Court Opinion

ID: 9454896
Source: CourtListenerOpinion
Date Created: 2023-08-04 19:03:08.379116+00
Date Added: 2024-06-11T17:34:22.004756
License: Public Domain

McCREE, Circuit Judge
(dissenting).
I, too, have compassion for petitioner, but I feel obliged by precedent and logic respectfully to dissent from the opinion of the Court.
Although the Congress has not created exceptions to the joint and several liability of husbands and wives stipulated in 26 U.S.C. § 6013(d) (3), the courts have exonerated the co-signer of a joint *482return if his signature was the product of mistake, duress, trickery or fraud.
Here, the Tax Court found that petitioner voluntarily signed the joint return for the years involved and, obedient to the teaching of Commissioner of Internal Revenue v. Duberstein, 363 U.S. 278, 80 S.Ct. 1190, 4 L.Ed.2d 1218 (1960), we are bound by that finding of fact unless it is clearly erroneous. Allen Industries, Inc. v. Commissioner of Internal Revenue, 414 F.2d 983 (Sixth Cir. Aug. 29, 1969). We should not hold that it is, because petitioner has admitted both by stipulation and by her sworn testimony that her signature was voluntary. I regard the fact that she derived no benefit, directly or indirectly, from her former husband’s unreported income as an irrelevancy.
Nor do I regard the Supreme Court’s holding in James v. United States, 366 U.S. 213, 81 S.Ct. 1052, 6 L.Ed.2d 246 (1961), that embezzled funds are income to the wrongful taker as a fiction. The concept of income is one of art and the Congress has not seen fit to exempt the proceeds of embezzlement from taxation in the eight years since that decision. It follows, then, if embezzled funds are income to the embezzler, they are, by virtue of 26 U.S.C. § 6013(d) (3), income to his spouse since that statute provides that “ * * * The tax shall be computed on the aggregate income and the liability with respect to the tax shall be joint and several.” (Emphasis supplied.) If an item is income to one spouse, it is necessarily part of the aggregate income of both.
The majority opinion suggests that some form of equitable relief should be afforded. However, the jurisdiction of the Tax Court is purely statutory and it has no general equitable jurisdiction. Our court has only the function of review and it is not empowered to take any action prohibited to the Tax Court. Taylor v. Commissioner of Internal Revenue, 258 F.2d 89 (2d Cir. 1958).
I regard the reliance of the majority on our opinion in Scudder v. Commissioner of Internal Revenue, 405 F.2d 222 (6th Cir. 1968), aff’d on rehearing, 410 F.2d 686 (1969), as misplaced. The majority opinion there regarded that case as one involving “special facts” turning on the circumstances under which the culpable spouse obtained the unreported income. 410 F.2d at 688. And despite the wife’s exoneration for taxes on the monies themselves because of the “special circumstances” under which they were obtained, the majority order on rehearing held that she was jointly liable for the tax on unreported profits realized by her husband on the monies' unauthorizedIy extracted from the partnership in which she had an interest. It is certainly arguable that she would not have signed the joint returns if she had known that such profits existed and were not reported. Nevertheless, the majority here states, without evidentiary support, that the taxpayer “obviously would not have signed (the return) had the embezzled money been included in it.” That fact alone does not bring this case within Scudder which has been described by a tax law commentator as “a hard case, and the court was obviously stretching to find a way out for the wife.” Mertens, Law of Federal Taxation, Vol. 8A § 47.48 (July, 1969 supplement).
To hold that a spouse must know of an understatement or non-reporting of income in order to be jointly and severally liable on a joint return would divest the pertinent section of the code of any meaning. It would ascribe to the Congress a vain act in providing for the vicarious liability of a person who would be liable, in the absence of Section 6013(d) (3), as a principal.
Finally, I cannot agree with the majority’s procedural resolution. It does not appear that petitioner was precluded in any way from showing the circumstances surrounding the preparation and signing of the return. She was represented by counsel and entered into a stipulation of facts which she does not seek to set aside. She also testified under oath and offered no testimony to bring her case within any of the exceptions to the statutory rule. The burden was on *483her to do so, Christman Co. v. Commissioner of Internal Revenue, 166 F.2d 1016 (6th Cir. 1948), and she should not be afforded a second opportunity in the absence of special circumstances which are not shown.
I would affirm the decision of Judge Tannenwald of the Tax Court.