Findings Of Fact The Petitioner, Florida Welding Services Corp., is a Florida corporation doing business in the State of Florida. The Respondent, Florida Department of Revenue, is the agency charged with enforcing the taxing statutes of this State, including the Florida Income Tax Code, Chapter 220, Florida Statutes. Pursuant to Chapter 220, Florida Statutes, the Petitioner is required to file a Florida Corporate Income Tax Return annually with the Respondent. The Return is due on the first day of the fourth month after the close of the tax year. The Petitioner's tax year for 1977 was April 1, 1976, through March 31, 1977. The Florida Corporation Income Tax Return for the 1977 tax year was due on July 1, 1977, and the Petitioner failed to file its Return by this date. The Petitioner's tax year for 1978 was April 1, 1977, through March 31, 1978. The Florida Corporation Income Tax Return for the 1978 tax year was due on July 1, 1978, and the Petitioner failed to file its Return by this date. In January 1977, all of the Petitioner's corporate records were seized, pursuant to a subpoena issued in the United States Federal District Court in and for the Southern District of Florida. (See Exhibit 1) The Petitioner's records were not returned to it for over a year. On September 15, 1978, the Petitioner filed a Tentative Income Tax Return and Application for Extension of Time to File Income Tax Return, wherein Petitioner requested an extension of time until November 15, 1978, in which to file its Florida income tax return for the 1977 and 1978 tax years. (See Exhibit 2) On October 5, 1978, the Department of Revenue denied the Petitioner's request for an extension of time on grounds that the request had been filed after the respective due dates of July 1, 1977, and July 1, 1978. (See Exhibit 2) On November 16, 1978, the Department of Revenue received Petitioner's Florida Corporation Income Tax Returns for the tax years 1977 and 1978. The Petitioner also remitted the tax it believed owing for each taxable year, $3,734.96 for 1977 and $6,803.56 for 1978. On February 2, 1979, the Department of Revenue, Corporate Income Tax Bureau, issued a Delinquent Notice of Tax Due to the Petitioner. The Notice indicated that the Petitioner had a balance due of $1,547.28 for the tax year ending March 31, 1977, which amount represented $933.74 penalty and $613.54 interest. (See Exhibit 3) On February 5, 1979, the Department of Revenue, Corporate Income Tax Bureau, issued a Delinquent Notice of Tax Due to the Petitioner. The Notice indicated that the Petitioner had a balance due of $1,986.43 for the tax year ending March 31, 1978, which amount represented $1,700.89 penalty and $285.54 interest. (See Exhibit 4) On March 15, 1979, Mr. Karl J. Leib, Jr., contacted the Department of Revenue on behalf of his client, the' Petitioner, requesting the Department to delay in issuing any tax warrants against the Petitioner until Mr. Leib had an opportunity to communicate with someone from the Department. (See Exhibit 5) A follow-up letter was sent by Mr. Leib to the Department on June 8, 1979. (See Exhibit 6) On April, 23, 1980, the Department of Revenue issued to the Petitioner a Final Notice and Demand for payment in the amount of $1,547.28. (See Exhibit 7) Although no Final Notice and Demand for payment in the amount of $1,986.43 was issued by the Department, the amount is still outstanding and the Department maintains that Petitioner owes this sum as well. It is the Petitioner's position that its inability to timely file its Florida Corporate Income Tax Returns was entirely due to factors beyond its control, i.e., the confiscation of its corporate records. The Petitioner maintains that it should not be assessed penalty and interest for late filing, as its failure to timely file was "due to reasonable cause and not willful neglect," as is provided for in Section 214.40(1), Florida Statutes. The Department's position is twofold. First, the Petitioner's failure to make a timely request for extension of time in which to file its return does constitute willful neglect. Second, that while Section 214.40(1), Florida Statutes, may provide the Department with some discretion in assessing penalties, there is no comparable provision for modifying interest payments and such amount is absolutely mandated by the statute for any late filed returns. In addition to the foregoing, along with the attached Exhibits, the undersigned hereby incorporate by reference and jointly offer as evidence those Exhibits attached to Petitioner's Request for Formal Proceedings. WHEREFORE, both parties respectfully request the Hearing Officer to consider the foregoing facts and exhibits, along with a Memoranda of Law to be filed by each party within 10 days of the filing of this Joint Stipulation, and to issue his Recommended Order, without the necessity of holding a formal hearing.
Findings Of Fact Based on the stipulations of the parties, on the exhibits received in evidence, and on the testimony of the witnesses at the hearing, I make the following findings of fact: Petitioner is a state government licensing and regulatory agency, charged with the responsibility and duty to prosecute Administrative Complaints pursuant to the laws of the state of Florida, in particular Section 20.30, Florida Statutes, Chapters 120, 455 and 475, Florida Statutes, and rules promulgated pursuant thereto. Respondent is now and was at all times material hereto a licensed real estate broker in the state of Florida having been issued license number 0120021 in accordance with Chapter 475, Florida Statutes. The last license issued was as a broker at 1170 John Anderson Drive, Ormond Beach, Florida 32074. On November 26, 1986, Respondent signed a plea of guilty to the felony offense of willfully aiding or assisting in the preparation and presentation to the Internal Revenue Service of a false or fraudulent corporation federal income tax return in violation of 26 U.S.C. Sec. 7206(2), as charged in Count 7 of an indictment filed against Respondent and others. The indictment count to which Respondent pled guilty read as follows: That on or about January 13, 1983, in Volusia County, Florida in the Middle District of Florida, NORMA F. NEWFIELD, defendant herein, a resident of Ormond Beach, Volusia County, Florida, did willfully aid and assist in, procure, counsel, and advise the preparation and presentation to the Internal Revenue Service of a U.S. Corporation Income Tax Return, Form 1120, for the fiscal year ending October 31, 1982 for the corporation Aron P. Newfield, D.O., P.A., 255 South Yonge Street, Ormond Beach, Florida, which was false and fraudulent as to a material matter, in that the said corporate tax return represented the gross receipts for the corporation Aron P. Newfield, D.O., P.A., to be $361,366.00 for the fiscal year ending October 31, 1982, whereas, the defendant then and there well knew and believed the gross receipts for the corporation Aron P. Newfield, D.O., P.A., for the fiscal year ending October 31, 1982 were in excess of that heretofore stated; all in violation of Title 26, United States Code, Section 7206(2). On December 15, 1986, in the United States District Court for the Middle District of Florida, Respondent was found guilty of the felony offense described above. The Judgment And Probation/Commitment Order issued that date included the following disposition: The court asked whether defendant had anything to say why judgment should not be pronounced. Because no sufficient cause to the contrary was shown, or appeared to the court, the court adjudged the defendant guilty as charged and convicted and ordered that the defendant pay a fine to the United States of America in the amount of TWENTY- THOUSAND DOLLARS ($20,000.00). It Is Further Ordered that imposition of a sentence of imprisonment is suspended and the defendant is placed on probation with the probation office of the Court for a period of THREE (3) YEARS under the standing conditions of probation and the Special Conditions that the defendant perform 250 hours of community service and that the defendant serve FIVE (5) DAYS in a jail-type institution reporting to the institution designated by the Bureau of Prisons no later than Noon January 15, 1987. Said institution to be the Seminole County Jail. Following the completion of her 250 hours of community service, Respondent's Probation Officer recommended the Respondent be discharged from probation. By order dated April 21, 1987, the court discharged Respondent from probation. By letter dated May 18, 1987, and received May 20, 1987, counsel wrote to the Florida Real Estate Commission on Respondent's behalf and advised the Commission of Respondent's plea of guilty and of Respondent's conviction. The letter had attached to it copies of the judgment and sentence and the order terminating probation. The letter of May 18, 1987, was the first notification to the Commission by or on behalf of the Respondent regarding her plea of guilty and her felony conviction. The corporation named "Aron P. Newfield, D.O., P.A.," is an incorporated medical practice of Aron P. Newfield, who is Respondent's husband. The corporation named "Aron P. Newfield, D.O., P.A.," is not involved in the business of real estate brokerage.
Recommendation Based on all of the foregoing, it is recommended that the Florida Real Estate Commission issue a final order in this case to the following effect: Dismissing the allegations in Count One of the Administrative Complaint; Finding the Respondent guilty of violation of Section 475.25(1)(f), Florida Statues, as alleged in Count Two of the Administrative Complaint; Finding the Respondent guilty of a violation of Section 475.25(1)(p), Florida Statutes, as alleged in Count Three of the Administrative Complaint; Imposing an administrative fine in the amount of One Thousand Dollars ($1,000.00) for the violation of Section 475.25(1)(f), Florida Statutes; Imposing an administrative fine in the amount of Five Hundred Dollars ($500.00) for the violation of Section 475.25(1)(p), Florida Statutes; and Suspending Respondent's license for a period of three (3) years for the violation of both Section 475.25(1)(f) and Section 475.25(1)(p) DONE AND ENTERED this 29th day of September, 1987, at Tallahassee, Florida. MICHAEL M. PARRISH, Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 29th day of September, 1987. APPENDIX TO RECOMMENDED ORDER, CASE NO. 87-2571 The following are my rulings on the findings of act proposed by the parties in their respective proposed recommended orders. Findings Proposed by Petitioner The findings of fact in this recommended order contain the substance of all of the findings proposed by Petitioner. Findings Proposed by Respondent Ruling on the findings of fact proposed by Respondent has been complicated by the fact that at pages three through nine of the Respondent's proposed recommended order the proposed findings are intertwined with proposed conclusions of law and legal arguments. I have attempted to glean the proposed facts from the mixture of facts, conclusions, and arguments, and the findings of fact in this recommended order contain the substance of all of the findings of fact proposed by Respondent, except as specifically noted below. Proposed findings regarding Respondents application for restoration of civil rights are rejected as irrelevant. Proposed findings regarding a disgruntled former employee are rejected as irrelevant. Proposed findings regarding Respondents character traits for responsibility, honesty, and integrity are rejected in part because they are irrelevant and also in large part because they are not fully supported by persuasive competent substantial evidence. Most of the testimony about Respondent's character had to do with how generous and kind she was in her personal life rather than how she conducted her business activities. Proposed findings regarding notice to the Commission by Margaret Penoyer are rejected as irrelevant. COPIES FURNISHED: James H. Gillis, Esquire Division of Real Estate 400 West Robinson Street Post Office Box 1900 Orlando, Florida 32802 James M. Russ, Esquire Tinker Building 18 West Pine Street Orlando, Florida 32801-2697 Harold Huff, Executive Director Division of Real Estate 400 West Robinson Street Post Office Box 1900 Orlando, Florida 32802 Tom Gallagher, Secretary Department of Professional Regulation 130 North Monroe Street Tallahassee, Florida 32399-0750 William O'Neil, General Counsel Department of Professional Regulation 130 North Monroe Street Tallahassee, Florida 32399-0750
The Issue Whether the Department of Revenue should assess Heftler Construction Company ("Taxpayer") for Florida corporate income taxes on a claim that: Taxpayer realized a gain under the Florida Income Tax Code when an asset acquired in 1971 (on liquidation of a joint venture) was sold in 1975 in satisfaction of an outstanding debt; and Taxpayer's losses created by the subtraction of foreign source income cannot operate to create or increase the Florida portion of the net operating loss carryover.
Findings Of Fact Formation and Liquidation of Joint Venture; Subsequent Sale of Asset Taxpayer is a New Jersey corporation, authorized to transact business in Florida. Heftler Realty Company ("Realty") is a Florida corporation, and is a subsidiary of Taxpayer. Taxpayer, for all years material to these proceedings, filed consolidated income tax returns with the Internal Revenue Service of the United States ("IRS") . Pursuant to the applicable provisions of the Internal Revenue Code ("IRC"), Taxpayer included in the income and expenses of its consolidated income tax returns the income and expenses of its operations in Puerto Rico. Taxpayer, for all years material to these proceedings, timely filed with the Department consolidated income tax returns. In 1969, Realty formed a joint venture with a company known as GACL, Inc., for the purpose of developing real property Realty, in accordance with its Joint Venture Agreement with GACL, Inc., prior to 1971, contributed to the joint venture the following assets with the following cost basis to Taxpayer on the date of contribution: ASSET DATE CONTRIBUTED TO JOINT VENTURE COST BASIS TO TAXPAYER ON DATE CONTRIBUTED Cash 3-5-69 $250,000 Land 3-5-69 2,000,000 In 1971, prior to the effective date of the Florida Income Tax Code ("Florida Code"), Chapter 220, Florida Statutes, the joint venture between Realty and GACL, Inc., was liquidated effective as of January 1, 1971. Pursuant to the plan of liquidation, Realty received, in liquidation of the joint venture, the assets as described in the attached Appendix. These assets had a then cost basis to the joint venture as described in the Appendix. The assets acquired by Realty in liquidation of the joint venture were subject to the debts described in the Appendix. Pursuant to the plan of liquidation of the joint venture, Realty agreed to acquire the assets and assume the attendant debts (itemized in the Appendix) as of January 1, 1971. At the time of the liquidation of the joint venture, Realty had a cost basis for its interest in the joint venture of a negative $285,749. (Realty had a negative basis in the assets because it sustained joint venture losses in excess of its contributions to the joint venture.) The net gain to Realty as' reported upon the federal income tax return of Taxpayer, after adjustment for depreciation, as a result of the liquidation was $1,238,37l. In 1971, Realty reduced its tax basis in the assets acquired in the liquidation. This adjustment (reduction) in the tax basis of the assets acquired by Taxpayer occurred prior to the effective date of the Florida Code. An asset acquired by Realty in 1971, pursuant to the plan of liquidation of the joint venture, was conveyed by Realty in 1975 to a creditor of Realty in satisfaction of debt. After adjusting the tax basis of the asset, a comparison of its book basis (to the joint venture) with the tax basis to Taxpayer after liquidation, reflects the following: Adjusted Basis as of Jan. 1, Tax Basis to Tax- Book Basis to payer or After Joint Venture Liquidation Difference 1971 $4,466,764 $3,055,722 $1,411,042 Accumulated Depreciation to Date of Sale (587,212) (414,541) (172,671) Adjusted Basis $3,879,552 $2,641,181 $1,238,371 For purposes of its Federal Income Tax, Taxpayer reported the transaction as a sale and computed the gain thereon as follows: $3,951,708 Expense of Sale $2,713,337 3. Total Gain $1,238,371 Gross Sale Price Cost or Other Basis and (The difference between the gross sales price and the adjusted basis referred to in paragraph 13 of $72,156 is an increase to the price due to escrow funds deposited with a mortgagee and assigned to the purchaser of the asset by Realty without Realty receiving reimbursement.) In computing the Florida income tax, pursuant to the Florida Code, for the fiscal year ending July 31, 1976, Taxpayer took as a subtraction an adjustment on line 8, Schedule II, page 2 of its income tax return. The subtraction was in the amount of the capital gain received upon the sale of the asset received in liquidation in the amount of $1,238,371. Taxpayer subtracted the gain, contending that it was realized prior to the effective date of the Florida Code. When acquired, the asset received in liquidation had a cost basis to the joint venture Of approximately $4,500,000. When the asset was distributed to Taxpayer, after the reduction by Taxpayer to the tax basis referred to in paragraph 11, the basis to Taxpayer of the asset was approximately $3,000,000. The tax basis in the amount of $3,000,000 was evidenced by the debts assumed by Taxpayer upon the liquidation; such assumption of debt is referred to in paragraph 7. Department contends that the gain on the sale of the asset acquired in liquidation was both realized and recognized in 1975 when the property was sold in satisfaction of a debt; it has issued a proposed assessment on that basis. Taxpayer contends that the gain was realized by Taxpayer for federal income tax purposes prior to the effective date of the Florida Code and that only the recognition of the gain occurred after the effective date of the Florida Code. II. 1975 Loss Created by Subtraction of Foreign Source Income; Attempt to Carryover Loss to Subsequent Years Taxpayer, in addition to the adjustment referred to above, in reporting income for its fiscal years ending July 31, 1976, July 31, 1977, and July 31, 1978, deducted a net operating loss carry-forward which included an item of $335,037 from its 1975 return (fiscal year ending July 31, 1976) and an item of $916,030 for fiscal year ending July 31, 1978, represented by a subtraction resulting from income earned in Puerto Rico. The subtraction resulted in losses during each of such years, which losses were carried forward by Taxpayer to the next ensuing year. Department contends that the losses created by the subtraction of foreign source income cannot be carried over to subsequent years to determine income and has issued a proposed assessment on that basis. Taxpayer contends that it is not the intent of the Florida Legislature to tax income derived from sources outside the United States and that the effect of a denial of the subtraction will result in the taxation, by Florida, of foreign source income received by Taxpayer.
Recommendation Based on the foregoing, it is RECOMMENDED: That the Department's proposed assessment of Taxpayer for corporate income tax deficiencies be issued. DONE AND RECOMMENDED this 21st day of January, 1982, in Tallahassee, Florida. R. L. CALEEN, JR. Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 21st day of January, 1982.
Findings Of Fact Having listened to the testimony and considered the evidence presented in this cause, it is found as follows: Petitioner is a domestic corporation. Petitioner provided medicare services to patients in the 1969-70 fiscal year. An on-site audit by the medicare auditing team was concluded in December of 1971, and petitioner received $56,131.00 of medicare reimbursements in January of 1972, for the services provided in the 1969-70 fiscal year. The petitioner did not file an amended federal income tax return for the fiscal year ending September 30, 1979. The adjusted federal income reported on petitioner's federal income tax return for the fiscal year ending September 30, 1972, included the $56,131.00 of medicare reimbursements received by petitioner in January of 1972. On petitioner's Florida income tax return for its fiscal year ending September 30, 1972, petitioner did not include the $56,131.00 figure in its adjusted federal income. On March 31, 1975, the respondent notified petitioner of a proposed deficiency in the amount of $2,100.99 arising from the petitioner's omission of the medicare reimbursements from its adjusted federal income as shown on its Florida corporate income tax return for the fiscal year ending September 30, 1972. Further correspondence ensued between the petitioner and the Corporate Income Tax Bureau of the respondent and the petitioner filed the present petition requesting a hearing on the issue. The respondent requested the Division of Administrative Hearings to conduct the hearing.
Recommendation Based upon the above findings of fact and conclusions of law, it is my recommendation that there is no legal basis for affording the petitioner any relief from the proposed deficiency and that said deficiency in the amount of $2,100.00 be sustained. Respectfully submitted and entered this 17th day of September, 1975, in Tallahassee, Florida. DIANE D. TREMOR, Hearing Officer Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304 (904) 488-9675 COPIES FURNISHED: E. Wilson Crump, II, Esquire Assistant Attorney General Department of Legal Affairs Tax Division, Northwood Mall Tallahassee, Florida 32303 Homer E. Ward, N.H.A. Administrator/President University Park Convalescent Center 1818 E. Fletcher Avenue Tampa, Florida 33612
Findings Of Fact The parties agreed at the hearing that there were no issues of fact which remained to be determined. The parties stipulated that the relevant facts are as set out in paragraph 5 of the Petition for Administrative Hearing. The following findings are quoted directly from paragraph 5 of the Petition. Petitioner is a federally chartered savings and loan association. Petitioner initially employed the cash receipts and disbursements method of accounting for Federal Income Tax purposes. In a desire to more clearly reflect income, Petitioner applied for and received permission from the Internal Revenue Service allowing Petitioner to change its method of tax accounting from the cash to the accrual method, pursuant to Revenue Procedure 70-27. This change was to commence with the calendar year 1971. Consistent with this accounting method change, all net accrued income as of January 1, 1971, was recorded in its entirety in Petitioner's financial statements as of December 31, 1970. The total net adjustment required to convert to the accrual method was $758,911.00. Pursuant to an agreement entered into with the Internal Revenue Service, an annual adjustment of $75,891.00 was required. The annual adjustment spread the effect of the accounting change over a 10-year period, despite the fact that all the income was realized prior to January 1, 1971. On January 1, 1972, the Florida Income Tax Code became effective. Petitioner timely filed its 1970 and 1971 Florida Intangible Personal Property Tax Returns. Upon subsequent review of Petitioner's records, it became apparent that the intangible tax had been overpaid and a refund claim was submitted. The refund was issued to Petitioner by the State of Florida during the calendar year 1973 and reported in Petitioner's 1973 Federal Corporate Income Tax Return. On December 16, 1975, Respondent notified Petitioner that Petitioner was deficient in its payment of Florida Corporate Income Tax in the amount of $25,386.84. The total deficiency consisted of $3,267.00 for the year ended December 31, 1972; $19,202.00 for the year ended December 31, 1973; and $2,916.84 for the year ended December 31, 1974. Included in the alleged total deficiency of $25,386.84 is a tax in the amount of $14,696.70 for the year 1973. This tax is attributable to Petitioner's apportionment of a part of its 1973 income to sources outside of the State of Florida. Petitioner is no longer protesting this deficiency. On February 9, 1976, Petitioner filed its protest against Respondent's determination that a deficiency in tax existed. By letter dated March 9, 1976, Respondent denied Petitioner's protest filed on February 9, 1976.
The Issue The primary issue in this proceeding is whether the taxable income of Jaffie Contracting Company of Florida, Inc. can be consolidated with the taxable income of Arlen Realty and Development Corp. in consolidated Florida Corporation Income Tax Returns for the taxable years ending February 28, 1973, and February 28, 1974. A second issue is whether Jaffie Contracting Company of Florida, Inc. should be liable for penalties for the underpayment of estimated taxes if it is determined that Jaffie Contracting Company of Florida, Inc. is not entitled to be included in Arlen Realty and Development Corp`s consolidated Florida Corporation Income Tax Returns for the fiscal years ending February 28, 1973, and February 28, 1974.
Findings Of Fact In a joint stipulation dated December 8, 1978, filed with the Hearing Officer, the parties stipulated to the relevant facts of this proceeding. Stipulation of Facts for Case No. 78-1800, together with the appendices thereto, are adopted by reference and made a part of the Findings of Fact of this Recommended Order. The consolidated Florida Corporation Income Tax Returns filed by Arlen Realty and Development Corp. pursuant to the first sentence of Section 220.131(1), Florida Statutes, for the fiscal years ending February 28, 1973, and February 28, 1974, indicated that there was no tax liability for the affiliated group of corporations which included Petitioner, Jaffie Contracting Company of Florida, Inc., a subsidiary of Jaffie Contracting Company, Inc. The Respondent, Department of Revenue, asserted deficiencies against Petitioner's taxable income separating it from that of Arlen Realty and Development Corp`s affiliated group for the fiscal years ending February 28, 1973, and February 28, 1974, in the amounts of $10,491.30 and $17,548.75, respectively. The Department had determined that Petitioner was not properly includable as a member of Arlen's affiliated group of corporations for Florida Tax purposes. Respondent additionally proposed penalties for the failure to make declarations of estimated tax for the same fiscal years in the amount of $751.30 and $1,356.98, respectively. The basis for the proposed deficiencies was that Petitioner did not qualify for inclusion in Arlen Realty and Development Corp`s consolidated Florida corporation income tax return because Petitioner's parent, Jaffie Contracting Company, was not subject to the Florida tax imposed by the Florida Income Tax Code and was not included in the consolidated Florida return, thereby breaking the chain of ownership of the affiliated group of corporations. Petitioner filed a protest against the proposed deficiencies. Following the initial consideration and reconsideration by the Department of Revenue, the proposed deficiencies were sustained. On November 27, 1978, a pre-hearing conference was held for the purposes of defining the issues in the case. Petitioner and Respondent filed Briefs, and Petitioner filed a Reply Brief prior to the hearing at which oral argument on the legal issues was heard. Both parties submitted excellent memoranda and Proposed Recommended Orders. Petitioner contends: That it elected to file its return under the first sentence of Section 220.131(1), and contends it has satisfied all the statutory requirements and that the deficiencies for the fiscal years ending February 28, 1973, and February 28, 1974, are invalid; that it is not liable for penalties for failure to file declaration of estimated taxes. Respondent contends: That one of the members of the affiliated group of corporations is not eligible to be included in the affiliated group of corporations inasmuch as it was not subject to tax under the Florida Income Tax Code, Chapter 220, Florida Statutes, as required by the first sentence of Chapter 220.131(1); that an affiliated group of corporations for federal purposes is not an affiliated group for Florida tax purposes; that the failure of the Petitioner to pay estimated taxes pursuant to provisions of Section 220.34(2)(a) subject Petitioner to the imposition of penalties.
Recommendation It is recommended that the Florida Corporation Income Tax Division deficiencies assessed against Jaffie Contracting Company of Florida, Inc. by the Department for the fiscal years ending February 28, 1973, and February 28, 1974, including the applicable penalties be upheld. DONE and ORDERED this 27th day of February, 1979, in Tallahassee, Leon County, Florida. COPIES FURNISHED: Gerald T. Hart, Esquire William P. Battaglia, Esquire Post Office Box 1876 Suite 701, Lewis State Bank Building Tallahassee, Florida 32302 Cecil L. Davis, Jr. Assistant Attorney General The Capitol, Room LL04 Tallahassee, Florida 32304 DELPHENE C. STRICKLAND Hearing Officer Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304 (904) 488-9675
The Issue The issue presented is whether HMY New Yacht Sales, Inc., is liable for the payment of use tax, together with penalty and interest, on a yacht which it purchased for resale and for use as a demonstrator.
Findings Of Fact Petitioner HMY New Yacht Sales, Inc., is a Florida cor-poration located in Dania, Florida. It is a franchise and an authorized dealer for several lines of new boats. Petitioner is registered as a dealer for Florida sales tax purposes and has a dealer decal. Petitioner became an authorized dealer for Davis Yachts, a manufacturer located in North Carolina, in 1985. In January 1990 Petitioner purchased a boat from Davis Yachts to be used for demonstration and promotional activities and for resale. The boat was a 47-foot fiberglass sports fisherman named "The Bandit." When the boat was delivered, Petitioner outfitted The Bandit with extensive electronics and fishing equipment, including a tuna tower, outriggers, a fighting chair, rocket launchers, and live wells. It took approximately two months (until the second week in March 1990) to outfit the boat to have it ready for its intended sports fishing purpose. The type of equipping done by Petitioner is typical of that done on every such boat when it is sold since such a boat cannot be used for its intended purpose without the electronics and other equipment. Petitioner, however, wanted the boat to be "ready to go," when Petitioner sold it rather than having the purchaser wait for the outfitting to be done before the purchaser could use the boat. Petitioner paid the factory approximately $520,000 for the boat. Petitioner's payments to local vendors for services and materials used in outfitting the boat brought Petitioner's cost to approximately $590,000. The Bandit was never documented or registered in the state of Florida. It was only operated under Petitioner's dealer registration and decal, as provided in Section 327.13, Florida Statutes. The boat was purchased with the intent to sell it, and it was always for sale from the first moment it was outfitted and ready to be shown. It was never Petitioner's intent to keep the boat. As soon as it was outfitted, the boat had on board, at all times, a file containing a complete inventory of the boat's equipment, including custom and standard options, and a color brochure with pictures of the boat to be given to potential customers. While Petitioner was attempting to sell the boat, it was also used by Petitioner as a sales promotional tool. Petitioner took the boat to various fishing tournaments and exhibited it at boat shows and open houses. Davis Yachts bore some of the expense of those activities since promoting the boat inured to the benefit of Davis as well as of Petitioner. When the boat was being used for promotional or sales activities, it would always have on board employees or salespersons of Petitioner or of Davis Yachts and customers. On occasion, family members accompanied Petitioner's salespersons on board the boat. The manner in which The Bandit was marketed--taking it to fishing tournaments and boat shows and having open house at various events--is typically the way new sport fisherman yachts are sold throughout the industry. The boat was shown to prospective customers at least once a month. Approximately 50 customers were taken on sea trials. The boat was never loaned or rented to anyone. It was used only under the direction of Petitioner or Davis Yachts. The only compensation received by Petitioner relating to the boat resulted from the occasions when Davis Yachts split some of the expenses for the promotional or sales activities. The boat did not sell as quickly as Petitioner hoped. In October 1990 Petitioner placed the boat on the Buck System, a multiple listing service which distributes information to other yacht brokers concerning boats which are for sale. Generally, boat dealers would not put new inventory in the multiple listing system. Petitioner did so in this instance, however, in order to quickly sell the boat because the government had announced a luxury tax proposal which Petitioner feared would result in a downturn in the boat market. Even with all the effort put into attempting to sell the boat, it did not sell until November 1991. In July 1992 the Department began a routine sales tax audit of Petitioner. The audit was completed in September 1992 and covered the period of time from March 1987 through February 1992. The Department auditor determined that Petitioner owed use tax on The Bandit because in November 1990, on the advice of its accountant, Petitioner took the boat out of its inventory account and placed it in its fixed assets account in order to take depreciation for federal income tax purposes. Based solely on Petitioner's treatment of the vessel on its corporate books, the auditor determined that Petitioner converted The Bandit to its own use and was, therefore, responsible for payment of the statutory use tax rate of 6 percent of the value of the boat as reflected on Petitioner's records. Based upon the audit, the Department issued its Notice of Proposed Assessment, assessing Petitioner $33,921.94 in tax, $8,480.50 in penalty, and $7,085.52 in interest through September 16, 1992. Interest continues to accrue at $11.15 per day.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a Final Order be entered determining that Petitioner is not liable for payment of use tax, penalty, or interest on The Bandit, and withdrawing the assessment which is the subject of this proceeding. DONE and ENTERED this 2nd day of August, 1995, at Tallahassee, Florida. LINDA M. RIGOT, Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 2nd day of August, 1995. APPENDIX TO RECOMMENDED ORDER Petitioner's proposed findings of fact numbered 1-12, 15, and 19 have been adopted either verbatim or in substance in this Recommended Order. Petitioner's proposed findings of fact numbered 13, 14, and 18 have been rejected as not constituting findings of fact but rather as constituting argument of counsel, conclusions of law, or recitation of the testimony. Petitioner's proposed findings of fact numbered 16, 17, and 20 have been rejected as being unnecessary to the issues involved herein. Respondent's proposed findings of fact numbered 1-3, 6, 8, and 9 have been adopted either verbatim or in substance in this Recommended Order. Respondent's proposed findings of fact numbered 4, 5, and 10 have been rejected as not being supported by the weight of the competent evidence in this cause. Respondent's proposed finding of fact numbered 7 has been rejected as being unnecessary to the issues involved herein. COPIES FURNISHED: Cynthia S. Tunnicliff, Esquire Pennington & Haben, P.A. Post Office Box 10095 Tallahassee, Florida 32302-2095 Mark T. Aliff, Esquire Office of the Attorney General Tax Section, The Capitol Tallahassee, Florida 32399-1050 Linda Lettera General Counsel Department of Revenue 104 Carlton Building Tallahassee, Florida 32399-0100 Larry Fuchs Executive Director Department of Revenue 104 Carlton Building Tallahassee, Florida 32399-0100
Findings Of Fact Based upon the agreement of the parties as to the relevant facts in this case, the following facts are found: For the calendar years ending December 31, 1972 and 1973, petitioner filed its federal corporate income tax returns reporting gross income from dividends in excess of its taxable income before the special deduction of 85 percent of the dividends received, limited to 85 percent of taxable income. As a result, a maximum of 15 percent of its net income was included in its taxable income on the federal tax returns. The federal returns for calendar years ending December 31, 1972 and 1973 reflected the deduction of net capital losses incurred and carried forward from years ending prior to January 1, 1972, the effective date of the Florida corporate income tax code. For its calendar years 1972 and 1973, petitioner filed its Florida corporation income tax returns reporting no Florida net income. The respondent examined the returns and determined deficiencies of $374.49 for 1972 and $566.40 for 1973. Such determination was based primarily on the additions to income of net capital losses carried forward from years ending prior to January 1, 1972.
Recommendation Based upon the findings of fact and conclusions of law recited above, it is recommended that there is no basis for affording petitioner relief from the proposed deficiency and that said deficiencies of corporate income tax of $374.49 and $556.40 for 1972 and 1973 respectively, be sustained. Respectfully submitted and entered this 22nd day of June, 1976, in Tallahassee, Florida. DIANE D. TREMOR, Hearing Officer Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304 (904) 488-9675 COPIES FURNISHED: Mr. T.H. Swindal Chief, Corporate Income Tax Bureau Department of Revenue Post Office Box 3906 Tallahassee, Florida 32303 Mr. Robert Fried Suite 210, Professional Centre 9000 Southwest 87th Court Miami, Florida 33176 Attorney for Petitioner Mr. Stephen E. Mitchell Assistant Attorney General Office of Legal Affairs The Capitol Tallahassee, Florida 32304 Attorney for Respondent
The Issue The issue in this proceeding is whether the Florida Corporate Income Tax Code subjects to taxation items realized for federal income tax purposes prior to the effective date of the Code but recognized for federal purposes after the effective date of the Florida Code.
Findings Of Fact In a joint stipulation filed with the Hearing Officer, the parties stipulated to the relevant facts of this proceeding. Findings (1) through (6) listed below are quoted directly from that stipulation of facts. In 1965 MORRIS TRADING CORPORATION (whose name at that time was Morris Grain Corporation) exchanged certain property used in its trade or business with Continental Grain Company for six thousand seven hundred twenty three (6,723) acres of real estate located in Florida a description of which is attached hereto and made a part hereof as Exhibit 1 containing a layout of the ranch acreage acquired by MORRIS TRADING CORPORATION from Continental Grain Company, including the nine hundred fifty eight (958) acre parcel sold in the fiscal year ending in 1968, the one thousand (1,000) acre parcel sold in the fiscal year ending in 1969, and the remaining acreage sold in the fiscal year ending in 1973, as well as a small parcel of property retained by the Corporation. Although MORRIS TRADING CORPORATION realized income for federal tax purposes in 1965 when it exchanged a grain elevator and other property for real estate described on Exhibit 1, the Corporation did not recognize any income for federal tax purposes in 1965 pursuant to Section 1031 of the Internal Revenue Code of 1954 as amended. The real estate acquired in exchange for the property traded by MORRIS TRADING CORPORATION had a fair market value in 1965 of ONE MILLION SIX HUNDRED THIRTEEN THOUSAND FIVE HUNDRED TWENTY AND NO/100 DOLLARS ($1,613,520.00), or TWO HUNDRED FORTY AND NO/100 DOLLARS ($240.00) per acre. The tax cost basis of the property given up by MORRIS TRADING CORPORATION in the exchange was TWO HUNDRED SIXTY SEVEN THOUSAND EIGHT HUNDRED THIRTY TWO AND SIXTY SIX/100 DOLLARS ($267,832.66). MORRIS TRADING CORPORATION paid TWENTY THOUSAND FOUR HUNDRED FIFTY THREE AND FIFTY FIVE/100 DOLLARS ($20,453.55) in cash for the purchase of mineral rights to the four thousand six hundred five (4,605) acres sold during the fiscal year ending in 1973 and there were ONE HUNDRED SIXTY TWO THOUSAND FIVE HUNDRED TWENTY TWO AND FIFTY FIVE/100 DOLLARS ($162,522.55) of costs connected with the sale of the property consisting of commissions of ONE HUNDRED THIRTY THREE THREE HUNDRED AND NO/100 DOLLARS ($133,300.00), attorneys fees of EIGHTEEN THOUSAND AND NO/100 DOLLARS ($18,000.00), and documentary" stamps and miscellaneous expenses of ELEVEN THOU- SAND TWO HUNDRED TWENTY TWO AND FIFTY FIVE/100 DOLLARS ($11,222.55). MORRIS TRADING CORPORATION sold four thousand six hundred five (4,605) acres-of the property acquired in the exchange in 1965 during its fiscal year ending May 31, 1973, for a gross sales price of TWO MILLION NINE HUNDRED SIXTY ONE THOUSAND EIGHT HUNDRED SEVEN AND NINETY SIX/100 DOLLARS ($2,961,807.96). On its Florida corporate income tax return for the fiscal year ending May 31, 1973, Petitioner excluded income from the 1973 sale of the 4,605 acres, although this income was reported as recognized on its federal income tax return. The Respondent, Department of Revenue, issued its proposed deficiency for the 1973 fiscal year assessing Petitioner $121,389.33. This assessment was based upon the gain received by Petitioner for the 1973 transaction, said gain being measured by the difference between the original cost of the property exchanged in 1965 and the adjusted sales price of the property sold in 1973. The Petitioner filed a protest against the proposed deficiency. An informal conference failed to resolve the matter and the Petitioner thereafter filed its petition for an administrative hearing. On August 4, 1976, the parties entered into a joint motion for stay of proceedings pending the Florida Supreme Court's resolution of the case of Dept. of Revenue v. Leadership Housing, Inc. and Leadership Communities, Inc., 343 So.2d 611 (Fla. 1977). Thereafter, a prehearing conference was held to narrow and define the issues, briefs were filed and a hearing was held to receive oral argument on the legal issues involved.
Recommendation Based upon the findings of fact and conclusions of law recited above, it is recommended that the proposed corporate income tax deficiency for the Petitioner's fiscal year ending in 1973 be held invalid. Said deficiency should be recomputed by subtracting from the gross, sales price of the real estate sold in 1973 the amount realized on Petitioner's federal return in 1965, the selling expenses and the purchase of additional mineral rights. Respectfully submitted and entered this 15th day of February, 1978, in Tallahassee, Florida. DIANE D. TREMOR, Hearing Officer Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304 (904) 488-9675 COPIES FURNISHED: Gerald T. Hart Thompson, Wadsworth, Messer, Turner and Rhodes Post Office Box 1876 Suite 701, Lewis State Bank Building Tallahassee, Florida 32302 E. Wilson Crump, II Assistent Attorney General Department of Legal Affairs Post Office Box 5377 Tallahassee, Florida 32301
