*155 Decisions will be entered under Rule 50.
1. The respondent's determination that petitioner William O'Dwyer received $ 10,000 from John P. Crane during the year 1949, and that this amount was includible in the taxable income of petitioners for that year, held not to be erroneous where petitioners introduced no evidence showing either that the amount was not received or that, if received, it was not taxable income under section 22 (a) of the Internal Revenue Code of 1939.
2. The amounts which petitioners are entitled to deduct for the years 1950 and 1951 as ordinary and necessary expenses incurred by petitioner William O'Dwyer, which were attributable to the performance of his duties as Ambassador to Mexico, determined.
3. The respondent's determination that $ 1,500 deposited by petitioner Sloan O'Dwyer during the year 1951 in a joint bank account with the Chase National Bank was includible in the taxable income of petitioners for that year held not to be erroneous where petitioners introduced no evidence showing that the amount deposited did not constitute taxable income under section 22 (a) of the Internal Revenue Code of 1939.
*699 The respondent determined the following deficiencies in the income tax of petitioners:
| Docket No. | Years | Income tax |
| 54608 | 1949 | $ 4,676.06 |
| 1950 | 5,023.50 | |
| 59475 | 1951 | 10,820.76 |
Some issues raised by the pleadings have been conceded by the parties and effect will be given to these concessions upon settlement under Rule 50.
The remaining issues are:
1. Did the respondent err in determining that the petitioner William O'Dwyer received from John P. Crane, president of the Uniformed Firemen's Association, during the taxable year 1949, taxable income in the amount of $ 10,000?
2. Did the respondent err in determining that expenditures made by petitioner William O'Dwyer in the amounts of $ 6,135.94 in 1950 and $ 10,000 in 1951 were not deductible by petitioners as expenditures made by William O'Dwyer in connection with his duties as Ambassador to the Republic of Mexico?
3. Did the respondent err in determining that the amount of $ 1,500 deposited in the Chase National Bank, New York City, during the year 1951 was includible in the taxable income of petitioners for that*157 year?
FINDINGS OF FACT.
The petitioners, formerly husband and wife, filed joint income tax returns for the year 1949 with the collector of internal revenue for the second district of New York and for the years 1950 and 1951 with the collector of internal revenue at Baltimore, Maryland.
William O'Dwyer will hereinafter be referred to as the petitioner. He was formerly a city magistrate of the City of New York; a county judge in Kings County, New York City; a district attorney of Kings County; and Mayor of the City of New York from November 1945 until his resignation in August 1950. On August 30, 1950, he was nominated as United States Ambassador to the Republic of Mexico, and served in that position from the latter part of 1950 until his resignation on December 6, 1952.
John P. Crane during 1949 was president of the Uniformed Firemen's Association of New York City. During 1949 Terrance Dolan was treasurer of that organization.
*700 The Uniformed Firemen's Association of New York City (hereinafter called U. F. A.) was an organization which represented the firemen of that city for the purposes of their general welfare. Part of its functions was to support legislation favorable*158 to the firemen, and to oppose such legislation as was unfavorable.
During 1949 the petitioner as Mayor of New York and Crane as president of U. F. A. had the occasion to meet together to discuss matters relating to the general welfare of the firemen.
As president of U. F. A., Crane was voted funds by that organization to be used by him in his discretion for purposes of promoting U. F. A.'s programs.
In the early part of 1949 relations between the petitioner and the U. F. A. became strained as the result of a resolution adopted by the latter stating that it would not support petitioner for reelection unless he lived up to a promise to support certain legislation involving salaries for firemen. Subsequently, Crane decided to heal the differences between U. F. A. and petitioner, and determined to give him the sum of $ 10,000 to evidence the support of U. F. A.
Dolan had withdrawn $ 5,000 from the U. F. A. account with National City Bank on September 26, 1949, and had this amount on hand as of October 6, 1949. Crane told Dolan that he wanted a sum of $ 10,000. On or about October 6, 1949, Dolan withdrew an additional $ 5,000, and gave the two sums to Crane in two "standard-size" white*159 envelopes.
Crane had met the petitioner on the steps of City Hall and told him he wanted to see him; the petitioner told him to "drop up" to Gracie Mansion, the official residence of the Mayor of New York.
After Dolan took the $ 10,000 in two packages out of his safe and gave it to Crane, the latter placed it in a second safe in the office of U. F. A. He then instructed the girl who had the combination to the safe to report to work early on the morning of Monday, October 10, 1949, in order that he could get the money out of the safe.
On the morning of Monday, October 10, 1949, Crane went to the office of U. F. A. about 8:30. He had three missions to perform: First, to leave his car at Mezey Motors for servicing; second, to go to Gracie Mansion and deliver the $ 10,000 to petitioner; and third, to take a plane to St. Paul to attend a labor convention. Crane took the money from the safe, broke open the two packages, and placed the money in a brown manila envelope.
Crane then drove his car to a fire station on 67th Street between Third and Lexington Avenues, where he met Victor Wilders, a fireman stationed there. Crane had been in touch with Wilders during the previous week with *160 respect to Wilders' seeing to it that Crane's car would be taken to Mezey Motors for servicing. Crane and Wilders drove to the garage, each in his own car.
*701 Upon leaving the garage, Crane attempted to hail a taxi at Second or Third Avenue, but was unsuccessful. Wilders offered to drive him wherever he was going. Crane directed Wilders to go first to a building at 96th Street and Park Avenue, where they were joined by Jerry Finkelstein, who was then the manager of petitioner's campaign for reelection as Mayor of New York. Crane had promised Finkelstein that when he went to see petitioner with an election contribution he would allow Finkelstein "to come along."
On the way to 96th Street and Park Avenue, Wilders had to make a sudden stop at a traffic light. The jar caused the flap of the envelope on Crane's lap to open, and Wilders saw money in the envelope.
Upon arrival at the gate of Gracie Mansion, a policeman stopped the car, put his head in the door of the car, and upon seeing Finkelstein told Wilders to go ahead.
Crane got out of the car and ascended the steps of the mansion Finkelstein stayed behind to talk to Mrs. O'Dwyer, then Sloan Simpson, who was waiting in a*161 car. As Crane was going up the stairs, the petitioner was coming out of the front door, adjusting his coat, assisted by a valet. Crane handed the manila envelope containing the $ 10,000 to the petitioner, who thanked him, walked back to the door, and tossed it to someone inside.
Finkelstein then walked up the steps and spoke to the petitioner on the porch. Crane, the petitioner and Finkelstein thereupon descended from the porch; Crane and Finkelstein entered Wilders' car, and Wilders drove them to the vicinity of 42d Street and Lexington Avenue, near the airline terminal. Crane then took a plane to St. Paul.
In determining the deficiency for the year 1949, the respondent added $ 10,000 to the taxable income reported by petitioners in their return for that year.
After petitioner's nomination as Ambassador to the Republic of Mexico on August 30, 1950, the petitioners kept a record of expenditures made by them during the remainder of the year 1950 and the year 1951. Some were ordinary and necessary expenses connected with petitioner's activities as Ambassador and some were personal in nature. The record maintained listed the dates and gave some indication as to the nature of the*162 various expenditures, but in many instances did not contain sufficient information from which it could be determined whether a particular expenditure was of a business or personal nature. Petitioners were in Mexico for a period of approximately 33 days during 1950, and expenditures made during that period were denominated "Mexican Expenses." The total of all expenditures made by petitioners during the period August 30, 1950, to December 31, 1950, was $ 7,678.63, and during the year 1951 was $ 28,390.76. Petitioner received reimbursement from the Department *702 of State for certain expenses incurred by him in connection with his activities as Ambassador. The amount received as reimbursement in 1950 was $ 542.69 and in 1951 the amount was $ 10,124.50. Deductions of $ 6,135.94 and $ 12,266.26 were claimed by petitioners in their returns for 1950 and 1951, respectively, for "expenses in connection with earning income." They arrived at these amounts by deducting from the total expenditures made in each year the amount received as reimbursement and an estimated amount for personal expenses. The amount estimated for personal expenses for "one month" in 1950 was $ 1,000, and the*163 amount estimated for such expenses for 1951 was $ 6,000. The respondent disallowed the entire amount of $ 6,135.94 claimed as a deduction for 1950, and $ 10,000 of the $ 12,266.26 claimed as a deduction for 1951, "for lack of substantiation."
The total expenditures made by petitioner which were attributable to his activities as Ambassador were $ 2,500 for 1950, and $ 18,000 for 1951.
On July 8, 1951, petitioner Sloan O'Dwyer made a deposit of $ 1,500 in a joint bank account under her name and that of her mother, Eleanora Young, with the Chase National Bank of the City of New York. The respondent included the amount deposited in the taxable income of petitioners for the year 1951.
All facts stipulated by the parties during the course of the hearing are incorporated herein by this reference.
OPINION.
1. The Commissioner determined that petitioner William O'Dwyer received unreported income in the amount of $ 10,000 in 1949. The burden of proof was on the petitioner and he neither appeared as a witness nor offered any evidence contradicting the Commissioner's determination.
Although it need not have done so, the Government, goaded by charges of petitioner's counsel that the proceedings*164 were instituted with improper motives and that there was no basis in fact for the deficiencies, undertook to present evidence with respect to this item. Petitioner's counsel subjected the witnesses to a thorough and vigorous cross-examination. We had ample occasion to observe the witnesses and, notwithstanding a few inconsequential inconsistencies in their testimony, we are convinced that they were telling the truth. We are fully satisfied that Crane paid over the $ 10,000 to the petitioner, as set forth in our findings.
However, the evidence strongly supports the view that Crane intended the payment as a political or campaign contribution. If it were such and were in fact used for such purposes then it would not constitute taxable income. On the other hand, if petitioner retained *703 the money or diverted it to his own personal use, it would be taxable income to him. The distinction has been plainly set forth in Manson L. Reichert, 19 T. C. 1027, affirmed 214 F. 2d 19 (C. A. 7), certiorari denied 348 U.S. 909">348 U.S. 909. See also Rev. Rul. 80, 1954-1 C. B. 11.*165
The difficulty in the present case is that the record is devoid of evidence showing the disposition of these funds. Petitioner himself was the one person who could throw the most light on this matter. Yet he deliberately chose not to take the witness stand and subject himself to cross-examination. This is a circumstance that cannot be lightly ignored. The burden of proof was upon him, and his failure to meet it calls for the same result that was reached in Manson L. Reichert, supra, 19 T. C. at 1039.
Petitioner seeks to justify his failure to present evidence on the ground that the Court improperly denied his motion for an order to direct compliance with a subpoena duces tecum addressed to the Regional Commissioner of Internal Revenue, which in substance requested the Government to produce all of its records and files that were used as a basis for determining the deficiencies in controversy. 1
*166 The respondent's attorney, although declining to hand over the Government's files, stated that he was not thereby making a blanket refusal to produce specific items. Moreover, the Court made it clear that its ruling was merely a "denial of the broad request * * * for all the papers and all the files relating to these cases," and indicated that it would rule upon requests for specific items when they became pertinent. Some of the items requested by petitioner were made available to him by the Government. On the other hand, the Government refused to surrender the revenue agent's report or, initially, a statement made to the Internal Revenue Service by Crane. The revenue agent's report was part of the Government's confidential file and petitioner was plainly not entitled to have it, without more than a general claim that the deficiencies were arbitrary and that the proceedings were improperly motivated. As to Crane's statement, petitioner's counsel gave no reason at that time for wanting it. When Crane was *704 subsequently called as a witness and counsel, on cross-examination, renewed his request for Crane's statement, it was turned over to him for the purpose of exploring*167 possible contradictory statements.
In the circumstances, we conclude that petitioner was without justification in refusing to present evidence on this issue, which must be decided against him for failure of proof.
2. The second issue before us relates to deductions in the amounts of $ 6,135.94 and $ 12,266.26 claimed as business expenses of petitioner in connection with his ambassadorial duties in 1950 and 1951, respectively. The deductions were determined in the following manner: Petitioner's accountant used checkbook stubs and certain data sheets to arrive at the totals of petitioner's expenditures for each year; from these totals he subtracted amounts for which petitioner had been reimbursed as well as arbitrary amounts that he treated as personal expenses. The remainders were claimed as deductions on the returns. The following table shows the amounts thus computed:
| 1950 | 1951 | |
| Total expenditures | $ 7,678.63 | $ 28,390.76 |
| Reimbursed | 542.69 | 10,124.50 |
| Unreimbursed | 7,135.94 | 18,266.26 |
| "Personal" | 1,000.00 | 6,000.00 |
| Claimed deduction | 6,135.94 | 12,266.26 |
The Commissioner disallowed the entire $ 6,135.94 for 1950 and $ 10,000 of the $ 12,266.26 claimed for 1951. The*168 disallowances were based upon lack of sustantiation that the amounts represented ordinary and necessary business expenses connected with petitioner's activities as Ambassador. The Government does not challenge the fact that the expenditures in question were actually made. The sole issue is whether they were proximately related to petitioner's duties as an Ambassador or whether they were personal.
Petitioner presented no testimony on this issue and the only materials before us are two joint exhibits detailing the expenditures. In some instances the identification of a particular item enables us to form some judgment as to whether it was personal or not; in many instances it is difficult, if not impossible, to reach a conclusion as to whether or to what extent a given item was personal or related to petitioner's activities as an Ambassador.
The burden of proof was upon petitioner, and the method selected by counsel to discharge that burden was not very helpful to the Court, without a fuller explanation of the numerous items listed on these exhibits and without sworn testimony as to their character. Nevertheless, we must do the best we can with the materials at hand, and taking into*169 account the admonition in Cohan v. Commissioner, 39 F. 2d 540, 544 (C. A. 2), we have determined that the gross amounts *705 attributable to petitioner's ambassadorial duties were $ 2,500 for 1950 and $ 18,000 for 1951. After deducting therefrom the amounts received as reimbursements in each of these years, petitioners are entitled to deduct as business expenses the amounts of $ 1,957.31 for 1950 and $ 7,875.50 for 1951. To the extent that the deductions claimed in their returns for these years exceeded these amounts, the Commissioner's disallowance must be approved.
3. The remaining item in controversy relates to an unexplained deposit of $ 1,500 made on July 8, 1951, by petitioner Sloan O'Dwyer in a joint bank account in her name and that of her mother, Eleanora Young, with the Chase National Bank. The respondent introduced in evidence the deposit slip which indicates that "Sloan O'Dwyer" made the deposit. The amount of $ 1,500 is shown thereon opposite the word "Checks." Respondent also introduced in evidence a ledger sheet from the Chase National Bank showing that the amount deposited was credited to the account. The address shown on*170 the ledger sheet is "Embassy Residence, Embassy of the United States, Mexico D. F. Mexico," the address of petitioners.
In determining the deficiency for the year 1951, the respondent made several adjustments, one of which was to add $ 15,656.48 to the net income reported by petitioners for that year on the ground that it had been understated in this amount. Prior to the trial respondent became satisfied that $ 14,156.48 of this amount did not represent taxable income, and he conceded that to that extent there was no understatement. This left in issue the amount of $ 1,500, representing the unexplained bank deposit. The petitioners contend that the respondent's concession of the major portion of the adjustment destroyed any presumption that his determination was correct insofar as the $ 1,500, not conceded, was concerned. We do not agree. The presumption of correctness of the respondent's determination that the $ 1,500 was taxable income continued to exist after the concession, just as it would have continued to exist if petitioners had proved at the trial that the $ 14,156.48 was not taxable to them, and had left unproved the remaining $ 1,500. The petitioners have not sustained*171 their burden of overcoming this presumption. They introduced no evidence or testimony. They seem content to rely upon the fact that the $ 1,500 was deposited in a joint bank account. That fact, however, does not establish that the $ 1,500 which petitioner Sloan O'Dwyer received from some undisclosed source in 1951, and was able to deposit, did not represent taxable income to her which the petitioners should have reported. The facts were peculiarly within her control, and it was incumbent upon her to come forward with some explanation. In the absence of some evidence that the $ 1,500 did not represent taxable income, we must sustain the respondent's determination in this regard.
Decisions will be entered under Rule 50.
Footnotes
1. The subpoena demanded the production of the following:
(1) Complete 1949 and 1950 revenue agents' reports, including the confidential elements thereof.
(2) All of the information from which it was determined that the petitioners understated their 1949 and 1950 income.
(3) All affidavits and all statements or transcripts of statements, under oath or not, submitted or made by the petitioners, to any office or officer of the Internal Revenue Service with respect to their tax liabilities for the years 1949 and 1950.
(4) Transcript of statement of interview with William O'Dwyer, witness, held in room 1007, Intelligence Unit, 253 Broadway, New York, N. Y., on March 28, 1951.
Although the foregoing appear to give some color of compliance with our Rule 44 (c↩), requiring that the subpoena "shall number, set forth separately, and describe adequately each item to be produced," it is plain, not only from item (2) but also from statements made by counsel during the course of the hearing as well as the accompanying affidavit of counsel, that petitioner was seeking to have "the records and files of the Respondent * * * produced and opened to inspection by the petitioner."