Foreman v. Commissioner

EDWIN T. FOREMAN, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

Foreman v. Commissioner

Docket No. 8088.

United States Board of Tax Appeals

10 B.T.A. 981 ; 1928 BTA LEXIS 3981 ;

February 24, 1928 , Promulgated

*3981 1. Petitioner was not an officer or employee of the City of Baltimore, and is not entitled to the benefits of section 1211 of the Revenue Act of 1926.

2. Penalties for delinquency affirmed.

J. Wallace Bryan, Esq., and Edward H. Copes, C.P.A., for the petitioner.

Dwight H. Green, Esq., for the respondent.

LANSDON

*981 The respondent has determined and assessed deficiencies in income taxes for the years 1919, 1920, 1921, and 1922 in the respective *982 amounts of $205.15, $146.15, $1,235.25 and $2,059.91, and under the provisions of section 3167 of the revised statutes has imposed and included in his jeopardy assessment of taxes, penalties in the respective amounts of $51.29, $36.54, $308.81 and $514.98. This proceeding arises from the refusal of the respondent to abate the taxes and penalties. The only issue is whether the petitioner's receipts from the City of Baltimore are exempt from income taxes under the provisions of section 1211 of the Revenue Act of 1926.

FINDINGS OF FACT.

The petitioner is a resident of the State of Maryland, and of the City of Baltimore. From 1904 until and including 1922 he was continuously *3982 engaged in rendering certain services to the Maintenance Division of the Office of the Highways Engineer of Baltimore. During the taxable years he supplied teams for the use of the city in maintaining the public highways and streets thereof. During the period here involved, he owned from 12 to 40 horses which he furnished the city, together with the carts, wagons and other gear necessary to their use in the highway service. He maintained his own stables and paid all the subsistence costs of his teams and paid the teamsters whom he employed from money paid him by the city. When his own teams were not sufficient for the requirements of the city he engaged the services of other teams and teamsters.

The petitioner signed the city pay roll and received payments for the service of his own teams and teamsters and for the service of the additional teams and teamsters employed in busy seasons. The amounts of such payments were determined by the number of hours of service rendered by the teams owned or engaged by him. During the period here involved the rate of pay per team, which included the wages of the teamster, averaged about 50 cents per hour for an 8-hour day and covered only *3983 actual working time.

The city pay rolls showed no names, only the numbers on the badges that were issued to all employees. The payees acknowledged receipt of amounts due by signing their names opposite the numbers of their respective badges. Upon receipt of the money paid for the services of the teams owned or hired by him, on Friday or Saturday of each week, the petitioner deposited the amounts so received to his own credit in certain banks and on Saturday night, by check or in cash, paid each employed teamster in full for the services of himself and team and also paid in full the teamsters who drove his teams. The petitioner received no stated salary or wage for his services. His entire compensation, which was his only income in the taxable years, was measured by the number of hours of team service rendered by his own teams, less whatever payments he made to the *983 drivers of such teams. He paid or passed on to the drivers or owners of extra teams all the money received from the city for their services.

The pay rolls contained the following statement:

MAYOR AND CITY COUNCIL OF BALTIMORE

Fiscal Year 191 Comptroller's Voucher No. P. Date Sheet No.

Pay Roll *3984 of the Highways Engineer Department, Division.

We, the undersigned, hereby acknowledge to have severally received from the Mayor and City Council of Baltimore, the sums set opposite our respective names in full payment for services rendered during the week ending

Upon the enactment of the Federal income-tax law, the question arose as to whether he and his fellow workers were subject to the taxes therein provided in so far as their income from the city was concerned. The Engineer's Assistant Paymaster went to the office of the collector of internal revenue and returning told the paymaster and others so that the statement reached the petitioner, that they were not. Influenced by this statement and because of his own individual views on the subject, petitioner rendered no return for such income.

Beginning with the year 1923, petitioner became an independent contractor, contracting with the City of Baltimore and other parties for various kinds of work. Since the end of 1922 he has done very little, if any, work as a city employee. He rendered a tax return for 1923. The respondent, or the collector of internal revenue for the district of Maryland, thereupon sent an agent to *3985 investigate and reached the conclusion that he was chargeable for taxes for each of the years here involved, prepared returns therefor, and made jeopardy assessments of the taxes and penalties here in controversy.

OPINION.

LANSDON: The only issue here is whether the petitioner rendered personal services to the City of Baltimore as an officer or employee thereof. There is no contention that he was an officer. It therefore remains only for us to determine whether in the taxable years he was an employee of a State or municipal subdivision thereof and so entitled to the benefit of the provisions of section 1211 of the Revenue Act of 1926.

The evidence shows that the petitioner did only one thing for the City of Baltimore. He supplied his own and other teams for work on the streets and from the receipts therefor he paid all the expenses of maintaining his teams and equipment, all the wages of the teamsters whom he employed, and all the costs for the service of extra *984 teams. He was not paid for personal service on any time basis. His remuneration, if any, was the difference between the pay roll amounts received and his payments of expenses and wages. *3986 We are of the opinion that in the taxable years the petitioner was neither an officer nor an employee of the City of Baltimore, but was an independent contractor and therefore not entitled to the exemptions that he claims. ; ; ; . See also ; .

The delinquency penalties are imposed for failure to make returns for any of the taxable years. The petitioner admits such failures but argues that there was honest belief that there was no taxable income and therefore no willful failure to make returns. The statute is clear. The penalty may be imposed for failure to file any return required by the law or the regulations. It is immaterial whether such failure results from ignorance or willfulness. If the petitioner had voluntarily made returns at a subsequent date the law provides for the remission of the penalties. The Commissioner's determination *3987 as to the penalty for each year is, therefore, approved. ; ; .

Reviewed by the Board.

Judgment will be entered for the respondent.