to fraud. I would decide the case strictly on the basis that on the facts here shown respondent has failed to establish by clear and convincing evidence that any portion of the underpayment for the year 1959 was due to fraud. The fact that Kahr was retaining partnership receipts without entry of the amount of such receipts on the partnership’s books with the result that on the partnership books his partnership income was understated, and to. the extent of his partners’ interest in the partnership he was embezzling partnership funds, is not in and of itself clear and convincing evidence of a fraudulent intent on Kahr’s part to evade tax. In Rohde v. United States, 273 F. Supp. 190 (E.D. Wis. 1967), the court stated: The government’s right to assessment of civil fraud penalties under section 6653(b), 26 U.S.C.A., I.R.C. 1954,1 depends on a showing of willfulness, that is, actual and deliberate wrongdoing with the specific intent to evade a tax believed to be owing. * * * [Footnote omitted.] Although, the words “intent to evade tax” do not appear in section 6653(b) as they did in section 293(b), I.R.C. 1939, in ray opinion in order to prove that a part of the underpayment is due to fraud as required iby section 6653 (b), it is necessary to show that a portion of the underpayment is the result of “willfulness” and “deliberate wrongdoing with specific intent to evade tax.” Under some circumstances respondent might be able to make such a showing by clear and convincing evidence even though the taxpayer died before his return was filed and his executor or administrator, because of lack of complete knowledge of the facts, filed an erroneous but not a fraudulent return. If respondent were able to show by clear and convincing evidence that a portion of an underpayment of tax for a year prior to a taxpayer’s death was due to a fraudulent intent to evade tax on the part of such taxpayer while he was living, the addition to tax for fraud for such year would be proper even though the return was filed after the taxpayer’s death and there was no fraud on the part of the taxpayer’s executor in filing the return. TaNNENWAld, agrees with this concurring opinion.