Petition — Kourakos v. Tully

Office - Supreme Court, U.S.

83-847 FILED

NOV 29 1968

ALEXANDE

3n The aa" Co

Supreme Court of the United States

October Term, 1983

PETER KOURAKOS,

Petitioner,

-against-

JAMES H. TULLY, JR., PRESIDENT, and others, MEMBERS

CONSTITUTING THE STATE TAX COMMISSION OF THE

STATE OF NEW YORK,

Respondents.

PETITION FOR WRIT OF CERTIORARI TO

THE NEW YORK STATE COURT OF APPEALS

MURRAY APPLEMAN

Attorney for Petitioner

225 Broadway

New York, N.Y.10007

(212) 349-6966

Dok Burley Pricbus, tb tdeed en Island, New York 10302

Tel.: (212) 447-5358 — (516) 222-2470 — (914) 682-0848

i

QUESTIONS PRESENTED

1. Does a condition precedent or special rule of

preclusion exist requiring that prior to being allowed

or permit‘cd assertion of the privilege against self in-

crimination (¥ifth Amendment to the Constitution of

. the United States) in an investigative or ad-

ministrative setting, where no challenge as to its basis

is raised, that in order to effect the protections of the

Fifth Amendment to the Constitution, demonstration

before that body is required to show that disclosure

might tend to incriminate or in the alternative should

effective enforcement of tax laws take precedence

over constitutional protections?

2. Does Section 697(e) of New York Tax Law,

which precludes the use of tax returns in most non-tax

criminal proceedings negate or frustrate a taxpayer’s

claim of privilege under the Fifth Amendment to the

Constitution of the United States?

3. May the New York State Tax Department, ex-

clusively on the reporting of an amount of income

received, deem income from an unknown source to

originate from a trade, business or occupation subject

to Unincorporated Buxiness Tax solely based on the

presumption of correctness which attaches to a notice

of deficiency (Tax Law Section 689(e))?

ii

TABLE OF CONTENTS

NS OE ee re i

I no Cis DO Via Swit vw 60 034 2 1

ND re 2

Reasons for Granting the Writ.............. 4

POINT I—

A Condition Precedent or Special Rule of

Preclusion Does not Exist Requiring that

Prior to Being Allowed or Permitted Asser-

tion of the Privilege Against Self-incrimina-

tion (Fifth Amendment to the Constitution

of the United States) Before an Investigative

or Administrative Body, Where no Challenge

as-to the Privilege’s Basis is Raised, that

in Order to Effect the Protections of the

Fifth Amendment to the Constitution, De-

monstration Before that Body is Required

that Disclosure Might Tend to Incriminate

and/or Effective Enforcement of Tax Laws

POINT II—

New York Tax Law Section 697(e), Which

Precludes the Use of Tax Returns in Most

Non-tax Criminal Proceedings Does not

Negate or Frustrate a Taxpayer’s Claim of

Privilege Under the Fifth Amendment to the

Constitution of the United States.......... . 16

iii

POINT III—

The New York State Tax Department, Exclu-

sively on the Reporting of an Amount of

Income Received, Cannot Deem Income from

an Unknown Source to Originate from a

Trade, Business or Occupation Subject to

Unincorporated Business Income Tax Solely

Based on the Presumption of Correctness

Which Attaches to a Notice of Deficiency

Pursuant to Tax Law Section 689 (e)........

NNER OES Pee AE LE 75S hee tee

APPENDICES

A—Order of the New York State Court of Ap-

peals Denying Motion ....................

B—Order of the New York State Court of Ap-

peals Dismissing Appeal ..................

C—Decision of the Appellate Division Third

EE 0 oes i a gis Care nec o aS pee eeenee

19

25

la

5a

iv

TABLE OF CASES

Page

Biliskie v. American Livestock Insurance Co.,

W.D., Okla., 1977 73 F.R.D.124............. 16,17

Bere. U8, Tab UG. Gi «sive cies ee Hes 15

Credit Life Insurance Co. v. Uniworld Ins. Co.,

S.D. Ohio, 1982 94 F.R.D.118.............. 16

Cudahy Packing Co. v. Holland 1942, 315 U.S.

_—_ LE i aaa ne ee oe, ae AN Ate. 2. 7 7,8

Edwards v. Commissioner of Internal Revenue,

A I: ook re woe bo hy wren wae 10, 12

Eglin Federal Credit Union v. Cantor Fitz-

gerald Securities Corp., N.D. Ga. 1981, 91

| on | MAO SE Ae SR DESDE Meme sc egy 16, 17

Elkins v. U.S. 1960, 364 U.S. 206............ 21

Federal Savings & Loan Ins. Corp. v. Krueger,

Sem MB To A 8S 3S ee en ey 17

Fulenwider v. Wheeler 5th Cir., 1958, 262 F.2d

BSR Pane ype an ats gkko 17

Garner v. U.S., 424 U.S. 648................ 7

Garrity v. State of New Jersey, 385 U.S. 493... 15

Gerardo v. C.I.R. 3rd Cir., 1977, 552 F.2d 549. . 20, 22

Vv

Grosso v. U.S., 1968, 390 U.S. 62............ 22

Heathman v. U.S. District Court, 9th Cir., 1974,

oe sa, ais bb eos 17

Hoffman v. U.S., 1951, 341 U.S. 479......... 5, 6

Deananen Gee Ue. BOD... cede eee 5, 8

In re Grand Jury Empanelled 3/19/80 680 F.2d

327 (3rd Cir., 1982) cert. granted............ 15

In re Grand Jury Subpoena for N.Y. State In-

come Tax Records, N.D. N.Y. 1979, 468 F. Sup.

ING ee Ate oer are La sk os = See ke bw 18

In re Grand Jury Subpoena for N.Y. State In-

come Tax Records, 2d Cir. 1979, 607 F.2d 566. 18, 19

Janis v. U.S., 1976, 428 U.S. 433............ 20

Kastigar v. U.S., 1972, 406 U.S.441......... 5, 8,13

Maldonado v. St. Croix Discount, Inc., D. St.

Croix 1978, 77 F.R.D.501............. = hienee 17

Malloy v. Hogan, 1964, 378 U.S.1........... b

Maness v. Meyers, 1975, 419 U.S. 449........ 5, 8,9

Marchetti v. U.S., 1968, 390 U.S. 39.......... 15

New York State Department of Taxation v.

N.Y. State Dept. of Law, 44 N.Y.2d 575....... 16

vi

Ohio Bell Tel. Co. v. Public Utilities Com., 301

MME ds oo 8's lod. on tees ae abn SRL CR 24

Oleshko v. N.Y.S. Liquor Authority, 285 N.Y.S.

2d 696, Aff’d 288 N.Y.S. 2d 474, 21 N.Y. 2d 778 8

Payne v. Howard, D.D.C. 1977, 75 F.R.D. 465. 17

People ex rel Taylor v. Forbes, 143 N.Y.219... 7,8

Pillsbury Co. et al. Petitioners v. John Conboy,

AE Ma MIE So wre nid'0 $n dh hme 14

Pizzarello v. U.S., 2d Cir., 1969, 408 F.2d 579. . 20

Premium Service Corp. v. Sperry & Hutchinson

Co., 9th Cir., 1975, 511 F.2d 225............. 16

Reeves v. Pennsylvania R.R. Co., D. Del., 1948,

as MINN o's" 0 0's cin's ede eee 16

Richland Wholesale Liquors Inc. v. Joseph E.

Seagram & Sons Inc., D.S.C. 1966, 40 F.R.D.

WP Ahn cxicutekss <>< 06 CoRRO ee Loebaedes 16, 17

Ronayne v. Lombard, Sup. Ct., Monroe County

CSOT eet es OOO 6 5s cic nieces ce'ben oan es 10

Shaffer v. U.S., 4th Cir. 1976, 528 F.2d 920.... 15

Shaver v. Yacht Outward Bound, N.D., Ill,

a Fe MOE in koe aR ce ae od 17

vii

Slochower v. Board of Ed. of N.Y., 350 U.S. at

LSE bk 6 ie Why kb Sie <cue 0:00 ORAL AE 24

Smith v. Bader, S.D.N.Y., 1979, 83 F.R.D. 437. 17

Tele-Radio Systems, Ltd., v. DeForest Elec-

tronics, Inc., D.N.J. 1981 92 F.R.D. 371...... 17

U.S.A. v. Leroy Barnes, 2d Cir. 1979, 604 F.2d

NE oO... Oras v5.0 doo 20's SEES ee 4

U.S. v. Fox, 2d Cir. 1983, Docket No. 83-6055. . 15

U.S. v. Karsky, 610 F.2d 548 cert. den. 444 U.S.

ea KIRY: ES AR ac er ate Se” a SS 10, 12

U.S. v. Neff, 615 F.2d 1235, cert. den. 447 U.S.

Mth arias. ys 5 was tye sg o.e Kou wi 10, 12

U.S. v. U.S. Coin and Currency (7th Cir. 1968),

ERR Sa, eee taser hres 14

U.S. v. U.S. Currency (CA-6, 1980), 626 F.2d 11 6

U.S. v. Verkuilen, 690 F.2d 648.............. 10, 12

Webb v. C.LR., 5th Cir. 1968, 394 F.2d 366.... 20

Weir v. Commissioner, 6th Cir. 1960, 283 F.2d

Rak NRE se 1 a4 a o'pih cabs + CEM Rake 22

RE So w:6'o 40 bas biVAG (omer DROS

Weisenberger v. W.E. Hutton & Co., S.D.N.Y.

2} kD)” a ee kes See

viii

Zicarelli v. New Jersey State Commission of In-

vestigation, 1972, 406 U.S. 472............. 6

OTHER AUTHORITIES

Amendments to the U.S. Constitution .

DEN Ek 5 03 Wd iiarne 0» /hke Rie dines ale eee i

POOROIOA S o..5 eves Sats OR Fs AG eo 2

New York State Constitution............... 24

Ps IND 5 064 5 « Racale was oo > bret 24

New York State Tax Law Sections 689, 697 and

MR Tos nod G Eee tc. o v «dake eee i, 16, 19

1

IN THE

SUPREME COURT OF THE UNITED STATES

OCTOBER TERM, 1983

PETER KOURAKOS,

Petitioner,

vs.

JAMES H. TULLY, JR., PRESIDENT, and others,

MEMBERS CONSTITUTING THE STATE TAX

COMMISSION OF THE STATE OF NEW YORK,

Respondents.

PETITION FOR WRIT OF CERTIORARI TO

THE NEW YORK STATE COURT OF APPEALS

JURISDICTION

Opinions of the courts below, New York Court of

Appeals affirming the judgment of the New York

Supreme Court, Appellate Division—Third Depart-

ment are set forth in Appendix, Infra.

The order of the New York Court of Appeals, the

court below, is dated June 16, 1983 and its refusal of a

motion for clarification or in the alternative for leave

to appeal is dated September 29, 1983, served by mail

dated October 13, 1983, received October 19, 1983.

The jurisdiction of this court is invoked, made and

conferred under 28 U.S.C. 2101 (b\\c\d) and 2104, Rule

2

21 of the Supreme Court and the Fifth and Fourteenth

Amendments to the Constitution of the United States

are involved herein.

STATEMENT OF THE CASE *

A proceeding pursuant to Civil Practice Law and

Rules Article 78 was transferred to the New York

Supreme Court, Appellate Division—Third Depart-

ment from Special Term, New York Supreme Court,

Albany County to review a determination of the New

York State Tax Commission, which sustained a notice

of deficiency for Unincorporated Business Tax pur-

suant to New York Tax Law Article 23.

Petitioner reported “Other Income” in the

amounts of $30,000 for 1972 and $37,000 for 1973.

Department of Taxation and Finance of New York

when it received no response as to the source of this in-

come, deemed it to be business income subject to unin-

corporated business tax solely due to the refusal of

taxpayer to respond. An administrative hearing was

requested and held in which petitioner’s attorney in-

voked the privilege against self-incrimination and the

Commission sustained the notice of deficiency.

At the administrative hearing as provided by New

York Law, the sole challenge to taxpayer’s assertion

of his Fifth Amendment’s rights was:

“The position of the Audit Division is that Peter

Kourakos’ income from miscellaneous and other

sources as shown on his income tax returns is subject

to unincorporated business tax. That there is no self

incrimination right that accrues in this kind of tax

proceeding because it’s not a criminal proceeding and

that the only possible penalty is for failure to file the

*There has been no change in the parties involved in the original

proceedings.

‘

ie

Ss -. as”,lU

3

returns and that’s a monetary penalty, that there is no

possibility of any jail term or confinement and

therefore most of the Supreme Court cases cited by

the petitioner are inapplicable.”

The Hearing Officer stated that:

“I can understand the position you're taking, you

know, and this becomes a public record no matter

what we discuss here, when I write my report up,

there’s nothing I could put aside and say, you know,

the protection of the petitioner’s right of privacy,

right against self incrimination, I can’t guarantee you

anything.

*** I’m very limited, you know, as far as my ap-

proach. I just have to make a determination, is the in-

come subject to U.B.T.”

4

REASONS FOR GRANTING THE WRIT

POINT I

A CONDITION PRECEDENT OR SPECIAL RULE OF

PRECLUSION DOES NOT EXIST REQUIRING THAT

PRIOR TO BEING ALLOWED OR PERMITTED

ASSERTION OF THE PRIVILEGE AGAINST SELF-

INCRIMINATION (FIFTH AMENDMENT TO THE

CONSTITUTION OF THE UNITED STATES) BEFORE

AN INVESTIGATIVE OR ADMINISTRATIVE BODY,

WHERE NO CHALLENGE AS TO THE PRIVILEGE’S

BASIS IS RAISED, THAT IN ORDER TO EFFECT THE

PROTECTIONS OF THE FIFTH AMENDMENT TO

THE CONSTITUTION, IMPLICIT DEMONSTRATION

BEFORE THAT BODY IS REQUIRED THAT

DISCLOSURE MIGHT TEND TO INCRIMINATE

AND/OR IN THE ALTERNATIVE EFFECTIVE EN-

FORCEMENT OF TAX LAWS DOES NOT TAKE

PRECEDENCE OVER CONSTITUTIONAL PROTEC-

TIONS.

It is apparent that no justification exists for

creating such an anomalous rule and like all other

governmental agencies, the New York State Tax

Department must obey the Constitution.

Subsequent to U.S.A. v. Leroy Barnes, 2d Cir.,

1979, 604 F.2d 121, 147-149, wherein it was stated

that since appellant did not claim the privilege on his

return and reported large amounts of income:

1. Fifth Amendment rights were not violated at

trial;

2. Prosecutor’s summation in which he discussed

large sums reported on the return was appropriate.

It is suspect if any question on an income tax return

5

can be deemed neutral although directed at the public

at large.

The United State: Supreme Court noting that the

Fifth Amendment privilege ‘‘is that no person shall be

compelled in any criminal case to be a witness against

himself...’ found that “the availability of the

privilege does not turn upon the type of proceeding in

which its protection is invoked, but upon the nature of

the statement or admission and the exposure which it

invites. The privilege may for example be claimed in a

civil or administrative proceeding, if the statement is

or may be inculpatory.’”’ In re Gault, 387 U.S. 149. The

Fifth Amendment privilege against self-incrimination

is not self executing.

The privilege against self-incrimination protects

the person claiming it from being compelled to give

‘answers that would in themselves support a convic-

tion’”’ or that “‘would furnish a link in the chain of

evidence needed to prosecute the claimant’ for a

crime. Hoffman v. U.S., 341 U.S. 479, 486 (1951). The

privilege extends to questions propounded in a civil

action, whether the claimant is a party or a witness.

Maness v. Meyers, 419 U.S. 449, 464 (1975); Kastigar

v. U.S., 406 U.S. 441, 444-45 (1972). The individual

asserting the privilege is not ‘‘required to prove the

hazard (of incrimination) in the sense in which a claim

is usually required to be established in court.’”’ Hoff-

man, 341 U.S. at 486; rather the privilege may validly

be asserted whenever “the witness has reasonable

cause to apprehend danger from a direct answer.” Id.

That a witness actually fears incrimination from

answering questions is not enough. The fear must be

reasonable in light of the witness’ specific cir-

cumstances, the content of the questions, and the set-

ON

6

ting in which the questions are asked. Id. accord

Zicarelli v. New Jersey State Commission of In-

vestigation, 406 U.S. 472, 480 (1972); Malloy uv.

Hogan, 378 U.S. 1, 11-14 (1964). The trial court is to

evaluate the incriminatory potential of questions ask-

ed. Hoffman, 341 U.S. at 487. Underlines scored.

If the government desires information protected

from compelled disclosure solely to help it to deter-

mine tax liability, it should be willing to grant

Kourakos immunity from prosecution in order to ob-

tain the information. If the government cannot at this

time so confine the use to which it desires to put

privileged information, it must obtain the information

by some other means other than compelled self

disclosure. Based on the State’s ability to neutralize

Kourakos’ potential for self-incrimination via a grant

of immunity, it is apparent that a claim of failing or

refusing to produce a witness in the party’s control is

negated and inapplicable. Further the privilege was

claimed as a shield, not as a sword. Evasion of taxes

was not the basis for refusing to relate the source of

the amount of income reported on his return.

Clearly individuals may not be forced to surrender

one constitutional right in order to assert another, nor

may they be placed in a position where the defense of

their property enhances their prosecution for a crime.

Simmons v. U.S., 390 U.S. 377, 394 (1968), U.S. v. U.S.

Currency, 626 F.2d 11 (CA-6, 1980). It is equally true

that civil penalties may not be placed upon the exer-

cise or assertion of an individual's privilege against

7

derived from an illegal source which could furnish a

link in the chain of evidence which could be used to

prosecute the petitioner herein. Thus it is uncon-

troverted that petitioner’s alleged fear of prosecution

was more than fanciful. Where it is not so perfectly

evident and manifest that the answer called for cannot

incriminate, as to preclude all reasonable doubt of fair

argument, the privilege must be recognized and pro-

tected. People ex rel. Taylor v. Forbes, 143 N.Y. 219,

231.

A Taxpayer is free to refuse to fill in particular

items on the tax return and when subsequently ques-

tioned as to those admissions, i.e., amount of income

received, he may assert his Fifth Amendment

privilege against self incrimination. Cudahy Packing

Co. v. Holland, 315 U.S. 357 (1942); Garner v. U.S.,

424 U.S. 648.

Witness himself is judge in each case whether he

is entitled to claim privilege against self incrimina-

tion, and he may not be compelled to give testimony

by which he himself may, in any manner whatever,

pave the way to possible prosecution. People ex rel.

Taylor v. Forbes, 143 N.Y. 219, 231.

In opposition, the State Tax Commission did not

aver that such refusal for non-compliance to reveal the

source of income was not based on belief that peti-

tioner stands in danger of criminal prosecution by giv-

ing a responsive answer but instead:

eee Oe ae Soe > Oe oe

’ income from miscellaneous and other

sources as shown on his income tax returns is subject

to business tax. That there is no self

right that accrues in this kind of tax

8

proceeding because its not a criminal proceeding and

that the only possible penalty is for the failure to file

the returns and that’s a monetary penalty. That there

is no possibility of any jail term or confinement and

therefore most of the Supreme Court cases cited by

the petitioner are inapplicable.” ps. 13-14 of

transcript.

Totally disregarding Jn re Gault, supra; Maness v.

Meyers, supra; Kastigar v. U.S., supra; Cudahy Pack-

ing Co. v. Holland, supra; People ex rel. Taylor v.

Forbes, supra and Oleshko v. N.Y.S. Liquor Authori-

ty, 285 N.Y.S. 2d 696 Aff’d 288 N.Y.S. 2d 474, 21 N.Y.

2d 778, the latter specifically holding that an ad-

ministrative body cannot compel one to testify in

violation of his Constitutional right.

If challenged, not accomplished here, only a court

could demand a factual predicate for the invoking of

the privilege raised after which a determination could

be made whether the yoke of silence should be pierced

or protected. The courts not administrative agencies

can only decide as to whether one can properly invoke

one’s Fifth Amendment privilege. No one in an ad-

ministrative agency can be granted such an important

vehicle as to deny one’s Fifth Amendment rights in an

arcade and cryptic manner. Petitioner was frustrated

from being able to assert or define his basis of the

Fifth Amendment Claim and since the basis of his

claim was never challenged, it never became necessary

to appear before a judge. In the administrative hear-

ing the Hearing Officer on page 8 of transcript stated:

9

the protection of the petitioner’s right of privacy,

right against self-incrimination, I can’t guarantee you

anything.”

“*** T am very limited you know, as far, as my ap-

proach. I just have to make a determination is the in-

come subject to Unincorporated Business Tax.”

Although direct attempts were made for an

evidentiary hearing or directly asserting the basis for

this claim of petitioner’s privilege of self incrimina-

tion, solely due to the procedures mandated in a tax

proceeding (Civil Practice Law & Rules), the taxpayer

was forced to permeate the hearing with suggestions,

indicia of potential incrimination and a colorable

showing that the privilege applied to him despite the

fact that no issue was raised with regard to the validi-

ty of his claim.

It is uncontroverted that the privilege against self

incrimination may be claimed by counsel for peti-

tioner. As the Court stated in Maness v. Meyers, 419

U.S. 449 (1975) a defendant should not be forced to let

the cat out ‘‘with no assurance whatever of putting it

back.”” Moreover, the State all during this hearing

never questioned or challenged the basis for peti-

tioner’s Fifth Amendment Claim.

10

sustained by the Court, unless it is ‘perfectly evident

and manifest’’ that there is no legitimate claim to the

privilege (See Ronayne v. Lombard, Sup. Ct., Monroe

County, 92 Misc. 2d 693, 697 (1977) and in the extant

situation there being nothing in the record to rebut or

contradict the validity of petitioner’s claim of his

privilege, or that the State challenged the basis for

such claim at the hearing the Court citing U.S. v.

Verkuilen, 690 F.2d 648, 654 and U.S. v. Karsky,

610 F.2d 548, 550 n5, cert. den. 444 U.S. 1092,

stated that ‘‘A taxpayer’s reliance on the Fifth

Amendment to block disclosure is ineffectual unless

he made a colorable showing that he is involved in

some activity for which he could be criminally pro-

secuted.’’ It was also stated that if neither the ques-

tion nor the setting in which it is asked suggests a real

and appreciable danger of self incrimination, the tax-

payer is obliged to come forward with some indicia of

potential incrimination. U.S. v. Neff, 615 F.2d 1235,

1240 cert. den. 447 U.S. 925. Thus it was held “that

unsupported assertion is an insufficient predicate for

the invocation” citing U.S. v. Verkuillen, supra and

Edwards v. Commissioner of Internal Revenue, 680

F.2d 1268, 1270.

It would appear that based on the aforemention-

ed, whenever one appears before any civil proceeding

that as a prerequisite to being able to invoke the Fifth

Amendment privilege, prior thereto, a foundation

therefor is required, contrary to U.S. Supreme Court

and New York Court of Appeals decisions. Further

that it was irrelevant that petitioner’s hearings are

permeated with suggestions and a colorable showing

that the income originated from an illegal source and

direct attempts to come forward with indicia of poten-

tial incrimination was prohibited due to the type of

11

hearings. In addition prior to being able to claim a

Fifth Amendment privilege it becomes essential to ap-

pear before a judge who apparently must rule ir-

regardless of whether any issue existed pertaining to

the validity of the claim, none raised herein, for its

foundation, herein deemed required.

To draw such a line of demarcation not only is ir-

rational in view of the nature and substance of the

Constitutional right against self incrimination, but

operates to deny petitioner his constitutional rights.

First, as was suggested at the hearing on p. 6 that

the source of income would not be divulged based on

petitioner’s right of silence under the Fifth Amend-

ment to the Constitution and it was indicated and sug-

gested at the hearing that the income originated from

an illegal source.’ There can be no doubt that at the

least a suggestion and colorable claims were made

that petitioner could be criminally prosecuted. Cir-

cumstances justifying recognition of the claimed

privilege and reasonable cause to apprehend danger

from a direct answer were testified to at the hearing.’

Based on these assertions no challenge per se was

made by the State Tax Commission to the validity of

the claim made by petitioner.

1. It cannot be denied that this act gives rise to a permissible in-

ference that Korakos obtained these funds from an illegal source.

This inference is made possible by the general obligation to

report the source of income and the exception when the report

would result in an incriminating disclosure.

2. Moreover it is sufficient if a court can by the use of reasonable

inference or judicial imagination conceive a sound basis for a

reasonable fear of prosecution present herein.

12

The cases cited by the Appellate Division in sup

put ef this Gectetan thes o temmibatten stant Ge tans

before a Fifth Aimendment claim can be asserted dif-

fers in the crucial respect in that in U.S. v. Verkuilen,

690 F.2d 654 n6 ‘*** appellant conceded during an in

was not based upon any activities for which he could

be criminally prosecuted and in Karsky, 610 F.2d 548,

550 n5 it was stated:

“Karsky never suggested that he was involved in any

activity in which he wished not to incriminate himself.

He claimed the Fifth Amendment privilege on his

return solely because of what he had been told by

speakers at tax protest sermons.”’

U.S. v. Neff, supra at page 1240 stated:

“Moreover the peculiarities of the case did not

strengthen Neff's claim. If anything, the tax protest

nature of defense witness Holmes’ testimony and the

materials that Neff appended to his returns suggest

that Neff's refusal to complete the forms was

motivated by a desire to protest taxes, rather than a

fear of self incrimination.”

Further, in Edwards, supra at 1270 it was reveal-

ed “Appellants steadfastly assert that they have

engaged in no criminal activity relating to their auto

repair business, nor is any criminal investigation

pending.”

In the extant situation a valid claim was made by

petitioner of his Fifth Amendment privilege against

self incrimination. He attempted to directly indicate

at the hearing that the hazard was real, substantial,

13

appreciable and reasonable cause existed for ap

prehension of such danger. Kourakos is not a tax pro-

testor and he was barred via the Civil Practice Law &

Rules and the hearing officer's comments from further

testimony. Moreover, the hearing is permeated with

suggestions and a colorable showing that the income

originated from an illegal source plus the fact that the

Respondent at the hearing never questioned peti-

tioner’s basis for claiming his constitutional privilege

of silence pursuant to the Fifth Amendment to the

Constitution. This arbitrary truncation of the Fifth

Amendment privilege claim constitutes a deprivation

of Constitutional rights. The zeal to protect public

revenue must not be able to blind the peril to our free

society that lies in a court’s disregard of the provec-

tions afforded by the Fifth Amendment to the Con-

stitution.

“The power to compel testimony, is not absolute.

There are a number of exceptions from the testimonial

duty, the most important of which is the Fifth Amend-

ment privilege against compulsory self incrimination.

The privilege reflects a complex of our fundamental

values and aspirations, and marks an important ad-

vance in the development of our liberty. It can be

asserted in any proceeding, civil or criminal, ad-

ministrative or judicial, investigatory or ad-

judicatory, and it protects against any disclosures

that the witness reasonably believes could be used ina

criminal prosecution or could lead to other evidence

that might be so used. This court has been zealous to

the values that underlie the

Kastigar v. U.S., 406 U.S. 441, 444-445 (1972) (Foot-

notes omitted). Underlines Scores.

The aforementioned would answer Respondent's

14

claim at the hearing, i.e., no right to claim privilege in

a civil tax proceeding.

Moreover, as was recently stated by Justice Mar-

shall in his concurring opinion in The Pillsbury Co. et

al. Petitioners v. John Conboy, 51 U.S.L.W. 4061,

4066 (1983)

Whenever a witness is forced to give incriminating

testimony, there is significant risk that fruits of that

testimony will later be used against him. Further in-

criminating evidence that is derived from

testimony cannot always be traced back to its source.

A witness who suspects that his compelled testimony

was used to develop a lead will be hard pr essed indeed

to ferret out the evidence necessary to prove it, for

though the Court puts the burden of proof on the

government, the government will have no difficulty in

meeting its burden by mere assertion if the witness

produces no contrary evidence. The good faith of the

prosecuting authorities is thus the sole safeguard of

the witness’ rights.

... Even their good faith is not a safeguard. For the

paths of information through the investigativie

bureaucracy may well be long and winding, and even a

prosecutor acting in the best faith cannot be certain

that somewhere in the depths of his investigative ap-

paratus, often including hundreds of employees, there

was not some prohibited use of the compelled

testimony.”

The situation facing Kourakos is not too

dissimilar from that presented to the Seventh Circuit

in the U.S. v. U.S. Coin and Currency in the amount of

$8,674.00, 393 F.2d 499 (7th Cir., 1968) where the

Court stated:

15

“The prospect of a felony conviction involved in Mar-

chetti* of course has a greater coercive effect than the

possible loss of money involved herein. On the other

hand, the prospect of losing in excess of $8,000 has a

substantial coercive effect. In this respect the land-

mark case of Boyd v. U.S., 116 U.S. 616, 6 S. Ct. 524,

29 L.Ed. 746 is controlling. Boyd was a civil forfeiture

action in which the claimant was given a choice be-

tween producing a possibly incriminatory document

and forfeiting the property. The Court held that such

a choice was impermissible under the Fourth and

Fifth Amendments. See Garrity v. State of New

Jersey, 385 U.S. 493, 496-497, 87 S.Ct. 616, 17 L.Ed.

2d 562 which reaffirms and follows Boyd.

* Marchetti v. U.S., 390 U.S. 398, 88 S.Ct. 697 (1968).

As was related in Shaffer v. U.S., (4th Cir., 1976)

528 F.2d 920 “If the government wishes to depose the

taxpayer, it should obtain immunity for him as to any

criminal proceeding other than one relating to per-

jury.”’ As was stated in U.S. v. Fox, 2d Cir., 1983 , n6,

Docket No. 83-6055 10/19/83:

“We do not believe that effective enforcement of the

tax laws should take precedence over constitutional

It would appear that the issue presented herein is

analagous to U.S. v. Doe, 51 U.S.L.W. 3789 (U.S. May

2, 1983) (summarized at 51 U.S.L.W. 3424) granting

cert. to In re Grand Jury Empanelled March 19, 1980,

680 F.2d 327 (3rd Cir., 1982).

i6

POINT II

NEW YORK TAX LAW SECTION 697(e), WHICH

PRECLUDES THE USE OF TAX RETURNS IN MOST

NON-TAX CRIMINAL PROCEEDINGS DOES NOT

NEGATE OR FRUSTRATE A TAXPAYER'S CLAIM

OF PRIVILEGE UNDER THE FIFTH AMENDMENT

TO THE CONSTITUTION OF THE UNITED STATES.

The Appellate Division claims that the hazard of

self incrimination through the use of tax returns has

been considerably reduced with the enactment of Sec-

tion 697 (subd. (e)) of the Tax Law, which precludes

their use in most non-tax criminal proceedings, citing

Matter of New York State Department of Taxation &

Finance v. New York State Department of Law,

Statewide Organized Claim Task Force, 44 N.Y.2d

575, 581.

The issue of whether income tax returns enjoy

any but limited privilege has been addressed by a few

courta, none of which have recognized the existence of

a general privilege against disclosure.

Premium Service Corp. v. Sperry & Hutchinson

Co., 511 F.2d 225 (9th Cir. 1975); Eglin Federal Credit

Union v. Cantor Fitzgerald Securities Corp., 91 F.R.D.

414(N.D. Ga. 1981); Biliske v. American Livestock In-

surance Co., 73 F.R.D. 124 (W. D. Okla. 1977);

Richland Wholesale Liquors, Inc. v. Joseph E.

Seagram & Sons, Inc., 40 F.R.D. 480 (D.S.C. 1966);

Reeves v. Pennsylvania R. Co., 80 F. Supp. 107 (D.

Del. 1948). Rather, a ‘‘qualified’”’ reining! emerges

from the law that disfavors the disclosure of income

tax returns as a matter of general federal policy.

Premitim Service Corp. v. Sperry & Hutchinson Co.,

supra, Credit Life Insurance Co. v. Uniworld Ins. Co.,

17

94 F.R.D. 113, 120 (S.D. Ohio 1982); Tele-Radio

Systems, Ltd. v. DeForest Electronics, Inc., 92 F.R.D.

371 (D.N.J. 1981); Smith v. Bader, 83 F.R.D. 437, 438

(S.D.N.Y. 1979); Maldonado v. St. Croix Discount,

Inc., 77 F.R.D. 501 (D. St. Croix 1978); Payne v.

Howard, 75 F.R.D. 465 (D.D.C. 1977); Shaver v. Yacht

Outward Bound, 71 F.R.D. 561, 563 (N.D. IIl., 1976);

Federal Savings and Loan Ins. Corp. v. Krueger, 55

F.R.D. 512 (N.D. Ill. 1972); Weisenberger v. W. E.

Hutton & Co., 35 F.R.D. 556 (S.D.N.Y. 1964).

This qualified privilege may be overcome,

however, in ‘‘appropriate circumstances.’ Heathman

v. United States District Court, 503 F.2d 1032, 1035

(9th Cir. 1974); Fulenwider v. Wheeler, 262 F.2d 97, 99

(5th Cir. 1958); Eglin Federal Credit Union v. Cantor

Fitzgerald Securities Corp., supra, at 416; Richland

Wholesale Liquors, Inc. v. Joseph E. Seagram & Sons,

supra, at 482-483.

Several courts have adopted a two-prong test to

guide them in their determination of the appropriate

circumstances in which the qualified privilege of tax

returns is overcome. That is to say, in order to compel

the disclosure of tax returns, the court must be shown

that the information sought from the returns bears

some relevance to the subject matter of the litigation;

and that the information sought from the returns is

not readily obtainable from other sources. Eglin Fed.

Credit Union v. Cantor Fitzgerald Securities Corp.,

supra; Tele Radio Systems v. DeForest, supra; Smith

v. Bader, supra; Maldonado v. St. Croix Discount,

Inc., supra; Biliske v. American Livestock Ins. Co.,

supra; Federal Savings and Loan Corp. v. Krueger,

supra at 515; Richland Wholesale Liquors v. Jos.

Seagram & Sons, supra.

:

—

18

As is readily revealed, New York has not been suc-

cessful in contesting Federal subpoenas of state tax

returns. At the United States District Court level, the

courts have simply viewed the issue as a conflict be-

tween federal and state power, resolvable by resort to

the Supremacy clause of the United States Constitu-

tion, i.e., Article VI cl. 2 with the Federal power of

course prevailing. See In re Grand Jury Subpoena for

New York State Income Tax Records, 468 F. Supp.

575, 577 (N.D.N.Y., 1979).

“Thus, inasmuch as the federal grand jury is a pro-

duct of the Fifth Amendment and its powers, a result

of its long history and specific Congressional atten-

tion, the conflict between state confidentiality provi-

sions and Congressional or constitutional in-

vestigatory powers has resulted in enforcement of

federal grand jury subpoenas despite state statutes,

which would otherwise prohibit compliance... Com-

pliance with this grand jury subpoena will not,

however, subvert New York interest in safeguarding

individual privacy because federal grand jury pro-

ceedings are conducted secretly. Furthermore, even

assuming that honest income tax reporting will be en-

couraged by protecting New York State income tax

returns from grand jury scrutiny, this objective is

more than counter-balanced by the necessity of

thorough grand jury investigations into violations of

federal law—particularly since the State’s interest in

honest tax reporting will still be protected by the ever

present threat of criminal sanctions which may be im-

posed upon individuals who file false or materially

misleading returns.”

New York has thus far been foreclosed from ap-

pellate review of this issue because a denial of a mo-

tion to quash is not a final appealable order. See Jn re

19

Grand Jury Subpoena for New York State Income Tax

Records, 607 F.2d 566, 568 (2d Cir. 1979).

Thus the Court’s reliance on the New York State

Tax Secrecy Law is misplaced as a basis for

abrogating one’s Fifth Amendment privilege.

POINT III

THE NEW YORK STATE TAX DEPARTMENT, EX-

CLUSIVELY ON THE REPORTING OF AN AMOUNT

OF INCOME RECEIVED, CANNOT DEEM INCOME

FROM AN UNKNOWN SOURCE TO ORIGINATE

FROM A TRADE, BUSINESS OR OCCUPATION SUB-

JECT TO UNINCORPORATED BUSINESS INCOME

TAX SOLELY ON THE PRESUMPTION OF CORRECT-

NESS WHICH ATTACHES TO A NOTICE OF DEFI-

CIENCY PURSUANT TO TAX LAW SECTION 68e).

Tax Law Section 703 defines an unincorporated

business as (a) *** any trade, business or occupation

conducted, engaged in or being liquidated by | an )1-

dividual or unincorporated entity ***.

No evidence appears which links Kourakos to any

trade, business or occupation. No rational foundation

for this assessment has been established nor is there

any evidence which could conceivably support an in-

ference that the taxpayer was involved in any activity

let alone one which could be considered a trade,

business or occupation. The United States Court of

Appeals for the Second and Third Circuits have held

‘We are obliged to conclude therefore that absent

proof in the record that Gerardo was involved in

gambling activities from April 4, 1966 through

August 5, 1966, no court could properly draw an in-

ference of such involvement.”

20

Pizzarello v. U.S., 408 F.2d 579 (2d Cir., 1969) cert.

den. 396 U.S. 986 (1970) and Gerardo v. C.I.R., (3d

Cir., 1977) 552 F.2d 549. The latter quoting Pizzarello

stated at 553

“Pizzarrello produced no records to contradict the

Commissioner’s assessment. Nevertheiess, the Se-

cond Circuit held that the assessment was excessive,

arbitrary and without some foundation declaring:

there is no proof in the record before us that Pizzarello

operated as a gambler for five years... No court could

properly make such inferences without some founda-

tion of fact.’’ Id. at 583

The absence of adequate tax records (as in the

case here) does not give the Commissioner carte blan-

che for imposing Draconian absolutes, citing Webb v.

C.LR., 394 F.2d 366, 373 (5th Cir., 1968).

The Appellate Division determined that attribu-

tion of Miscellaneous Other Income to Unincor-

porated Business Tax was reasonable, given the other

information on petitioner’s returns plus presumption

of correctness which attaches to Notice of Deficiency.

It should be noted that the only items on these

returns are petitioner’s name and address and prior to

the decision in U.S. v. Barnes, supra, the amount of in-

come.

As was stated in Weimerskirch v. Commissioner,

(9th Cir., 1979), 596 F.2d 358, 360:

In Janis, 428 U.S. 433, 441-442, 96 S.Ct. 3021, 49

L.Ed. 2d 1046 (1976) the Supreme Court decided that

the exclusionary rule did not prevent the Internal

Revenue Service (IRS) from using illegally-seized

evidence as the basis from which to extrapolate a tax-

21

payer’s unreported income from wagering activities.

Prior to addressing the exclusionary question, the

Court stated that if the illegally-seized evidence could

not be used, then the result would be:

“a naked assessment without any foundation

whatsoever.... The determination of tax due

then may be one ‘without rational foundation and

excessive,’ and not properly subject to the usual

rule with respect to the burden of proof in tax

cases.”’ (citations and footnotes omitted)

428 U.S. at 441, 96 S.Ct. at 3026. The Court noted,

that there was apparently some conflict between the

Federal Courts of Appeals as to the burden of proof in

tax cases and then went on to make these observa-

tions:

“‘However that may be, the debate does not ex-

tend to the situation where the assessment is

shown to be naked and without any foundation.

“Certainly proof that an assessment is utterly without

foundation is proof that it is arbitrary and erroneous.”

428 U.S. at 442, 96 S.Ct. at 3026. While the language

may not have been dispositive of the issue decided in

Janis, supra, it certainly is a strong indication that the

Commissioner must offer some foundational support

for the deficiency determination before the presump-

tion of correctness attaches to it. After all as the Court

observed in Elkins v. United States, 364 U.S. 206, 80

8.Ct. 1437, 4 L.Ed. 2d 1669 (1960)

‘*.,. a8 a practical matter it is never easy to prove

a negative... .” 364 U.S. at 218, 80 S.Ct. at 1444.

See also Flores v. United States, 551 F.2d 1169,

1175 (9th Cir. 1977)

22

An initial presumption of correctness applies to

assessments. At the outset, therefore, taxpayers

usually have the burden of producing evidence to

refute the validity of the assessment. It devolves at

once upon the taxpayer to challenge the assessment.

Where it is a negative assertion that a successful tax-

payer would have to prove though, the law imposes

much less of a burden upon a taxpayer. Weir v. Com-

missioner, 283 F.2d 675, 679 (6th Cir. 1960).

Reasonable denials of the assessment’s validity have

sufficed in such cases to shift the burden back to the

government. The government then bears the task of

substantiating its assessment in cases of this type.

See also Gerardo v. C.I.R., 552 F.2d 549, 552 (3rd Cir.

1977).

Petitioner denies that he is subject to Unincor-

porated Business tax. The proof required, i.e.,

negative assertion, justifies use of the lighter burden

and allocation of the ultimate risk of non persuasion

on the government. See generally C. McCormick,

Handbook of the Law of Evidence, sec. 378; J.

Wigmore, Evidence sec. 2485 (discussing apportion-

ment consideration).

Indeed the burden of proof could not otherwise be

allocated without risking violation of petitioner’s

privilege against self incrimination. In Grosso v. U.S.,

390 U.S. 62, 65-69, 88 S.Ct. 709, 19 L.Ed. 2d 706

(1968), the Supreme Court ruled that the Fifth

Amendment privilege against self incrimination

precluded federal criminal prosecutions for failure to

file the required wagering tax forms. As the basis of

the Court’s decision was the Hobson’s choice the

Federal Wagering tax laws pose to gamblers. Prior to

the Grosso decision, a gambler had no choice but to

23

file returns and pay the tax and possibly incriminate

himself under state law, or not comply and possibly in-

cur a federal penalty. To preserve the efficacy of the

self incrimination privilege, the court prohibited the

imposition of certain criminal sanctions for failure to

comply with the wagering tax laws.

The choice between self incrimination and undue

forfeiture looms no less ominously in the context of a

civil action. One reporting income derived from an il-

legal source who desires to challenge the correctness

of an assessment runs the high risk of incriminating

himself. The government may impose an assessment

as in the extant situation solely from bare surmise,

conjecture, speculation and rumor when in fact none is

due. To show error in the assessment, a taxpayer may

have no choice but to divulge the inculpating details

of an illegal involvement and thus expose himself to

prosecution. If a prudent taxpayer decides not to

challenge the assessment lest he invite another

criminal prosecution, this often averts self incrimina-

tion only at the cost of unwarranted tax liability. To

allow one reporting income from an illegal source to

disprove an assessment only by a preponderance of

evidence could penalize the exercise of the privilege

against self incrimination in a manner that the

Supreme Court outlawed in Grosso.

The aforementioned burden of proof accomodates

both the privilege against self incrimination and the

presumption of accuracy normally accorded to

government tax assessments. It neither forces the

protesting taxpayer to expose himself to other

criminal liabilities nor robs the government of the ad-

vantage gained by the initial presumption. It merely

spares the taxpayer from the threat of self incrimina-

tion by requiring the government to justify its claim.

24

It is well established that compulsion of potential-

ly self incriminating testimony is permissible only

where the witness is provided immunity protection

which is coextensive with his constitutional privilege

against self incrimination. Immunity statute

represents an accomodation between the

goverument’s need, in certain circumstances to com-

pel testimony from knowledgeable citizens and a

citizen’s constitutionally based privilege against self

incrimination under the Fifth Amendment of the

Federal Constitution and Article I, Section 6 of the

New York State Constitution.

The Commissioner offered no evidence linking

Kourakos to any activity that could be deemed sub-

ject to Unincorporated Business Tax. No evidence

was proferred from which it could even be inferred

that he engaged in any activity subject to Unincor-

porated Business Tax. Thus the assessment falls of its

own weight as wholly without support. There has not

been the “protection of the individual against ar-

bitrary action’’ which Mr. Justice Cardozo

characterized as the very essence of due process. See

Slochower v. Board of Ed. of N.Y., 350 U.S. at 559.

citing Ohio Bell Tel. Co. v. Public Utilities Com., 301

U.S., 292, 302.

25

CONCLUSION

It is respectfully submitted that this petition for

certiorari be granted.

Respectfully submitted,

MURRAY APPLEMAN

Attorney for Petitioner

A Member of the Bar of the

United States Supreme Court

la

APPENDIX “A”

ORDER DATED SEPTEMBER 29, 1983

At a session of the Court, held at Court of Ap-

peals Hall in the City of Albany on the twenty-

ninth day of September, A.D. 1983.

PRESENT:

HON. LAWRENCE H. COOKE

Chief Judge, presiding.

STATE OF NEW YORK

COURT OF APPEALS

In the Matter of the Application of

PETER KOURAKOS,

Appellant,

For a Review etc.,

vs.

JAMES H. TULLY, JR., President, & ors.,

Members constituting the State Tax Commission

of the State of New York,

Respondents.

A motion having heretofore been made herein

upon the part of the appellant for clarification of this

Court’s order of dismissal dated June 16, 1983 or, in

2a

the alternative, for leave to appeal to the Court of Ap-

peals in the above cause, papers having been submit-

ted thereou and due deliberation having been

thereupon had, it is

ORDERED, that the said motion be and the same

hereby is denied in each respect.

s/Joseph W. Bellacosa

JOSEPH W. BELLACOSA

Clerk of the Court

.

=

a...

a

3a

APPENDIX “‘B”

ORDER DATED JUNE 16, 1983

At a session of the Court, held at Court of Ap-

peals Hall in the City of Albany on the Sixteenth

day of June, A.D. 1983.

PRESENT:

HON. LAWRENCE H. COOKE,

Chief Judge, presiding

STATE OF NEW YORK

COURT OF APPEALS

In the Matter of PETER KOURAKOS,

Appellant,

vs.

JAMES H. TULLY, JR., President, & ors.,

Members constituting the State Tax Commission

of the State of New York,

Respondents.

The appellant having filed notice of appeal in the

above title and due consideration having been

thereupon had, it is

4a

ORDERED, that the appeal be and the same

hereby is dismissed without costs, by the Court sua

sponte, upon the ground that no substantial constitu-

tional question is directly involved.

s/Joseph W. Bellacosa

JOSEPH W. BELLACOSA

Clerk of the Court

5a

APPENDIX “C”

DECISION DATED MARCH 24, 1983

SUPREME COURT—APPELLATE DIVISION

THIRD JUDICIAL DEPARTMENT

In the Matter of PETER KOURAKOS,

Petitioner,

Vv.

JAMES H. TULLY, JR.., et al.,

Constituting the State Tax Commission,

Respondents.

Proceeding pursuant to CPLR article 78 (transfer-

red to this court by order of the Supreme Court at

Special Term, entered in Albany County) to review a

determination of the State Tax Commission which

sustained a notice of deficiency for unincorporated

business taxes pursuant to article 23 of the Tax Law.

Petitioner and his wife filed New York combined

income tax returns covering the years 1972 and 1973

upon which petitioner reported receiving ‘‘other in-

come’ of $30,000 and $37,000, respectively. When

petitioner failed to respond to a request for informa-

tion concerning the source of this income, the Depart-

ment of Taxation and Finance issued a notice of defi-

ciency informing petitioner it deemed the “‘other in-

come” to be business income and subject to an unin-

corporated business tax of $2,585 plus interest and

6a

penalties. Upon petitioner's request for a recetermina-

tion, a hearing was held at which petitioner neither ap-

peared nor offered any evidence. However, on peti-

tioner’s behalf his attorney invoked petitioner’s

privilege against self incrimination; it is urged that

petitioner has a constitutional right to remain silent

as to the origin of the income. The commission sus-

tained the notice of deficiency and this proceeding en-

sued.

Although petitioner mainiains that the rationale

of Garner v. U.S. (424 U.S. 648), in reaffirming U.S. v.

Sullivan (274 U.S. 259), justifies his refusal to divulge

the derivation of his ‘‘other income,” we find it un-

necessary to even confront this proposition. A tax-

payer’s reliance on the Fifth Amendment to block

disclosure is ineffectual unless he has made “‘a col-

orable showing that he is involved in some activity for

which he could be criminally prosecuted’ (U.S. v.

Verkuilen, 690 F 2d 648, 654; see U.S. v. Karsky, 610

F 2d 548, 550, n. 5, cert. den. 444 U.S. 1092). If neither

the question nor the setting in which it is asked sug-

gests a real and appreciable danger of self incrimina-

tion, the taxpayer is obliged to come forward with

some indicia of potential incrimination (U.S. v. Neff,

615 F 2d 1235, 1240, cert. den., 447 U.S. 925). Nothing

in this record, apart from his counsel’s assertion to

that effect, indicates that revelation of the source of

petitioner’s other income will bring to light his in-

volvement in any criminal activity. That unsupported

assertion is an insufficient predicate for the invoca-

tion of the privilege (U.S. v. Verkuilen, supra; see Ed-

wards v. Commissioner of Internal Revenue, 680 F 2d

1268, 1270).

7a

We note also that the hazard of self incrimination

through the use of tax returns has been considerably

reduced with the enactment of section 697 (subd. [e])

of the Tax Law, which precludes their use in most non-

tax criminal proceedings (see Matter of New Yor.

State Dept. of Taxation & Fin. v. New York State

Dept. of Law, Statewide O~-ganized Crime Task Force,

44 NY 2d 575, 581), making it unavoidable that the.

taxpayer show something other than a vague and

unexplained fear of incrimination.

The argument that the assessment of an unincor-

porated business tax was without foundation is

meritless. Given the other information on petitioner’s

return, attribution of miscellaneous other income to

an unincorporated business was obviously reasonable.

Furthermore, the failure of petitioner to produce any

evidence demonstrating that the assessment was er-

roneous leaves standing the presumption of correct-

ness which attached to the notice of deficiency (Tax

Law, §689, subd. [e]; Matter of Tavolacci v. State Tax

Comm., 77 A D 2d 759).

Determination confirmed, and petition dismissed,

with costs.

KANE, J. P.. MAIN, MIKOLL, YESAWICH,

JR., and LEVINE, JJ., concur.