Fred N. Acker v. Commissioner of Internal Revenue

not called these 833. Hence we are defects. Thus other fishermen stayed away. upon point not made notice parties. person I would doubt that a could convicted of violation of a Rehearing Petition On case, just did not cover his because thought accused it did.

PER CURIAM. rehearing petition The is denied.

POPE, Judge (dissenting). Circuit my concurring opinion In of June 1958, I noted the reason there is doubt any

as to whether there was closed season in Zimovia Strait the time stated in at my the information. However I stated judgment concurrence in the affirm- ACKER, Petitioner, Fred N. ground point ance on the had appeal not been raised at trial or on OF INTERNAL COMMISSIONER REV- here I felt that under the circum- ENUE, Respondent. upon stances would not be called No. 13320. point plain notice the as a error under Appeals United States Court of 52(b), Fed.Rules Crim.Proc. Rule Sixth Circuit. U.S.C. 18, 1958. June Upon petition rehearing ap- for a pellants have called attention fact Rehearing Sept. Denied regulations if provide did not any prohibition Strait, as to Zimovia then the information did not state an offense.

They also note that under Criminal Rule

12(b) (2), the failure of an information charge an offense shall be noticed petition the court at time. fur- suggests ther that there is no substantial proof of an administrative construction regulations such as that which I my opinion. refer former bearing proposition I am in mind the person should not be fined or im- reg- prisoned of a for violation statute or ambiguous ulation or uncertain. I think it is a serious Since regulations, framed, whether the ac- fishing tually prohibited in Zimovia question, Strait at time in I think grant rehearing should that we now 12(b) appear Rule would since appropriate make it for us to consider matter. suggested time of the It is appellants had reason to alleged offense area, regulations covered this think reliance act in then did Judge, SIMONS, MIL- Before Chief LER, Judge, MATHES, Dis- Circuit Judge.

trict

Judge. MATHES, District The Tax toto sustained in

spondent’s of deficiencies determinations in additions income tax and under of 1939 §§ Int.Rev.Code thereto 294(d) (2), 291(a), 294(d) (1) (A), and (1) (A), 291(a), 294(d) 26 U.S.C.A. §§ years 1947-1950 inclusive. Petitioner here does not tax under correctness of the additions to validity 291(a), challenges of but deficiency ad- all the determinations and (1) (A) 294(d) ditions to tax under §§ years in- of for each volved. facts, as set out in the Tax Court’s Findings

Memorandum of Fact Opinion CCH Tax Ct. Memo. [16 controversy. (1957)], not Peti- attorney tioner is an resident of During period peti- Ohio. the relevant stockholder, in- tioner was a in some stockholder, stances the sole in several corporations. All but one of defi- ciency determinations in issue petitioner review concern activities of respect one or more of cor- with those porations. only disputes

Petitioner not cor- application of rectness the Tax Court’s involved; Code sections he also at- constitutionality general tacks provisions the income tax the Internal Revenue Code tionality and the constitu- particular requirement of the declaration of that a estimated tax be filed. Inasmuch as the constitutional issues need, if, petitioner reached con- tends, incorrectly the Tax Court inter- preted applied pertinent sections Acker, per. pro. N. Fred Internal Revenue Code of Buckley, Washington, C., statutory D. questions. turn first A. Helen Atty. Gen., Joseph Rice, Army Asst. Rescue Municipal Court, [See: K. Charles Jackson, Goetten, A. 568-575, Lee N. Robert U.S. F. Freeman, Dept.

Anderson, B. E. Charles Ashwander v. Ten- Washington, brief, C., Valley Justice, Authority, D. on nessee 288, 341, 345-348, respondent. 56 S.Ct. R., grounds, er C. I. (concurring opinion Mr. Justice MacCrowe’s Estate v. see: Brandéis).] Tank Commissioner, Rentals, Inc., Truck 1949, petition In personally on paid estate taxes er real Express 2d Motor Co. v. Hoover corporation property Ohio owned wholly him. owned turn was 511, 2 L.Ed.2d 568. kept in title was Petitioner admits that solely corporation own petitioner $8,500 for his conven In 1947 loaned ience, property corporation as stock, taxes were to a in which he owned against corporation, during and that sessed and the loan became worthless corpo year. period petitioner within In 1948 was re selling guar pay quired ration business to transacted a note which he had property. corporation The Tax Court some of anteed for in which sustaining clearly resulting re stock, $3,465.49 was owned correct he in a spondent’s Respondent under the determination that loss him. to determined that property only taxes were of these circumstances both losses deductible were by petitioner. debts, required Int.Rev. not deductible non-business bad to be 23(c) (1), 1939, capital 26 U.S.C.A. § Code of treated as short term losses [Int. § Regulation 23(c) Treasury (1); (k) 111 1939, (4)], § Rev.Code of 23 and so § (1949); (c)-l, subject Moline specified 29.23 C.F.R. the amount limitation 1943, Commissioner, Properties, Inc., 117(d) (2) v. Internal of the Revenue § 1132, 436, 1939, 117(d) (2). of Code 26 U.S.C.A. § 1499; Magruder Supplee, 1942, petitioner 316 U. The Tax found that 1555; 1162, 394, S. failed to show that he was in the busi Commissioner, Cir., Corp. lending money guaranteeing Gilken ness of to or 1949, 141; corporations, Brudno Commis 176 F.2d loans of and so sus sioner, Cir., respondent’s and tained determinations. We Murphy agree. Regulation [Treasury Co. v. Commission see Simon J. 29.- § er, Cir., 1956, 23(k)-6, (1949); 231 F.2d 639. 26 C.F.R. Putnam v. Commissioner, 1956, 82, 92-93, petitioner was In 1950 convicted 1 L.Ed.2d Wheeler v. imprisoned file and for willful failure to Commissioner, Cir., 1957, an return for 1946. In his income tax 883; Commissioner of Internal Revenue of unsuccessful defense criminal Schaefer, expended $2,290 prosecution petitioner Commissioner, Cir., and see McNeill legal expenses for and bond costs 866-867.] urges deductible, apparently un he are years through For the 23(a), of on the § der Int.Rev.Code spondent petitioner defending against imposed on and theory criminal necessity” Tax Court charges sustained additions for an tax “an absolute n attorney fight 294(d) (1) (A) both under for § his the crimi failure and tax, reputation. to file declaration of greatly his estimated enhanced nal case 294(d) (2) properly under for substantial sustained re un- § Tax Court derestimation of estimated tax. of this deduc Peti- spondent’s disallowance rely prose statutory does not on the taxpayer has been tioner who tion. “A cuse “reasonable cause or state statute federal not cuted under * * * neglect” justify willful a crime been his convicted Rather, for failure file the declarations. his attor deduction tax permitted a statutory provi- he maintains Internal ney’s Commissioner fee.” filing requiring Heininger, of a sions Revenue of estimated tax unconstitutional be- powers MacCrowe, “the enumerated E. cause of Albert Estate note (1955), power do not include Memo. af Ct. Tax 14 CCH compel prophesy. a citizen to reversed on It point and oth- firmed, be- on this yond any ability human and therefore Peterson v. United D.C.S.D. Congressional subject not a Tex.1956, interven- F.Supp. 382]. tion.” While this court has affirmed three petitioner Since no makes at Tax Court decisions which have sanc tempt excuse, statutory to establish the imposition tioned penalties under both correctly applied Tax Court the stat 294(d) (A) 294(d) § and § sustaining imposition ute in of the addi where no declaration of estimated tions (1) (A) to tax under filed, had been examination of the briefs failure to file the declarations of estimat appendices in these discloses cases ed tax. And we hold with the Tax Court propriety that the imposing pen that tutionality attack the consti alty for substantial underestimation of the Inter where no estimate at all had filed been nal requiring Revenue Code of 1939 the was not raised in this court. Fed [John filing tax, of a declaration of estimated erika, 14 CCH Tax Ct. Memo. imposing penalties file, for failure to (1955), affirmed, per curiam, “wholly without merit.” Such re denied, certiorari quirements are a valid exercise of the 1957, 1025, 590, 1 L.Ed. taxing power by 1, 8, conferred Article § 596; 2d Fogel, Robert 14 CCH Tax and the Sixteenth Amendment of the 718, Ct. (1955), affirmed, per Memo. 728 Granquist, Constitution. 9 Erwin v. curiam, Cir., 1956, 918; 6 M.R. Cir., 1958, 26; v. Unit Walker Clayton, 105, 15 CCH Tax Ct. Memo. 109 States, Cir., 601, ed denied, 1957, 5 certiorari (1956), affirmed, per curiam, Cir., 6 939, 1402, S.Ct. 77 1957, 245 F.2d The 1 L.Ed.2d 1538. open mains for examination then as res integra here. im next contends that Petitioner penalties position of concurrent under §§ though problem Even of concur- 294(d) (2) 294(d) (1) (A) and penalties only rent exists under the 1939 statutory is without warrant. 1939 Code Code, and cannot arise under the 1954 Tax Court held that The expressly provides Code which but a sin- all amount failure to file estimate at gle penalty underpayment for of estimat- which, turn, estimate re ed to a zero 1954, 6651(e), ed tax [Int.Rev.Code §§ in a substantial underestimate sulted 6654, 6651(c), 6654, 26 U.S.C.A. §§ (2). purview of § within This Cong. see 3 U.S.Code & Adm.News Treasury is in accord with (1954), pp. 4544, 4567, 5241-5242], the 29.294-l(b) (i) Regulation 111 § problem important remains an one be- by (1949)], supported and is C.F.R. [26 yet cause of cases to be decided long [see, line of Tax decisions a by will be ruled the 1939 Code [see Int. Buckley, among others: F. Clarence 1954, 6654(h)]. Rev.Code of § Garsaud, 50; 1957, Marcel 29 T.C.No. 1090; 1086, argument 1957, support Harold C. 28 T.C. of the valid- 687, 692; Marbut, 1957, ity part Treasury Regulation 28 T.C. J. D. of that Abbott, 1957, 795, 808-809; (b) (3) (i) An- T.C. 29.294-1 § [26 C.F.R. 1957, 845, thony Delsanter, (1949)] declaring 28 T.C. 861- that “[i]n the event Kaltreider, 1957, 862; required Walter H. 28 T.C. of failure a to file the declara- 992, Maxey, 1956, 121; tion, 26 T.C. Marvin amount the estimated tax 360, Harry Hartley, 353, 996; purposes provision T.C. of this 564; Fuller, 1954, zero,” 23 T.C. E.G. has been well modified stated in Palmisano 316, 308, affirmed, 1953, States, supra, D.C., on other 20 T.C. United F.Supp. 102], 98, 99, grounds, States, Peterson v. United supra, F.Supp. 382, decisions [Pal- District Court some and Farrow v. States, supra, States, D.C., F.Supp. v. United D.C.E.D.La. 581, misano F.Supp. 1958, Farrow United Fuller, also supra, G. E. [See 20 T.C. D.C.S.D.Cal.1957, F.Supp. States, page at long regula- rule “statutes quoted established give effect But to ** * levying greater to be taxes problem presents even a tion beyond implication clear in tended difficulty logical encountered than language import of the used.” [United estimate saying has filed no who that one Merriam, 1923, 263 his States v. U.S. thereby underestimated all has 187-188, 68 L.Ed. 58- S.Ct. v. United Barnwell [See tax. Harrelson, 1930, 4, Crooks v. (E.D.S.C.Feb. Par. 1 U.S.T.C. 1958).] Reinecke although For Gardner, 1928, of es- declaration to file a failure treated Gould, Gould v. underestima- substantial timated acts separate and distinct of tax as tion O’Day, sep- L.Ed. cf. Parker Pen Co. v. Code, provided under the each, penalties and different arate taxpayer who renders cogent reasoning Mindful of the ipso facto failed file a of the Tax Court District Court penalty subject for failure both the sustaining opinions regulation, we penalty un- substantial file and the opinion Treas nevertheless are ury itself Tax Court As the derestimation. Regulation (b) 29.294-1 rebuffing attempt of observed (i) (1949)] C.F.R. is invalid insofar [26 penalties respondent these to extend provides it the event “[i]n legislature in- implication: “If had declaration, required failure to file would have been it such result tended the amount of the tax for the estimated provide.” simple [An- matter so to purposes provision of this is zero.” In page thony Delsanter, supra, 28 T.C. at that, so we are mindful too as 862.] the Tax Court and District Courts the regu out, Treasury regulations pointed Moreover, have as the inasmuch presumptive!y imposes penalty we think addition to are valid. But lation by expressly imposed in this considerations of statute it that instance one the construing omission, policy are reason and same unable involved self the regulation levying imposing pen perceive is nec statutes taxes and wherein the to essary statutory taxing outweigh presumption the valid alties the effectuate to ity; quoted provision of that the scheme. of the Internal Section regulation is, words, penal is in nature other “unreason of 1939 Revenue Code [Stephan plainly strictly able inconsistent with the and to construed. be [statute],” Commissioner, Cir., 1952, revenue and so cannot be sus v. 5 712; States, supra, Rev [Commissioner tained. of Internal Barnwell v. United Co., 1948, 9374; Lumber v. Dud enue v. South Texas 58-1 Par. Davis U.S.T.C. 496, 501, ley, F.Supp. 426, D.C.W.D.Pa.1954, 68 92 124 333 U.S. S.Ct. L.Ed. 429; F. Broadcast 831.] see C. C. v. American ing Co., 1954, 284, 296, 74 This conclusion is buttressed are “Penalties never it accord with that reached fact by implication” v. Rail extended [Elliott majority of the District Courts 573, 576, Co., 99 road problem. which have considered 292; United v. J. H. Winchester States States, supra, v. United 58-1 [Barnwell Co., 472], & 9374; Granquist, Par. Erwin U.S.T.C. questions in “all doubt must be resolved (D.Ore.1957), Par. 57-2 U.S.T.C. penalty in favor from whom the of those affirmed, Cir., 1958, 26; Pow- sought.” [Hatfried, Inc., v. Commis Granquist, D.C.D.Ore.1956, 146 ell v. F. sioner, Cir., 1947, 162 F.2d 308, 312, affirmed, Cir., Supp. Wood, Furthermore, D.C.Ariz.1956, Jones in- F.2d even if the exactions F.Supp. Tax,” Stenzel as “additions to volved be treated United States, D.C.N.D.Cal.1957, they F.Supp. denominated as Hodgkinson States, Code, runs counter United 57-1 (S.D.Cal.1956); cause of U.S.T.C. Par. indirect effects of a statute that clearly D.C.D.Neb.1955, States, represents Owen v. United an exercise of the tax- ing F.Supp. power [see, example, McCray modified on point States, Knop States, sub nom. v. United United 78], Todd v. United more than one on occa- (N.D.Ga. Supreme 57-2 sion the U.S.T.C. Par. 9768 Court adverted 1957); Dunn, possibility although law, Glass v. 56-2 U.S.T.C. de- (N.D.Ga.1956); might taxing statute, Par. 9840 States nominated a F.Supp. taxing Ridley, D.C.N.D.Ga.1954, all, statute at but one which 3, 11; boundary Ridley, on its United States v. D.C.N.D. face has crossed the

Ga.1954, F.Supp. 530, from the classification “tax” to the class- “taking,” ification so to become sub- judgment of the Tax must ject Fifth limitations therefore be reversed as to the additions Amendment [Stew- Constitution. 294(d) (2). However, to tax under § Davis, 1937, ard Machine Co. v. our conclusion deduc- the claimed 548, 585, properly compels tions were disallowed R., 1916, Brushaber v. Union Pacific us nonetheless reach the constitutional 60 L.Ed. 493.] provi- issues raised as to the income tax sions of the Internal Revenue Code authority holding knowWe of no Congress may constitutionally enact which, although a law ute, called a tax stat- Petitioner asserts these income taking on its face amounts to are unconstitutional be- private property compensation without high cause: the rates are so as to therefor. That a law would fall such levy make the not a tax but a confiscation n “taking,” within area of rather than property contrary to the Fifth “taxing,” subject area of so be Constitution, (2) Amendment to the judicial nullification because of the progressive unconstitutional, rates are limitations of the Fifth Amendment was the “income tax law considered clearly recognized by Mr. Chief Justice as a whole in its excessive rates arbi- speaking for White the Court Brusha- trary provisions openly subversive of R., supra, 1, ber Union Pacific U.S. philosophy the fundamental of the Con- 236, 493, 60 L.Ed. he S.Ct. where repug- stitution of the United States and pointed that, despite out the breadth nant to its continued existence.” taxing power by the conferred the Con- summarily Tax The dis stitution, might there arise “a case posed of these constitutional issues with where, although seeming was a there long recog the “It statement: has been taxing power, of the the ercise act com- taxing nized that where a statute is arbitrary plained of was so as to con- power Congress within the enact, to to the conclusion that strain it was not clearly is, as the Internal Revenue Code the exertion of taxation but a confisca- provided the fact that the rates thereun property; is, taking tion of that of the may excessive, confiscatory, der be or de Amendment; in violation of 5th same the taxing structive not does invalidate the equivalent thereto, or, is what was so Memo, act.” CCH Tax [16 Ct. at 91.] wanting in basis for classification as to gross patent produce inequali- such a the Tax Court This inevitably ty argu- to lead to the same as con- completely overlooks pages 24-25, assuming very thing clusion.” U.S. at [240 36 S. the that ments page namely, at disputes, 244.] Ct. whether the Con- he gress power has the to enact an income principle recognized also This was found like that in the Internal tax law speaking Cardozo Mr. Justice of 1939. Code Revenue in Davis, Steward Machine Court supra, Co. v. may 548, the 883, courts While U.S. 57 S.Ct. not 81 L. Congress judgment 1279, of the he disturb be- Ed. when wrote: “[W]e assume say enough, gross discrimination, he has addressed them to if wrong Congress, forum; they subject un- equivalent are for the to confiscation challenge for not the courts. der Amendment to the Fifth page at and annulment.” U.S. [301 stated, judgment For the reasons 585, page do Nor Tax Court is insofar as reversed ringing forget Justice of Mr. words it sustains the additions to tax under § when, dissent, declared: in he Holmes 294(d) (2) of the Internal Code Revenue power power “The tax is respects, judg- of 1939. In all other destroy [Pan- while this Court sits.” ment is affirmed. Mississippi ex handle Oil Co. State of Rehearing On Petition for Knox, rel. U.S. PER CURIAM. applied an Since the Tax Court party petitioned Each legal judging peti incorrect standard hearing. por- Petitioner but restates a unconstitutionality, tioner’s claim of it argument. tion of his earlier proper would to en to remand the case Respondent, however, now advances weigh able that court to the evidence Treasury Regu- the contention that “the light legal of correct standards. Howev question hardly lation in could be incon- er, surveying on the entire record from * * * sistent with the statute because fully appears petitioner which it language Regulation Treasury presented to his con the Tax Court both language is by identical used arguments almost stitutional and his evidence Reports in the Committee supporting them, no we think there is dealing [Compare with the statute.” reasonable basis holding fact or law Regulation Treasury 29,294-1(b) income S.Rep. (3) (i), 26 C.F.R. with of the Internal Revenue Code of 1939 (1943 Cong., No. 78th 1st Sess. unconstitutional either on their face or Cum.Bull, 1314, 1345), H.R.Rep. No. applied petitioner in this case. Cong., (1943 78th Cum. 1st Sess. unquestionably The 1939 Code tax- 1351, 1372).] Bull. ing statute in substance as well as Respondent constitutionality progres- to our name. The also calls attention long sive tax recent of Patchen Com [Knowlton rates settled. decisions Moore, missioner, Commissioner, Cir., Brushaber v. Union Pa- Abbott v. R., supra, and Hansen cific v. Commis sioner, Cir., 1958, 258 F.2d 585. These classifications drawn appear decisions, subsequent here do not to be ei- rendered case, arbitrary opinion publication ther or our in unreasonable of this disagreement contrary, express constitutional sense. To the with our large they part represent penalty “the record a of the for failure file that government’s keep pace endeavor to the of estimated tax [Int.Rev. fertility whereby 294(d) (1) (A), the of invention with of 1939 U.S. Code § larg- taxpayers keep 294(d) (1) (A)] penalty had contrived to the C.A. the § ownership and er benefits of be relieved for substantial underestimation of es (2)] attendant v. [Burnet of burdens.” tax cannot [id. the timated Wells, 1933, 670, 676, concurrently imposed so as be to work penalty. of double the exaction a tax, say the of case the that rates In the Patchen we learned can Court Nor high, Appeals admittedly appears reached confisca- Fifth have for the of Circuit “taking” authority in the constitutional to credit as decisions a of this or tion may problem all, we much as as men in which the Court All was never sense. arguments citing Fogel footnote 15 sympathize [See with raised. judges Commissioner, Cir., 1956, plight, as we must v. 237 F.2d our about gives Clayton Commissioner, Cir., naturally pause, us are nonethe- v. regula- Roehner, challenged opinion 1957, 245 less F.2d See also of that the authorizing page imposition 153 at tion of double Federal Taxation Par. penalties 1958).] (Aug. 8, cannot the validated fact be substantially quotation is from that it In Court the Abbott case the learned Congressional reports. the committee n recog- Appeals for the Third Circuit un- the nizes “An that: examination policy It seems to us a of first of Section derestimation taxpayers “govern order that under this (d) (2), alone, unanswered taken leaves ment of laws and men” entitled not of be pro- penalty of whether the expect Congress whenever imposed dec- vided no should be where penalty particular intends to exact for a filed.” tax is laration estimated omission, by unequivocal this will done be Commissioner, supra, 258 F. v. [Abbott language regularly embodied in a statute page ob- then Court '2d at Constitution, conformably enacted ambig- being served uous, statute “[t]he report and not is committee history legislative is resort neither voted on of both the members proper Con- in an ascertain endeavor to nor the President Houses submitted to gressional ; intent” and concluded [ibid.] I, approval. for his Art. [U.S.Const. §§ legislative history from the XVI; 7, 8, see: clause Amend. (cid:127)Congress penalty the double intended Langstaff D.C.W.D.Ky.1925, Lucas, regulation precisely ac- since “the is 692-693, F.2d affirmed Congressional intent cord with the Cir., Court, opinion of the District report.” pressed in the conference denied, 13 F.2d certiorari [Ibid.] 111, L.Ed. Hansen learned Court In the ease the Cir., Corp. Fly, Masonite Appeals likewise (cid:127)of Ninth Circuit Helvering Rebsamen history legislative from concluded Motors, Inc., Cir., possible other conclusion “[n]o That 587-588.] Congress provide ’but intended” to penalty. Especially where, [Han- for the double the Act as so supra, Commissioner, sought sen bar, penalty in the case at page imposed by regulation administrative is cumulative with and in addition to long However, our been it has penalty clearly expressly another intention “[such view that an] imposed by the statute identical gathered from the must be omission. Such an at * * language [United Act tempted expansion and extension of Stroop, Cir., States v. 891, statute amendment tantamount to an Hopkins Commis see also thereof, “presumptions of and neither sioner, validity” nor doctrines” “reenactment 158 A.L.R. 1301.] can serve to States validate it. [United Ap “Further”, Calamaro, 1957, 351, 358-359, pointed peals Third Circuit Koshland L.Ed.2d occasion, is well- “it Helvering, 1936, out on 441, 446- application penal in the settled 447, 56 S.Ct. Man questions must be re in doubt ‘all ties Equipment General Co. v. Com hattan missioner, from whom the favor those solved 129, 134-135, ” sought.’ [Hatfried, Inc., penalty is Lincoln Commissioner, Cir., 1947, Employees’ Profit-Sharing Co. Elec. 628, 633.] Commissioner, Trust 326, 330; Langstaff Lucas, great respect F.2d for the learn- our While pages 692-693; Appeals supra, 9 F.2d see the Courts ing acumen Abrams, States v. Fifth, Third, Ninth Circuits denied, 805, certiorari 855, 73 S.Ct. treasury secretary “The regulations or amend alter his

cannot Jones, law.” [Morrill a revenue rehearing petitions for Each of the is denied. America,

UNITED STATES Appellant, Margaret BOND and Robert Rutherford Appellees. Bond, E. 16954. No. Appeals Court of United States Fifth Circuit. July

Case Details

Case Name: Fred N. Acker v. Commissioner of Internal Revenue

Court Name: Court of Appeals for the Sixth Circuit

Date Published: Sep 3, 1958

Citation: 258 F.2d 568

Docket Number: 13320

Court Abbreviation: 6th Cir.