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Shahadi v. Commissioner of Internal Revenue

decided: April 16, 1959.

ALBERT N. SHAHADI, PETITIONER,
v.
COMMISSIONER OF INTERNAL REVENUE, RESPONDENT (TWO CASES). ALBERT N. SHAHADI, AND JOSEPHINE SHAHADI, PETITIONERS, V. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.



Author: Morrill

Before MCLAUGHLIN and HASTIE, Circuit Judges, and MORRILL, District Judge.

MORRILL, District Judge.

Tax deficiencies, fraud penalties and underestimation penalties were assessed against petitioner Albert N. Shahadi for the years 1944-1949 inclusive and against him and his wife, Josephine, for the year 1950. Appeals heard by the Tax Court as a consolidated group resulted in the Commissioner being sustained and the petitioners are now before us in a consolidated review after a denial by the Tax Court of their motion for reconsideration.

The deficiencies and additions amounted to $74,599.29 as follows:

Year Deficiency Additions to Tax Sec. 29 Sec. 294(d) (Underestimation)

3(b) (Fraud)

1944 $4,472.04 $2,236.02 $None

1945 9,757.73 4,878.87 658.98

1946 7,052.82 3,526.41 423.17

1947 4,679.09 2,339.55 210.77

1948 5,464.99 2,732.50 341.21

1949 15,005.87 7,502.94 974.97

1950

(Joint) 1,461.34 730.67 86.51

1951

(Joint) None None 62.84

On the basis of a net worth computation, it was found that there was a failure to report income during 19441950 inclusive in the amount of $102,277.74.

The principal questions are: Was the use of the net worth method justified under ยง 41*fn1 of the Internal Revenue Code of 1939?*fn2 Did the evidence justify the finding of deficiencies? Were the deficiencies due to "fraud ...


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