*616 FRAUD. - On the facts, held that for the taxable years 1927, 1928, and 1929 petitioner Albert A. Levin filed false or fraudulent returns with intent to evade tax, and is liable for the penalty provided in sections 275(b) and 293(b), Revenue Acts of 1926 and 1928, respectively.
*1168 These are consolidated proceedings for the redetermination of deficiencies in income tax and penalties as follows:
| Petitioner | Docket No. | Year | Deficiency | 50 percent penalty | 25 percent penalty |
| Albert A. Levin | 60969 | 1927 | $165,512.42 | $82,756.21 | |
| Do | 60969 | 1928 | 247,515.13 | 123,757.57 | |
| Do | 60969 | 1929 | 174,482.58 | 87,241.29 | |
| Church & Brighton Corporation | 60970 | 1928 | 8,794.80 | 4,397.40 | $2,198.70 |
| Do | 60970 | 1929 | 9,236.15 | 4,618.08 | 2,309.04 |
| Do | 60970 | 1930 | 10,893.60 | 5,446.80 | 2,723.40 |
| Eleven Associates, Inc | 60971 | 1928 | 19,746.00 | 9,873.00 | 4,936.50 |
| Do | 60971 | 1929 | 41,331.40 | 20,665.70 | 10,332.85 |
| Do | 60971 | 1930 | 46,544.40 | 23,272.20 | 11,636.10 |
All of the foregoing deficiencies and penalties were assessed by respondent on August 25, 1931.
*617 At the hearing it was agreed by the parties that all income, upon the basis of which the deficiencies and penalties set out above were determined against the Church & Brighton Corporation and the Eleven Associates, Inc., belonged to the petitioner Albert A. Levin. It results that there are no deficiencies or penalties due from such corporations for the taxable years involved. In Docket Nos. 60970 and 60971 judgments will be entered accordingly. This leaves for consideration here only the proceeding in Docket No. 60969, in connection with which Albert A. Levin will hereinafter be referred to as the petitioner.
At the hearing the parties filed a stipulation of facts in Docket No. 60969 in which are set forth the deficiencies in income tax agreed to be due from the petitioner, if not barred by limitations, and the sole issue submitted for decision is whether or not any part of each of such deficiencies is due to fraud with intent to evade tax.
*1169 FINDINGS OF FACT.
The parties stipulated the following facts:
It is hereby agreed that for the taxable year 1929, the petitioner in this proceeding had taxable net income as follows:
| Dividends | $49,175.94 | |
| Legal fees | 1,009.50 | |
| Profit from sale of securities (not capital net gain) | 59,546.76 | |
| Interest | 588.32 | |
| $110,320.52 | ||
| Deductions: | ||
| Salaries | $6,658.34 | |
| Interest | 33,213.26 | |
| Rent, etc | 2,127.85 | |
| Office expense | 1,135.11 | |
| Postage and telephone | 308.62 | |
| Miscellaneous expense | 111.95 | |
| Recording fees | 59.39 | |
| Legal expense | 219.45 | |
| Contributions | 721.25 | |
| Total deductions | 44,555.22 | |
| Net income taxable at ordinary rates | $65,765.30 | |
| Capital net gain | $148,130.06 | |
| It is further agreed that for the taxable year 1929, the total tax liability of this petitioner, exclusive of any penalties that may be found and determined by the Board is | $24,235.56 | |
| Tax assessed and paid | 72.90 | |
| Deficiency in tax paid | $24,162.66 |
*618 It is further agreed that the petitioner's income tax liability for the years 1927 and 1928, exclusive of penalties, is in the respective amounts of $22,849.76 and $34,168.85, with respect to which payments have been made in the respective amounts of $65,56 and $85.20, leaving unpaid deficiencies in the respective amounts of $22,784.20 and $34,083.65. That the petitioner's income tax returns for the years 1927 and 1928 were filed with the Collector of Internal Revenue, First District of New York, March 15, 1928, and March 15, 1929, respectively, and no waivers or consents have been given with respect to the statute of limitations.
It is further agreed that evidence shall be submitted at the hearing of this proceeding with respect to the fifty per cent fraud penalties for the years 1927, 1928 and 1929, and that with the exception of the taxable year 1929, the deficiencies above-stated are barred by limitation unless it is fund and determined from the evidence that said deficiencies are due in whole or in part to an understatement of income by the petitioner with intent to evade the payment of tax lawfully due.
The following facts were established by evidence adduced at the*619 hearing:
*1170 Petitioner is a duly licensed attorney, who maintains offices for the practice of law at Brooklyn, New York. For some time preceding the World War and for some two or three years thereafter he was actively engaged in the practice of law; however, gradually his law practice has given way to financial matters, particularly with reference to banks and insurance companies.
During the taxable years petitioner's principal business was dealing over-the-counter in securities of banks and insurance companies. He also dealt extensively, through over-the-counter dealers, in the purchase and sale of stocks of various kinds.
In 1928 petitioner received from the sale of securities the sum of $332,340.35, but failed to produce or offer records to show the cost of the securities sold, except as to 66 shares of Squibb 8 percent preferred, which was sold for $23,897.28 and cost $12,480. In 1929 petitioner sold securities for the sum of $460,365.95, and admits that he thereby realized a profit of $207,676.82.
Petitioner's records and documents submitted at the hearing failed to show any of the admitted sales or purchases of securities for 1927 and failed to show, except*620 in the single instance above referred to, the cost of the securities sold in 1928, despite the fact that petitioner insisted that he kept full and complete records, and desired to "vindicate" himself by such records.
Petitioner's records show that he received dividends during 1927 in the amount of $29,580.62, during 1928 in the amount of $33,534.20, and during 1929 in the amount of $49,175.94.
None of the items of gross income above set out was reported or disclosed in the tax returns filed by petitioner for the years 1927, 1928, and 1929.
During the year 1927 petitioner paid interest in the amount of $6,581.63, during 1928 in the amount of $26,295.88, and during 1929 in the amount of $33,213.26, but claimed no deduction on that account in his income tax returns.
Petitioner reported in his tax return for 1927 total gross income of $6,888.58, a deduction of $475, and net income of $6,413.58, on which he paid a tax of $65.56. The evidence available shows total gross income of $36,104.20, deductions of $8,126.77, and net income of $27,977.43. Petitioner admits that his income tax liability for 1927, if not barred by limitations, is in the amount of $22,849.76, and that there*621 is a deficiency of $22,784.20, thus indicating that in 1927 he derived a substantial amount of income neither reported in his return nor disclosed in the records submitted. The evidence affirmatively discloses the omission from gross income reported in petitioner's return for 1927 of dividends in the amount of $29,580.62, of which he had actual knowledge.
*1171 Petitioner's income tax return for the year 1928 disclosed total income of $7,769.41, a deduction of $483, and net income of $7,286.41, on which he paid a tax of $85.20. The evidence submitted shows total income of $372,343.96, deductions in the amount of $39,266.88, and net income of $333,077.08. Petitioner concedes that his tax liability for 1928 is in the amount of $34,168.85, and that there is a deficiency of $34,083.65, if not barred by limitations. The evidence affirmatively establishes that petitioner knowingly omitted from his 1928 return gross receipts from the sale of securities in the sum of $332,340.35 and dividends in the sum of $33,534.20.
Petitioner reported in his income tax return for 1929 total gross income of $17,567.19, total deductions of $8,207.96, and net income of $9,359.23, on which*622 he paid a tax of $72.90. Petitioner now admits by stipulation that his correct total gross income for 1929 was $258,450.58, that the allowable deductions amounted to $44,555.22, leaving a net taxable income of $213,895.36. Petitioner further concedes that his correct tax liability for 1929 is $24,235.56, and that there is a deficiency of $24,162,66. Petitioner omitted from the gross income reported in his 1929 return, among other items, gain derived from the sale of securities in the amount of $207,676.82, and dividends in the amount of $49,175.94.
All of petitioner's income tax returns for the taxable years were prepared and executed by him in his own handwriting. Prior to the preparation and filing of the returns, girls in petitioner's office prepared statements on an adding machine showing the total amount received during the particular year from sales of securities and the amount of dividends received, and petitioner had these figures before him when he personally prepared his returns.
The Church & Brighton Corporation and Eleven Associates, Inc., were used by petitioner as dummies in the transaction of his business; and the names of 11 individuals, in addition to the*623 two corporations, were also used by petitioner as "designees" or dummies. The dividend books kept by petitioner showed all dividends received, whether in the name of a dummy or of petitioner, and all checks received were deposited in petitioner's bank account. The profit derived or loss sustained by petitioner for any particular year could always have been determined by him from the records which he kept.
Petitioner made gross bank deposits, as determined by respondent and not denied by petitioner, during the year 1927 in the amount of $690,540; during the year 1928 in the amount of $1,017,783; and during the year 1929 in the amount of $753,990.
OPINION.
HILL: The parties have stipulated the amounts of deficiencies in tax due for taxable years involved, as set out hereinabove, and *1172 have submitted for decision the single issue whether or not any part of each of such deficiencies is due to fraud with intent to evade tax.
In his tax return for 1927, petitioner reported net income of $6,413.58, and paid a tax thereon of $65.56. Petitioner now admits that he should have paid a tax for that year in the amount of $22,849.76. He omitted from gross income dividends*624 of $29,580.62, of which it is shown that he personally had knowledge.
In his 1928 return petitioner reported net income of $7,286.41, and paid a tax of $85.20. He concedes that he should have paid a tax for that year of $34,168.85. He knowingly omitted from gross income reported for 1928 proceeds from sales of securities in the amount of $332,340.35, and dividends in the sum of $33,534.20.
In his return for 1929 petitioner reported net income of $9,359.23, on which he paid a tax of $72.90. He has stipulated that the net income for that year was in fact $213,895.36, on which the correct amount of tax due was $24,235.56. He deliberately omitted from gross income reported in his return for 1929 profits realized from the sale of securities in the amount of $207,676.82 and dividends in the amount of $49,175.94.
Petitioner has not offered, nor attempted to offer, any reasonable explanation for his actions; indeed, it would, under the facts and circumstances shown, be difficult to conceive of any explanation which could lead an impartial mind to a conclusion other than that petitioner was guilty of deliberate fraud. He personally prepared his income tax returns for all years*625 involved; they are admittedly in his own handwriting. He omitted from income reported, among other items, dividends and profits derived from sales of securities amounting in the aggregate to hundreds of thousands of dollars. Without further proof, it would be unreasonable to assume that petitioner could innocently have overlooked such large amounts of income; but we are not left to conjecture on this point. The evidence discloses not only that petitioner had sufficient records from which he could have determined his taxable income for each year, which fact he now admits, but the figures were prepared for him by his assistants and he had them before him when he made up his returns. It is unnecessary to refer in detail to numerous other facts in the record, all of which tend strongly to establish a fraudulent intent.
We hold that the stipulated deficiency for each of the taxable years is due to fraud with intent to evade tax, and pursuant to the provisions of section 275(b) of the Revenue Act of 1926, and section 293(b) of the Revenue Act of 1928, 50 per centum of the total amount of each deficiency (in addition to such deficiency) may be assessed and collected as a fraud penalty. *626 Cf. ; ; .
*1173 Having reached the conclusion that the returns filed by petitioner were false or fraudulent with intent to evade tax, it follows that assessment and collection of the deficiencies and penalties are not barred by limitation. Sec. 278(a), Revenue Act of 1926; sec. 276(a), Revenue Act of 1928.
In Docket No. 60969, judgment will be entered under Rule 50. In Docket Nos. 60970 and 60971 judgments of no deficiencies and no penalties will be entered.