The Issue The issue presented is what is Peaches' basis in the Sterling stock?
Findings Of Fact There is no dispute as to the material facts in the instant case, Exhibit 1 presented at the hearing is a composite exhibit which is comprised of the Petitioner's U.S. Corporate Income Tax Return and Florida Corporate Income Tax Return for the fiscal year ending June 30, 1973. Exhibit 3 is the Respondent's document entitled "Income Tax Audit Changes" which reflects the adjustments made by the Respondent based upon a review of the Petitioner's return and the reasons for assessing the deficiency. Exhibit 2 is a composite exhibit comprised of the Petitioner's Amended Protest of the proposed deficiency and the Respondent's letter denying the same. Petitioner's federal return (Exhibit 1) Schedule D, Part II, reflects the 31,500 shares were acquired in 1958 at a cost basis of $10,191.00. These shares were subsequently sold by Peaches in 1972 for $1,160,131.00 or a gain of $1,149,940.00. This gain was reported on line 9(a) of the federal tax return as a portion of the "net capital gains." On its 1973 Florida Corporate Income Tax Return, Petitioner computed the income using the basis for the stock as of January 2, 1972, thereby reducing its reported income by $1,013,040.00 from the federal tax. The $1,013,040.00 reflects the amount of appreciation in the value of the stock between the transferrer's acquisition and January 1, 1972, the effective date of the Florida corporate income tax code. The shares of stock of Sterling Drugs were acquired by Peaches in 1971 from the controlling stockholder who made a contribution to capital to the corporation.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, the Hearing Officer recommends that the Petitioner's petition be denied and that the assessment against the Petitioner in the amount of $29,435.00 together with interest be assessed. DONE and ORDERED this 22nd day of January, 1979, in Tallahassee, Florida. STEPHEN F. DEAN Hearing Officer Division of Administrative Hearings 530 Carlton Building Tallahassee, Florida 32304 (904) 488-9675 COPIES FURNISHED: Edwin J. Stacker Assistant Attorney General Department of Legal Affairs The Capitol Tallahassee, Florida 32304 James S. Moody, Jr., Esquire Trinkle and Redman, P.A. 306 West Reynolds Street Plant City, Florida 33566 ================================================================= AGENCY FINAL ORDER ================================================================= STATE OF FLORIDA, DEPARTMENT OF REVENUE TALLAHASSEE, FLORIDA PEACHES OF FLORIDA, INC. Petitioner, vs. CASE NO. 78-1433 STATE OF FLORIDA, DEPARTMENT OF REVENUE, Respondent. / NOTICE TO: JAMES S. MOODY, JR., ESQUIRE ATTORNEY FOR PETITIONER TRINKLE AND REDMAN, P. A. 306 WEST REYNOLDS STREET PLANT CITY, FLORIDA 33566 E. WILSON CRUMP, II, ESQUIRE ATTORNEY FOR RESPONDENT ASSISTANT ATTORNEY GENERAL POST OFFICE BOX 5557 TALLAHASSEE, FLORIDA 32304 You will please take notice that the Governor and Cabinet of the State of Florida, acting as head of the Department of Revenue, at its meeting on the 5th day of April, 1979, approved the Recommended Order of the Hearing Officer dated January 22, 1979, with paragraph 3 of the "Findings of Fact" therein amended to read as follows: "The shares of stock of Sterling Drugs were acquired by Peaches in 1972 from the controlling stockholder who made a contribution to capital to the corporation", in accordance with Stipulation of the Petitioner and Respondent filed in the case on March 1, 1979. This constitutes final agency action by the Department of Revenue. JOHN D. MORIARTY, ATTORNEY DIVISION OF ADMINISTRATION DEPARTMENT OF REVENUE STATE OF FLORIDA ROOM 104, CARLTON BUILDING TALLAHASSEE, FLORIDA 32304 CERTIFICATE OF SERVICE I HEREBY CERTIFY that a true and correct copy of the foregoing Notice was furnished by mail to James S. Moody, Jr., Esquire, Trinkle and Redman, P. A., 306 West Reynolds Street, Plant City, Florida 33566, Attorney for Petitioner; by hand delivery to Wilson Crump, II, Esquire, Assistant Attorney General, Post Office fox 5557, Tallahassee, Florida 32304, Attorney for Respondent and Stephen F. Dean, Hearing Officer, Division of Administrative Hearings; Room 530, Carlton Building, Tallahassee, Florida this 5th day of April, 1979. JOHN D. MORIARTY, ATTORNEY
Findings Of Fact At all times pertinent to the allegations contained here, the Respondents, Thomas C. Pluto, Kathleen M. Pluto, and Pluto Realty, Inc., were licensed as real estate brokers and a brokerage corporation respectively. On October 23, 1985, Karen S. Hicks, listed certain property owned by her, located at 1537 Oak Park Avenue, Sarasota, Florida, for sale with Allstar Realty of Sarasota, Inc., (Allstar), utilizing Annette Schmidt as broker. On or about November 25, 1985, Respondent Thomas C. Pluto entered into a contract for sale between himself/or assigns as buyer and Karen Hicks as seller. The contract was for the sale of the property mentioned above. Respondent, Thomas Pluto was representing an investor who was to be the actual buyer and Mr. Pluto neither intended nor desired to purchase the property for himself. Because of the unfavorable interest rate then existing on the mortgage in effect on the property, which resulted in a negative amortization and a less favorable purchase opportunity, the warranty deed, mortgage deed, and closing statement to be executed in closing of the contract of sale herein were to be back dated to September 12, 1985 in order to take advantage of certain peculiarities of the federal income tax law pertinent thereto. By Respondent's own admission, had this sale been consummated in this fashion, it would have constituted at least a conspiracy to defraud the U.S. Closing was held on December 27, 1985. Prior to the closing, the intended buyer of the property, Mr. Pluto's investor, backed out of the deal and Mr. Pluto so informed Ms. Hicks through her agent, Ms. Schmidt. Because Ms. Hicks was anxious to close, because of the Christmas season, and because Mr. Pluto felt that he still might be able to find an investor to take over the property, Mr. Pluto agreed to go through with the purchase and as a part of the closing, paid Ms. Schmidt a $1,000.00 split commission. When the documentation was prepared for the December 27, 1985 closing, Thomas C. Pluto was shown as the buyer, but the mortgage deed, the warranty deed, and the closing statements all reflected a date of September 12, 1985. These documents were drafted and prepared by Respondent, Kathleen Pluto, who received her instructions as to what date to utilize thereon from Respondent, Thomas C. Pluto. The date of September 12, 1985, was initially dictated by the accountant for the original proposed investor who stipulated that date be used in order to take advantage of certain tax advantages possibly involved. According to Mr. Pluto and Mrs. Pluto, independent of each other, Mr. Pluto never thought to change it, and she merely assumed the back date was still to be used. This back dating of documents was, however, even by admission by the Respondent, Thomas Pluto, an improper act. Since the closing did not go through, however, the significance of the back dating relates only to the issue of the intent of Mr. Pluto at the time he took title to the property. By the middle of February, 1986, Mr. Pluto was still unable to secure another buyer for the property and on February 21, 1986, he submitted a written request for an assumption package to the mortgagee, Cameron-Brown, Incorporated. This written request was followed up by a verbal request on February 24 and again on March 18 and April 8, 1986. The mortgage assumption package was ultimately received by Mr. Pluto on April 11, 1986 and was completed and returned to the mortgagee on April 15, 1986. It was, however, either never received or was misplaced by Cameron-Brown. On June 27, and again on July 8 - 21, 1986, another assumption package was requested which was received on July 23, 1986, and returned completed to the mortgage company on July 25, 1986. The assumption was ultimately finalized on August 12, 1986, with credit being given back to September 12, 1985, at the reguest of Ms. Hicks. In the interim, all mortgage payments were timely made by Mr. Pluto. The Respondents did not claim a tax deduction or any tax advantage on the basis of this transaction nor was it ever their intent that they gain a personal tax advantage from it. Petitioner alleges that Mr. Pluto left the original back date on the deed when he took title to the property to make the property more attractive to another buyer to whom the property could have been transferred and who could have taken advantage of the earlier date for tax purposes. Mr. Pluto, on the other hand, contends that was not his intention and that if that had been his intention, he would not have taken title to the property when he did in his own name because that would require another complete closing and the resultant additional fees and charges inherent therein. This would have made the property less desirable because of the already high interest rate, the negative amortization and other financial problems. In light of the above, it appears that Mr. Pluto was quite willing to participate in a potentially illegal scheme and at the time he executed the documents for the final closing, notwithstanding he claims he did not realize the date had not been changed, he was guilty of at the very least, culpable negligence and dishonest dealing by scheme. The fact that he paid the selling broker a commission after alleging he went through with the purchase as a favor to her, tends to weaken the credibility of his story.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is, therefore: RECOMMENDED that Respondent, Thomas C. Pluto's, license be suspended for 90 days and that he be reprimanded but that the execution of the suspension be stayed for one year with provision for automatic remission at the end thereof; that Respondent, Kathleen M. Pluto, be reprimanded; and that the charges relating to Pluto Realty, Inc., be dismissed. RECOMMENDED this 4th day of February, 1988, at Tallahassee, Florida. ARNOLD H. POLLOCK, 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 4th day of February, 1988. APPENDIX TO RECOMMENDED ORDER, CASE NO. 87-3084 The following constitutes my specific rulings pursuant to Section 120.59(2), Florida Statutes, on all of the Proposed Findings of Fact submitted by the parties to this case. BY THE PETITIONER 1 Accepted and incorporated herein. 2&3 Accepted and incorporated herein. Accepted and incorporated herein. Accepted and incorporated herein. 6&7 Accepted and incorporated herein. Accepted and incorporated herein. Accepted and incorporated herein. 10&11 Accepted. 12 Accepted and incorporated herein. BY THE RESPONDENTS 1-3 Accepted and incorporated herein. 4&5 Accepted. 6-10 Accepted. Accepted and incorporated herein. Accepted and incorporated herein. Accepted and incorporated herein. Accepted and incorporated herein. Accepted except for the words, "through inadvertence, oversight, or mistake" Rejected as contra to the evidence. Accepted except for the words, "by oversight and error" Accepted. 19&20 Accepted and incorporated herein. 21 Accepted. COPIES FURNISHED: James R. Mitchell, Esquire DPR, Division of Real Estate Post Office Box 1900 Orlando, Florida 32801 Robert P. Rosin, Esquire 1900 Main Street, Suite 210 Sarasota, Florida 34236 Kathleen M. Pluto, pro se 8415 Midnight Pass Road Sarasota, Florida 34242 Darlene F. Keller Acting Executive Director DPR, Division of Real Estate Post Office Box 1900 Orlando, Florida 32801
The Issue What, if any, is Petitioner's tax liability to the State of Florida, after any legitimate tax credits are applied, for June 1998 through December 1998?
Findings Of Fact During the period of June 1998 through September 1998, Petitioner Ron Ross Meardy operated a used car lot from a location in Duval County, Florida, to wit: 1400 Mayport Road, Atlantic Beach, Florida, 32233-3440. Mr. Meardy conducted business through a sole proprietorship named Auto Liquidation Center (ALC). Mr. Meardy's business included both retail sales and wholesale sales of motor vehicles. Between June 1998 and December 1998, Mr. Meardy was a registered dealer with DOR. Mr. Meardy's sales tax registration number was 26-02-151942-23/4, which registration number pertains to the Mayport location in Duval County, Florida. Mr. Meardy filed State of Florida Sales and Use Tax returns, standard form DR-15, for each month between December 1997 through May 1998. In so doing, he relied entirely on his employees. Mr. Meardy also filed State of Florida Solid Waste returns, standard form DR-15SW, for each month between December 1997 through May 1998. In so doing, he relied entirely on his employees. In September 1998, Mr. Meardy opened a car lot in St. Augustine, St. John's County, Florida and closed the Duval County car lot. Mr. Meardy filed no DR-15 (sales tax) forms for the period of June 1998 through December 1998. Mr. Meardy filed no DR-15SW (waste tax) forms for the period of June 1998 through December 1998. Mr. Meardy asserted that he did not know that his employees had made a lot of bad loans or failed to file tax returns for June 1998 through September 1998. Mr. Meardy admitted that from September to December 1998, he deliberately filed no tax returns. First, he claimed he did not file returns because there were no taxable sales made in that period. Then, he asserted that he did not file because, in an unrelated matter, the Florida Attorney General's Office, investigating several businesses "run" by him, held necessary business documents from October 27, 1998 until December 11, 1998 (+/- 45 days). Mr. Meardy's credible testimony that he did not have his business records from October 27, 1998 to December 1998 was unrefuted. As a result of Mr. Meardy's not having filed any DR-15 and DR-15SW forms for the period of June 1998 through December 1998, DOR filed a sales and solid waste tax warrant against him dated March 30, 1999, for $11,937.86. As permitted by law, this audit/warrant merely estimated Mr. Meardy's liability. Mr. Meardy did not then file formal tax returns, file a formal request for an alleged credit (DR-95 form), or provide DOR access to his business records so that DOR could make an accurate assessment/audit/warrant for any tax, penalty, interest, and/or credit. Instead, he timely-filed a Petition for Administrative Hearing on May 28, 1999. The Petition for Administrative Hearing, dated May 21 and filed May 28, 1999, was the first written expression by which Petitioner alerted DOR that he was seeking a tax credit due to repossessions he claimed to have made on defaulted loans. The Petition only stated that DOR "owes ALC money due to repossession credits." The Petition does not contain all of the information required by rule or by the standard credit claim form DR-95B. Petitioner had, in the past, applied for credit for tax paid on repossessed items by attaching the DR-95B form to his monthly tax returns (P-3). He maintained he had relied on his employees for this function. Petitioner's credible testimony that the Attorney General again held some of his documents from the end of May 1999, until September 30, 1999 (+/-five months), due to an unrelated matter, was unrefuted. However, at no time did Petitioner ever file a formal request for credit (form DR-95B) or any tax returns for the period at issue in this proceeding. Only during the course of discovery in the instant proceeding, which discovery Petitioner resisted by every legal means, did it become clear that Petitioner was claiming a tax credit from his May 1998 sales tax return, and that the credit he sought was in excess of the tax he had paid by way of his May 1998 tax return. Only during the discovery process herein did Petitioner provide DOR with any information concerning repossession and default amounts that he was claiming. He did this by producing a "database" (DOR-4). It is unclear from the evidence at hearing when this information was provided, but the date Petitioner claims in his Proposed Findings of Fact to have first produced DOR-4 is February 10, 2000. Petitioner also claims to have given someone at DOR a computer disc with his supporting information, but no DOR witness confirmed this. Petitioner produced no such disc at hearing. Exhibit DOR-4 did not provide the vehicle registration number as part of the property description, the date the sales and use tax was paid, the purchase price less trade-in, the purchase price less cash down, or the actual date of repossession. A copy of each invoice supporting each repossession was not attached. Petitioner did not submit any tax return with DOR-4. Petitioner admits that DOR-4 does not contain all of the information required by the tax credit claim form, DR-95B. DOR revised its assessment once, based on the information Petitioner was required to produce in this proceeding. DOR revised its assessment a second time as a result of the information Mr. Meardy provided in the course of his deposition taken January 19, 2001, approximately a week-and- a-half before final hearing. As agreed-to within the Joint Pre-hearing Stipulation, the revised assessment figure in this case is now limited to $2626.31 sales tax, $1313.40 penalty, and $75.35 interest, for a total of $4735.56, as of January 31, 2001. If the foregoing base amounts are, in fact, owed, penalties and interest continue to accrue, pursuant to statute. In making the final audit/assessment/warrant, DOR's Auditor IV, Thelmesia Whitfield, used original materials supplied by Petitioner. From these, she took the actual amounts Petitioner had listed on his dated invoices and other original records as the tax he collected for June 1998 through December 1998. She then calculated the sales tax due, but not remitted, for that period. In so doing, she determined that no additional taxes were due for the months of August 1998 through December 1998. She also concluded that for Petitioner's sales in June and July 1998, a penalty should be assessed at the legal rate of 10% per month on a cumulative basis up to 50% and interest should be assessed at the legal rate of 12% per year or 1% per month on the cumulative balance that is due. Petitioner's solid waste fee liability was calculated by Ms. Whitfield on the basis of the dated sales invoices provided by Petitioner where he had charged fees for tire and battery disposal. Ms. Whitfield's calculations did not include transactions without invoices or other original records. She noted that on several transactions Petitioner had collected more solid waste tax than was required, and she concluded that once collected, those amounts should be remitted to DOR unless they had been refunded to the customer. She calculated local option taxes at the applicable rate for Duval County. Ms. Whitfield's re-calculations do not reflect credits for the repossessions shown on DOR-4, because no state tax returns were filed from June through December 1998, because all the necessary information had not been provided, and because she believed the information on DOR-4 had been provided beyond the period available to claim repossession credits, which is 13 months after the repossession takes place. Ms. Whitfield's re-calculations also do not include credits for worthless accounts orally claimed by Petitioner in the course of his January 19, 2001, deposition or which he urges that she extrapolate from DOR-4, because Petitioner did not also provide either federal tax returns or equivalent financial statements as required by law. Because Petitioner was asking for a refund of more than he said he had paid, and because the sales he was referencing took place before the period being audited, Ms. Whitfield had no way to verify that the amount of sales tax actually had been paid. Therefore, Ms. Whitfield only used DOR-4 where there was a question as to whether a sale had taken place at all. Although DOR-4 is merely a summary, because it was produced by Petitioner and listed sales dates, she used it only as his admission that certain questionable sales had, in fact, taken place. Accordingly, it is found that DOR has not relied on estimations based on prior sales outside the time frame audited, but has made its final assessment (DOR Composite Exhibit 3) upon reasonable documentation provided by Petitioner, which documentation he represented as being accurate to the best of his ability. It is further found that DOR applied defineable legal standards. Petitioner essentially challenges DOR's last assessment/audit/warrant because Ms. Whitfield did not use DOR-4 to assign him a credit or off-set. He seeks to have the undersigned relate, according to his theory of repossession/default credits, DOR's final assessment reflected in DOR's audit report and work papers (DOR Composite Exhibit 3); DOR-4, Petitioner's "database"; and Petitioner's Exhibits 1-3 so as to determine Petitioner's sales tax and solid waste liability for the June 1998 through December 1998 period, and to thereby assign him a credit against his May 1998 tax return and payment (P-3). Petitioner's theory is based on his representation that his database (DOR-4) uses the first time he received money from each sale of a vehicle as the date of the sale/transaction, even though his own invoices and other original supporting data which he provided to DOR, showed different dates as the date of each sale. Then, he asserts that where vehicles have been repossessed, or where a sale has not "gone through," or where a loan has been defaulted (presumably even without repossession, of the car, although this is unclear), a credit should be related back to his May 1998, tax return (P-3). His argument and evidence are not persuasive for the following reasons. At the outset, it is noted that Petitioner's credit claim in excess of $12,000, is more than the tax Petitioner paid in May 1998, as reflected on Exhibit P-3. Likewise, although Petitioner's invoice used in Ms. Whitfield's calculations recorded a sale on June 22, 1998, to Lori Armstrong at $1500.00, Petitioner, without any supporting evidence, asserted at hearing that this sale actually was made on June 23, 1998, and that someone stole $500.00 of the tendered price, so he should pay tax, if at all, on a sale of only $1,000. He had a similar unsupported reason for attempting to reduce, by $100.00, the sales price on another invoice amount for Randy Davis, which invoice Ms. Whitfield had utilized. Petitioner also claimed, at hearing, again with no supporting evidence, that invoices he had previously produced and which were relied upon by Ms. Whitfield for customers Crumley, Mosley, and Lebourgeois "did not go through," and therefore he should not be liable for sales tax on these invoices. He asserted that since DOR could not find any title at the Department of Highway Safety and Motor Vehicles (DHSMV) for these customers, the inference must be drawn that those sales never closed and therefore no sales tax on them is owed by him. Petitioner also claimed at hearing that the Lebourgeois sale had resulted in a repossession. At hearing, Petitioner admitted liability for a $1,000 sale to a customer Millwater, but claimed that a credit from May 1998 would cover it, without any clear explanation of how this should occur. Petitioner maintained at hearing, again only because no title in that name had been located at the DHSMV, that an invoice of September 14, 1998, to a customer Wilkerson for $200 meant that the sale to Wilkerson was an out-of-state sale, and therefore no tax was owed. In his Proposed Findings of Fact, Petitioner does not address theft as an alleged reason he did not collect the full amounts shown on his invoices (see Finding of Fact 35), but he does seek a tax credit for all sales where no title was found at DHSMV and discusses at least the Crumley, Mosley, and Lebourgeois transactions as a source of these alleged "credits," sometimes for months in which he did not file any tax return. He also addressed customers Varner, Bailey, Little, Wright, Emanual, Lanier, Maynard, Porter, Williams, Arenas, Bays, Beasley, Butt, Carvey, Catlin, Chapman, Clendenin, Cunningham, Forbes, Catina Friend, Gonzalez, Knight, Lloyd, Owens, Strickland, Daniels, Johnson, and McDade, whose names and information (except for Bailey) appear on DOR-4, Petitioner's database, as repossessions or defaulted loans. Bailey appears on DOR-4 but in a different portion of DOR-4. (See Finding of Fact 47). The two biggest problems with Petitioner's theory are that he submitted no evidence to affirmatively demonstrate that any vehicle was repossessed, and Exhibit P-3 does not allow the undersigned any way of determining which vehicle sales were included in the May 1998 tax paid. Exhibit P-3 does provide information as to the repossessions claimed in May 1998 for previous months' sales, but it does not itemize or identify May 1998 sales upon which the tax was being paid in that month. Simply testifying that a repossession or default occurred and that someone entered that information into Petitioner's database (DOR-4) is not competent and credible proof that repossession occurred. In light of Petitioner's testimony that he relied on unreliable and dishonest employees to handle both his sales and tax matters at the Duval County office and without any explanation or documentation of how repossessions or loan defaults were handled from either of his business locations, the undersigned is left with the sense that Petitioner had neither hands-on experience with the listed repossessions nor with the subsequent entries of repossessions and/or loan defaults into his database. Although Petitioner has made a logical argument for "starting at ground zero" with regard to his May 1998 tax return, without more than is in evidence here, vehicles allegedly sold prior to June 1998 cannot be related to vehicles allegedly repossessed after June 1998 by way of the May 1998 tax return (P-3). (See Findings of Fact 21 and 41.) The absence of a title of registration in a given individual's name, without more, is not sufficient to infer that a sale was not consummated or that there had been an out-of- state sale. If the buyer had the duty to transfer title, failure of title proves nothing. If the dealer had the duty to transfer title, Petitioner's failure to transfer title does not automatically translate into a tax credit. The minimal documentation underlying DOR-4 which Petitioner offered (Exhibits P-1 and P-2), also is not persuasive of Petitioner's theory of the case, including but not limited to his suggestion that DOR is required to regard the sale date as being a date when money allegedly was first received, instead of the dates of sale on his invoices or other underlying documentation. It seems undisputed that "Ralston Varner" and "Varner Dean" are the same customer, full name "Ralston Dean Varner." Petitioner's Exhibit 1 is a receipt showing a payment by Ralston Varner for an "'88 Chevy Caviler" [sic] and is dated May 1, 1998, which is the date Petitioner claims to be the completion of sale date. By Petitioner's theory, sales tax on this purchase should have been included in his May 1998 tax return, entitling him to receive a tax credit upon repossession of this or some other vehicle. This cannot be determined from the tax return (P-3). Exhibit DOR-6 is a composite exhibit concerning a sale to Ralson Varner. Those pages preceding the page titled "Certification," dated July 19, 1998, were produced by Mr. Meardy at his office. The materials following the certification constitute a DHSMV "body jacket." The first page of DOR-6 reveals "6-10-98," as the date of the used car order, but pertains to a "1989 Ford T-Bird." The twelfth page, the "Installment Sale Contract-Motor Vehicle," is dated June 10, 1998, and also relates to a 1989 Ford "T-Bird." DOR's final audit refers to a 1989 Ford Thunderbird sold to "Varner Dean," not an '88 Chevy Cavalier, as urged by Petitioner. Petitioner's Exhibit 2 shows two receipts from Dennis Bailey, one on May 26, 1998 and one on June 2, 1998. Petitioner maintained that the sale in question went through on May 26, 1998, the sales tax was remitted on his May 1998 tax return, and the car was later repossessed. The May 1998 tax return (P-3) does not help decipher this. A Dennis Bailey appears on DOR-4 as of May 26, 1998, in relation to a Ford Taurus, but it is not one of the transactions Petitioner has singled out by the hand- written notations on DOR-4 as being defaulted or repossessed. Exhibit DOR-5 is a composite exhibit concerning the sale to Dennis Bailey which Ms. Whitfield audited. Those pages preceding the page titled "Certification," dated July 19, 1999, were produced by Petitioner. The materials following the certification constitute a DHSMV "body jacket." Exhibit DOR-5, page one, shows "June 2, 1998," as the date of the used car order. DOR-5, page 10, the fourth page following the certification, reveals the date of sale as "6-2-98," as reported to the DHSMV, both related to a 1988 Taurus. Under these circumstances, Petitioner's view of this sale cannot prevail. Also, Petitioner admitted that even by his theory and calculations, his May 1998 tax return was "off" by $1,007, and he had been unable to discover the reason (TR-103). Moreover, the evidence does not clearly establish that DOR-4 was presented to DOR within either 12 or 13 months of all the repossessions in question. (See Findings of Fact 19 and 21- 22.) Lastly, Petitioner did not present any evidence of refunds to customers of solid waste tax overpayments.
Recommendation Based upon the foregoing findings of fact and conclusions of law, it is RECOMMENDED: That the Department of Revenue enter a Final Order finding Petitioner is liable for the amounts as set out in Finding of Fact 24, without any credits or set-offs, and providing for accruing interest and penalties, pursuant to law. DONE AND ENTERED this 4th day of May, 2001, in Tallahassee, Leon County, Florida. ELLA JANE P. DAVIS Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 4th day of May, 2001. COPIES FURNISHED: Ron Ross Meardy Post Office Box 1853 St. Augustine, Florida 32085 Charles Catanzaro, Esquire Office of the Attorney General The Capitol, Tax Section Tallahassee, Florida 32399-1050 Linda Lettera, General Counsel Department of Revenue 204 Carlton Building Tallahassee, Florida 32399-0100 James Zingale, Executive Director Department of Revenue 104 Carlton Building Tallahassee, Florida 32399-0100
Findings Of Fact The facts in this cause are essentially undisputed. The Pen Haven Company was a Subchapter "S" corporation for federal income tax purposes and therefore incurred no State income tax liability. It was formed in 1960 and retained its Subchapter "S" status thorough 1976 for federal income tax purposes. In December of 1977, the capital stock of Pen Haven Sanitation Company was sold to the Board of County Commissioners of Escambia County. Inasmuch as the sole corporate stock holder then was no longer an individual, but rather a governmental entity, the corporation Subchapter "S" election for federal income tax purposes was terminated. Escambia County did not wish to own stock in a private corporation so it accordingly liquidated Pen Haven and its assets were distributed to the County's direct ownership. Thereafter the Corporation filed a final corporate income tax return for 1977 which reflected capital gains on the assets of the corporation which had been distributed. Some of those assets had tax bases which had been reduced to zero through reduction by depreciation, most of which had been charged off prior to January 1, 1972, the effective date of the Florida corporate income tax code. All of the depreciation deductions had been taken prior to the termination of the Subchapter "S" status of the Pen Haven Company. On disposition of the Pen Haven assets however, a gain was reported equal to the fair market value or salvage value, less the basis. This gain was accordingly reported on Pen Haven's federal income tax return, and on the 1977 Florida corporate income tax return, albeit under the protest as to the Florida tax return. Inasmuch as Pen Haven had previously deducted depreciation since its inception, and had the benefit thereof for federal tax purposes, it was required by the Internal Revenue Service to recapture the depreciation for federal tax purposes upon its sale and the filing of its tax return in 1977. The same recapture of depreciation treatment was required of West Florida Utilities. Thereafter an application was made by the Petitioner corporations for Florida Corporate Income Tax Refunds asserting that they should have not paid taxes on the amount of gains which represented a recapture of depreciation which had been taken as a deduction prior to the effective date of the Florida corporate income tax on January 1, 1972. In effect the Petitioner is contending that the so- called "income" which is the subject of the tax in question was not realized in 1977, but rather merely "recognized" in that year by the federal tax law and that it represented income actually "realized" during the years when the depreciation was taken as a deduction prior to January 1, 1972. The Petitioners contend that "realization" for federal income tax purposes occurs when the taxpayer actually receives an economic gain. "Recognition" on the other hand refers only to that time when the tax itself becomes actually due and payable. The Petitioners maintain that when the tax became due and payable in 1977 that was merely the point of "recognition" of the subject taxable gain and not "realization" in that the gain was actually realized prior to the Florida Jurisdictional date of January 1, 1972, in the form of the economic benefit derived from those depreciation deductions applied to federal tax liability prior to that date. The Petitioners cite SRG Corporation vs. Department of Revenue, 365 So2d 687 (Fla. 1st DCA 1978), for the proposition that Florida could not tax those gains accruing to the taxpayer prior to Florida's having the constitutional and statutory power to impose a corporate income tax. The Respondent in essence agrees that the question of when the economic benefit to the Petitioners was received by them or was "realized" is the key question in this cause. The Respondent contends, however, that "realization" of a taxable gain occurred when the assets were disposed of by the Petitioners in 1977, well after the date when Florida's power to tax such a gain was enacted. The underlying facts in the case of West Florida Utilities are substantially similar. This corporation, however, was organized in 1962 and has never been clothed with Subchapter "S" corporate status. The only grounds upon which it can therefore claim a refund is its assertion that Florida does not have authority to tax that portion of the capital gains attributable to recapture of depreciation which was originally charged off as a deduction prior to January 1, 1972. The Department of Revenue and the Comptroller of the State of Florida both denied the refund claim made on behalf of the Petitioners, and thereafter they seasonably petitioned for a formal administrative hearing pursuant to Chapter 120.57(1), Florida Statutes.
Recommendation Having considered the foregoing Findings of Fact and Conclusions of Law, the evidence in the record, the candor and demeanor of the witness and pleadings and arguments of counsel it is, therefore RECOMMENDED this 3rd day of September, 1981, in Tallahassee, Leon County, Florida. P. MICHAEL RUFF, 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 3rd day of September, 1981. COPIES FURNISHED: Thurston A. Shell Post Office Box 1831 Pensacola, Florida 32578 Robert A. Pierce, Esquire General Counsel Department of Revenue Tallahassee, Florida 32301 Michael Basile, Esquire Deputy General Counsel Office of Comptroller The Capitol, Suite 1302 Tallahassee, Florida 32301 Wilson Crump, II, Esquire Assistant Attorney General Department of Legal Affairs The Capitol Tallahassee, Florida 32310
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.
The Issue The issue presented is whether Respondent is guilty of the allegations contained in the Administrative Complaint filed against her, and, if so, what disciplinary action should be taken, if any.
Findings Of Fact Respondent Anne E. Carr is and has been at all times material hereto a licensed real estate broker in the State of Florida, having been issued license number 0268356. In 1988 Helen B. Moser and her husband, John J. Moser, Jr., obtained their real estate salesman licenses. In 1989 they became real estate brokers. Upon becoming licensed brokers, they decided that they would like to open their own real estate office. They began contacting various real estate brokers seeking advice on how to open and operate a real estate business. Respondent was one of the brokers the Mosers contacted for advice. She and the Mosers already knew each other from previous professional activities. At the time, Respondent was the broker and sole stockholder of Carr Real Estate, Inc. She also was spending a substantial amount of time selling luxury condominiums for a particular developer, which required her to be on-site at the development. Respondent suggested to the Mosers that they join Carr Real Estate, Inc., and run the office for her rather than opening their own office, which would give them immediate access to her listings and many clients and allow her to devote her time to sales for the large real estate development. The Mosers agreed that was a good opportunity for all concerned and joined Carr Real Estate, Inc., as broker/salesmen in October of 1989. The Mosers began running the business for Respondent at her request, providing Respondent with monthly accountings. During 1990 the Mosers earned approximately $90,000 as a result of the listings they took over from Respondent and as a result of the listings Respondent referred to them. Throughout that year Carr Real Estate, Inc., remained a major presence in the Highland Beach area where Respondent was well known both for her flamboyant fashions and her ability to list and sell luxury ocean-front and water-front properties. During the first week of December 1990 Respondent advised the Mosers that due both to financial problems she was experiencing and pressure on her from the developer to devote full time to his sales she would be closing the business on December 31 unless the Mosers wanted to purchase the company from her. They advised Respondent they were interested in doing so and that they would draft the documents for Respondent's signature. Many discussions took place between Respondent and the Mosers over the next several weeks formulating the terms of the sale of the business, and the Mosers submitted to Respondent a number of drafts of documents. While the negotiations were on-going, Respondent filled out and executed on December 12, 1990, the documents necessary for her to file for personal bankruptcy. On December 15 she faxed written instructions to her attorney to not file the bankruptcy petition because she was selling her company. On December 20, 1990, Respondent and the Mosers executed a Purchase and Sale Agreement and a Bill of Sale. It is noted that those documents also involved the sale of Respondent's interest in two other corporations to the Mosers but that portion of the transaction raises no issues involved in this proceeding. The Purchase and Sale Agreement provided that its effective date would be January 1, 1991. The Agreement specifically represented that Carr Real Estate, Inc., was being sold free of any liabilities and encumbrances and that the corporation did not own any tangible assets. The Agreement further provided that Respondent would indemnify the Mosers from all obligations and liabilities incurred by Carr Real Estate, Inc., prior to January 1, 1991. The Agreement provided for no money to change hands as a result of the Mosers' purchase of Respondent's business; rather, the purchase price for the corporation was five percent of all sales commissions received by the corporation for a period of two years. On December 29, 1990, Respondent executed the Seller's Affidavit given to her by the Mosers. The portion of the Seller's Affidavit pertinent to this dispute is that Respondent attested that there were no actions or proceedings then pending in any state or federal court in which "the Affiant or Corporations" are parties, including bankruptcy. It was very clear in Respondent's mind that what she was selling under the Purchase and Sale Agreement and the Bill of Sale and what she was attesting to in the Seller's Affidavit was in regard to the corporation and not her personally. It never occurred to Respondent that she was representing to the Mosers that she personally had no bills and no assets. Respondent had no intention of defrauding the Mosers. Supporting this intent is the clear language contained in the Purchase and Sale Agreement, the Bill of Sale, and the Seller's Affidavit that she would personally indemnify and hold harmless the Mosers from any liabilities incurred by the corporation prior to the effective date of the sale. In mid-January 1991, approximately two weeks after the effective date of the sale, the Mosers discovered that a bankruptcy petition had been filed on behalf of Respondent as an individual. Although that petition did not involve the corporation, John Moser immediately contacted Respondent who did not know that her attorney had filed the petition contrary to Respondent's instructions. On January 23, 1991, Respondent wrote to Helen Moser apologizing for the erroneous filing of her bankruptcy petition and assuring her that it would be corrected. Respondent immediately contacted her attorney to ascertain how the petition could be dismissed. She was advised by her attorney that the only way she could dismiss the petition was to not attend the first meeting of creditors which would cause the petition to automatically be dismissed. Respondent did fail to attend the first meeting of creditors. Due to her failure to attend, her bankruptcy petition was dismissed. She immediately contacted Helen Moser to advise her of the dismissal. On February 1, 1991, John Moser called Respondent to inform her that a statement for a monthly automobile lease payment in the name of Carr Real Estate had been received. Respondent immediately sent the Mosers a note indicating that she had contacted G.M.A.C. but that company refused to allow her to transfer responsibility for her automobile lease payments from the corporation to herself. She acknowledged that she was responsible for any of the lease payments and requested that the Mosers acknowledge that the automobile was not an asset of the corporation. At the time Respondent knew that she was responsible for the lease payments because she signed the lease agreement as an individual. Respondent's contact with G.M.A.C. was unnecessary since her automobile had been leased to her as an individual in June of 1988, a date which preceded the existence of Carr Real Estate, Inc. The automobile was insured in Respondent's individual name and was registered in the name of G.M.A.C. at Respondent's address. The Bill of Sale executed by Respondent and the Mosers does not list the automobile as an asset of the corporation that was conveyed. The automobile leased by Respondent was not an asset of the corporation. The only relationship between Respondent's leased automobile and Carr Real Estate, Inc., concerns the deduction of automobile expenses as business expenses on the tax return for Carr Real Estate, Inc. On February 6, 1992, Helen Moser asked Respondent for a copy of the 1990 corporate tax return for Carr Real Estate, Inc., and Respondent provided a copy to her that same day. The return had been prepared in August or September of 1991 by Mary Dorak, a person enrolled with the Internal Revenue Service. It contained an entry entitled "loan from shareholder" in the sum of $107,060. Respondent had been the sole shareholder of the corporation. On February 26, 1992, the Mosers obtained an opinion letter from an attorney advising them that the corporation was not liable to Respondent for any debts. Neither the Mosers nor their accountant ever contacted Dorak or Respondent about the information contained in that tax return. Instead, the Mosers filed an amended corporate tax return for 1990 for Carr Real Estate, Inc. They removed the automobile as a corporate asset while leaving the shareholder's loan because it benefited them tax-wise. Instead of amending the return, the Mosers could have filed a 1991 return showing Respondent's stock exchange for the basis that was left of the stock in the corporation because the transaction took effect on January 1 of that year. Doing so would have caused no adverse tax consequences to the Mosers. Respondent typically provided Dorak with a listing of Respondent's income and expenses for the year and would then simply sign the return after Dorak had prepared it without reviewing the return first. Without any input from Respondent, Dorak had listed the automobile and some personal debts of Respondent on the 1990 corporate tax return because Respondent could take advantage of certain business deductions. That action had no adverse tax consequences for the Mosers. The Mosers never requested a tangible property tax return which would have reflected if there were any assets in the corporation. Had they made this request, they would have been told that there was none in existence because the corporation had no assets. At the time that Respondent and the Mosers executed the Purchase and Sale Agreement, the Bill of Sale, and the Seller's Affidavit in December, all three believed that the corporation had no assets or liabilities and that any assets and liabilities of Respondent were hers personally. As of January 1, 1991, the effective date of the sale, the corporation had no assets or liabilities. There were no tax consequences to the Mosers because of the listing of the shareholder loan in the 1990 corporate tax return because in that Subchapter S corporation the person ultimately adversely affected by the sale would be Respondent since she owned all of the shares in 1990. On the other hand, the filing of an amended 1990 corporate tax return by the Mosers without Respondent's knowledge and consent has resulted in adverse tax consequences to her, an unnecessary result. In November 1988 Respondent was involved in the sale of a condominium unit owned by Mr. and Mrs. Roy Heinz. Due to extended negotiations, the buyer's decision to not purchase the unit, and instructions from Heinz who was her client, Respondent delayed in placing the buyer's deposit check in her escrow account. Petitioner filed an Administrative Complaint against Respondent only and not also against Carr Real Estate, Inc., since that corporation was not yet in existence. After a formal evidentiary hearing, a Hearing Officer of the Division of Administrative Hearings specifically cleared Respondent of any intentional wrongdoing and of any culpable negligence. Respondent was found guilty, however, of what was specifically characterized to be a technical violation of failure to immediately place the deposit check into her escrow account. The minimum penalty permissible was assessed against Respondent. Respondent was also dismissed from the civil lawsuit filed by Roy Heinz which emanated out of the same circumstances for which the administrative action was brought. The Mosers knew about the disciplinary action and the civil lawsuit pending against Respondent individually prior to their execution of the December 1990 documents transferring Carr Real Estate, Inc., from Respondent's ownership to theirs effective January 1, 1991. The "Roy Heinz matter" was specifically raised by John Moser during the negotiations among the Mosers and Respondent. In April of 1991 Respondent sent Helen Moser a copy of the Recommended Order finding Respondent not guilty of any dishonest conduct or culpable negligence, and Helen Moser failed to even read the entire Order since she considered it unimportant and because she knew the transaction involved occurred prior to the formation of Carr Real Estate, Inc. The Mosers continue to operate Carr Real Estate, Inc. The business has been diminishing, however, since 1991 due to the reduction in the number of salespersons affiliated with the business, John Moser's inability to attract listings and retain clients, and the amount of time the Mosers have been devoting to John Moser's computer business. Respondent's actions and/or inactions have not been the cause of the decline in Carr Real Estate, Inc.'s, business. Moreover, the Mosers have not been harmed financially or in any other way due to any statements contained in the Purchase and Sale Agreement, Bill of Sale, or Seller's Affidavit executed by Respondent. The sale of Carr Real Estate, Inc., by Respondent to the Mosers benefited all three of them. In her negotiations surrounding that sale, Respondent agreed to the terms desired by the Mosers, acted honestly, and did not knowingly or intentionally misrepresent any material fact. Those misrepresentations alleged by the Mosers and Petitioner to be contained in the closing documents, such as any statement that Respondent personally had no assets or liabilities, were not material to the sale and purchase of the corporation.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is, RECOMMENDED that a Final Order be entered finding Respondent not guilty of the allegations contained in the Administrative Complaint filed against her and dismissing that Administrative Complaint. DONE and ENTERED this 16th day of December 1994, 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 16th day of December 1994. APPENDIX TO RECOMMENDED ORDER Petitioner's proposed findings of fact numbered 1-4, 6-11, 13, 15, 18, and 19 have been adopted either verbatim or in substance in this Recommended Order. Petitioner's proposed findings of fact numbered 5, 16, and 17 have been rejected as not being supported by the weight of the credible evidence. Petitioner's proposed findings of fact numbered 12 and 14 have been rejected as being subordinate. Respondent's proposed findings of fact numbered 1-29, 31, and 33-36 have been adopted either verbatim or in substance in this Recommended Order. Respondent's proposed finding of fact numbered 30 has been rejected as not being supported by the weight of the credible evidence in this cause. Respondent's proposed findings of fact numbered 32 has been rejected as not constituting a finding of fact but rather as constituting argument of counsel. COPIES FURNISHED: Jack McRay, Esquire Acting General Counsel Department of Business and Professional Regulation Northwood Centre 1940 North Monroe Street Tallahassee, Florida 32399-0792 Theodore R. Gay, Senior Attorney Department of Business and Professional Regulation 401 Northwest 2nd Avenue, Suite N-607 Miami, Florida 33128 Harold M. Braxton, P.A. Suite 400, One Datran Center 9100 South Dadeland Boulevard Miami, Florida 33156-7815
Findings Of Fact At all times pertinent to the matters in issue here, Bellot Realty operated a real estate sales office in Inverness, Florida. The Department of Transportation was the state agency responsible for the operation of the state's relocation assistance payment program relating to business moves caused by road building operations of the Department or subordinate entities. Frank M. Bellot operated his real estate sales office and mortgage brokerage, under the name Bellot Realty, at property located at 209 W. Main Street in Inverness, Florida since July, 1979. He operated a barber shop in the same place from 1962 to 1979. He moved out in October, 1991 because of road construction and modification activities started by the Department in 1989. The office was located in a strip mall and the other tenants of the mall were moving out all through 1990. Mr. Bellot remained as long as he did because when the Department first indicated it would be working in the area, its representatives stated they would be taking only the back portion of the building. This would have let Mr. Bellot remain. As time went on, however, the Department took the whole building, including his leasehold, which forced him out. He received a compensation award from the Department but nothing from any other entity. Though the instant project is not a Federal Aid Project, the provisions of Section 24.306e, U.S.C. applies. That statute defined average annual net earnings as 1/2 of net earnings before federal, state and local income taxes during the two taxable years immediately prior to displacement. During 1988, Mr. Bellot's staff consisted of himself and between 3 and 5 other agents from whom he earned income just as had been the case for several prior years. In 1988 his Federal Corporate Income Tax return reflected gross income of $120,843.00 and his profit was reflected as $27,377.25. The Schedule C attached to his personal Form 1040 for that year reflected gross sales of $25,078.00 with deductions of $5,250.00 for a net income of $19,828.00. Two of his agents foresaw the downturn in business as a result of the road change and left his employ during 1989. A third got sick and her working ability, with its resultant income, was radically reduced. This agent was his biggest producer. For 1989, Petitioner's tax return reflected the company's gross receipts were down to $50,935.75 and his operating loss was $5,700.03. However, the Schedule C for the 1989 Form 1040 reflected gross revenue of $21,450 with a net profit of $14,503. In 1990, the Schedule C for the Form 1040 reflected gross receipts of $5,565.00 which, after deduction of expenses, resulted in a net profit of $1,665.00 for the year. The corporate return reflects gross receipts of $23,965.96 and a net income figure from operations of $1,282.21. Mr. Bellot contends that neither 1989 or 1990 were typical business years as far as earnings go. Aside from a loss of activity and a general decline in business in Inverness, his parents, who were always in the office due to a terminal illness, caused him lost work time as he was very busy with them. He was also involved in a move and in refurbishing a house. In 1990, Mr. Bellot decided he could no longer stay in his office location due to the fact that the Department decided to take his whole building. Even if the taking had been of only one-half the building, however, it still would have put him out of business because it would have taken his parking area. At that time, the Department was rushing Mr. Bellot to vacate the premises. He was in difficult financial straits, however, and it would not have been possible for him to move but for the Department's compensation payments. As it was, he claims, the compensation was after the fact, and he had to borrow $30,000.00 in his mother's name in order to rehabilitate the building he moved into. Instead of utilizing income figures from years in which business activity was normal, the Department chose to use the income figures from 1989 and 1990, both of which were, he claims, for one reason or another, extraordinary. In doing so, since the income in those years was much lower than normal, the compensation he received was also much lower, he claims, than it should have been. He received $8,725.50. Had the 1988 and 1989 years income been used, the payment would have been $20,000.00, the maximum. He also claims the Department used the incorrect operating expense figures concerning travel expense. The Schedule C reflects a higher deduction for automobile expense for both years, arrived at by the application of a standard mileage expense approved by the Internal Revenue Service. In actuality, the expense was considerably less and, if the real figures had been used, his income would have been increased substantially for both years. Mr. Bellot's appeal was reviewed by Ms. Long, the Department's administrator for relocation assistance who followed the provisions of departmental manual 575-040-003-c which, at paragraph (IV) on page 33 of 35, requires the displacee to furnish proof of income by tax returns or other acceptable evidence. At subparagraph (e) on page 31 of 35 of the manual, the requirement exists for the displaced business to "contribute materially" to the income of the displace person for the "two taxable years prior to the displacement." If those two years are not representative, the Department may approve an alternate two year period if "the proposed construction has already caused an outflow of residents, resulting in a decline of net income. " To grant an alternative period, then, the Department must insure that the loss of income is due to the Department's construction and not to other considerations. Here, the Department's District Administrator took the position it was not it's actions which caused the Petitioner's loss of income. Ms. Long took the same position. The Department's District 5 initially notified the people of Inverness of the proposed project somewhere around 1988. The project was to straighten Main Street out through downtown Inverness for approximately 2 miles. There is no evidence as to when the first affected party moved and Ms. Long does not know whether or not the project had an adverse effect on business in downtown Inverness. Petitioner's evidence does not show that it did.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is, therefore: RECOMMENDED that Petitioner's appeal of the Department's decision to refuse to use alternate tax years or actual mileage deduction in its calculation of a relocation assistance payment be denied. RECOMMENDED this 29th day of December, 1992, in Tallahassee, Florida. ARNOLD H. POLLOCK 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 29th day of December, 1992. APPENDIX TO RECOMMENDED ORDER The following constitutes my specific rulings pursuant to Section 120.59(2), Florida Statutes, on all of the Proposed Findings of Fact submitted by the parties to this case. FOR THE PETITIONER: Accepted. & 3. Accepted and incorporated herein. Accepted and incorporated herein. Accepted and, in part, incorporated herein. Rejected as not proven by competent, non-hearsay, evidence. Accepted. Not proven. Merely a statement of Petitioner's position. Accepted that Petitioner's business income dropped. It cannot be said that the road project's were the primary cause of the decline in Petitioner's business. There is no independent evidence of this. Accepted and incorporated herein. First sentence accepted. Balance not based on independent evidence of record. Not a proper Finding of Fact but a comment on the evidence. First sentence accepted. Second sentence rejected. Accepted and incorporated herein. Not a Finding of Fact but a restatement of and attempted justification of Petitioner's position. Accepted and incorporated herein. Rejected as argument and not Finding of Fact. Not a Finding of Fact but a recapitulation of the evidence. FOR THE RESPONDENT: Accepted. & 3. Accepted. - 6. Accepted and incorporated herein. Accepted and incorporated herein. Accepted. & 10. Accepted. 11. & 12. Accepted. 13. Accepted. COPIES FURNISHED: Charles G. Gardner, Esquire Department of Transportation 605 Suwannee Street Tallahassee, Florida 32399-0458 James R. Clodfelter Acquisitions Consultant Enterprises, Inc. P.O. Box 1199 Deerfield Beach, Florida 33443 Ben G. Watts Secretary Department of Transportation 605 Suwannee Street Tallahassee, Florida 32399-0458 Thornton Jpp. Williams General Counsel Department of Transportation 605 Suwannee Street Tallahassee, Florida 32399-0458
Findings Of Fact On a date prior to November 2, 1971, petitioner exchanged property it then held for property it now holds. This transaction resulted in a capital gain for petitioner, although recognition of the gain has been deferred for federal tax purposes. For such purposes, petitioner's basis in the property it presently holds is deemed to be the same as its basis in the property it formerly held. On its own books, however, petitioner has stated its basis in the property it now holds as the market value of the property at the time it was acquired. This figure is higher than the figure used for federal tax purposes. Working from this higher figure, petitioner states larger depreciation allowances on its own books than it claims for federal tax purposes. On its 1973 Florida corporation income tax return, petitioner claimed these depreciation allowances instead of the smaller depreciation allowances it claimed on its federal income tax return for the same period.
Recommendation Upon consideration of the foregoing, it is RECOMMENDED: That respondent assess a deficiency against petitioner based on the income not stated in its 1973 return because of its unauthorized depreciation claim, together with interest and applicable penalties. DONE and ENTERED this 2nd day of February, 1979, in Tallahassee, Florida. ROBERT T. BENTON, II Hearing Officer Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304 (904) 488-9675 COPIES FURNISHED: Joseph Philip Rouadi, C.P.A. 781 Wymore Road Maitland, Florida 32751 E. Wilson Crump, Esquire Post Office Box 5557 Tallahassee, Florida
Findings Of Fact Pursuant to a stipulation, the following facts are found. Petitioner is a West Virginia corporation, organized under the laws of that state on January 4, 1958. Prior to June 1, 1962, it operated an automobile dealership in Huntington, West Virginia. On June 1, 9162, Petitioner exchanged assets of its automobile dealership for fifty (50 percent) percent of the capital stock of Dutch Miller Chevrolet, Inc., a West Virginia corporation organized to succeed the automobile dealership formerly operated by the Petitioner. Prior thereto, in 1961, the Petitioner had acquired one hundred percent (100 percent) of the capital stock in Palm Beach Motors (the name of which was changed on August 10, 1961 to Roger Dean Chevrolet, Inc.). Roger Dean Chevrolet, Inc. is a wholly owned subsidiary of the Petitioner which operated on property owned by the Petitioner. The years involved herein are the fiscal years ending December 31, 1972 and 1973, during which years the Petitioner's principal income (except for the gain involved herein) consisted of rents received from Roger Dean Chevrolet, Inc. Petitioner and its subsidiary filed consolidated returns for the years involved. During the fiscal year ending December 31, 1972, Petitioner sold its stock in Dutch Miller Chevrolet, Inc. to an unrelated third party for a gain determined by the Respondent to be in the amount of $349,217.00, which, although the sale took place out of the State of Florida, the Respondent has determined to be taxable under the Florida Income Tax Code* (Chapter 220, Florida Statutes). In the fiscal years ending December 31, 1972 and 1973, Petitioner included in Florida taxable income, the amounts of $76.00 and $6,245.00, respectively, from the sale of property on April 23, 1971, such gain being reported for federal income tax purposes on the installment method under Section 453 of the Internal Revenue Code of 1954. Roger H. Dean, individually or by attribution during the years involved herein, was the owner of one hundred (100 percent) percent of the stock of Roger Dean Enterprises, Inc. and seventy-five (75 percent) percent of the stock of Florida Chrysler-Plymouth, Inc. The remaining twenty-five (25 percent) percent of Florida Chrysler-Plymouth, Inc. was owned by Robert S. Cuillo, an unrelated person. The Respondent disallowed the $5,000.00 exemption to the Petitioner in computing its Florida corporate income tax for each of the years in question on the theory that the two corporations were members of a controlled group of corporations, as defined in Section 1563 of the Internal Revenue Code of 1954. By letter dated April 13, 1976, the Respondent advised Petitioner of its proposed deficiencies for the fiscal years ending December 31, 1972 and 1973, in the respective amounts of $19,086.25 and $1,086.79. Within sixty (60) days thereafter (on or about May 10, 1976), Petitioner filed its written protest in response thereto. By letter dated May 27, 1976, the Respondent rejected the Petitioner's position as to the stock sale gain and exemption issues. Thereafter on September 17, 1976, a subsequent oral argument was presented at a conference held between the parties' representatives in Tallahassee, and by letter dated September 23, 1976, Respondent again rejected Petitioner's position on all pending issues raised herein. The issues posed herein are as follows: Whether under the Florida Corporate income tax code, amounts derived as gain from a sale of intangible personal property situated out of the State of *Herein sometimes referred to as the Code. Florida are properly included in the tax base of a corporation subject to the Florida code. Whether amounts derived as installments during tax years ending after January 1, 1972, from a sale made prior to that date are properly included in the tax base for Florida corporate income tax purposes. Whether two corporations one of whose stock is owned 100 percent by the same person who owns 75 percent of the stock in the other, with the remaining 25 percent of the stock in the second corporation being owned by an unrelated person, constitute members of a control group of corporations as defined by Section 1563 of the Internal Revenue Code of 1954. Many states, in determining corporate income tax liability, utilize a procedure generally referred to a "allocation" to determine which elements of income may be assigned and held to a particular jurisdiction, where a corporation does business in several jurisdictions. By this procedure, non- business income such as dividends, investment income, or capital gains from the sale of intangibles are assigned to the state of commercial domicile. This approach was specifically considered and rejected when Florida adopted its corporate income tax code. Thus, in its report of transmittal of the corporate income tax code to the legislature, at page 215, it was noted: "The staff draft does not attempt to allocate any items of income to the commercial domicile of a corporate taxpayer. It endeavors to apportion 100 percent of corporate net income, from whatever source derived, and to attribute to Florida its apportionable share of all the net income." Additional evidence of the legislature's intent in this area can be seen by noting that when the corporate income tax code was adopted, Florida repealed certain provisions of the Multi-state Tax Compact (an agreement for uniformity entered into among some twenty-five states). Thus, Article IV, Section (6)(c), a contained in Section 213.15, Florida Statutes, 1969, which previously read: "Capital gains and losses from sales of intangible personal property are allocable to this state if the taxpayer's commercial domicile is in this state", was repealed by Chapter 71-980, Laws of Florida, concurrently with the adoption of the Corporate Income Tax Code. This approach has survived judicial scrutiny by several courts. See for example, Johns-Mansville Products Corp. v. Commissioner of Revenue Administration, 343 A.2d 221 (N.H. 1975) and Butler v. McColgan, 315 U.S. 501 (1942). Respecting its constitutional argument that amounts derived as installments during tax years subsequent to January 1, 1972, from a sale made prior to the enactment of the Florida Corporate Income Tax Code, the Petitioner concedes that the Code contemplates the result reached by the proposed assessment. However, it argues that in view of the constitutional prohibition which existed prior to enactment of the Code, no tax should now be levied based on pre-Code transactions. The Florida Supreme Court in the recent case of the Department of Revenue v. Leadership Housing, So.2d (Fla. 1977), Case No. 47,440 slip opinion p. 7 n. 4, cited with apparent approval the decision in Tiedmann v. Johnson, 316 A.2d 359 (Me. 1974). The court in Tiedmann, reasoned that the legislature adopted a "yard-stick" or measuring device approach by utilizing federal taxable income as a base, and reasoned that there was no retroactivity in taxing installments which were included currently in the federal tax base for the corresponding state year even though the sale may have been made in a prior year. The Respondent denied the Petitioner a $5,000.00 exemption based on its determination that the two corporations herein involved were members of a controlled group of corporations as defined in Section 1563 of the Internal Revenue Code. Chapter 220.14(4), Florida Statutes, reads in pertinent part that: "notwithstanding any other provisions of this code, not more than one exemption under this section shall be allowed to the Florida members of a controlled group of corporations, as defined in Section 1563 of the Internal Revenue Code with respect to taxable years ending on or after December 31, 1972, filing separate returns under this code." Petitioner's reliance on the case of Fairfax Auto Parts of Northern Virginia, 65 T.C. 798 (1976), for the proposition that the 25 percent ownership of an unrelated third party in one of the corporations precluded that corporation and the Petitioner from being considered a "controlled group of corporations" within the meaning of Section 1563 of the Internal Revenue Code, is misplaced in view of the recent reversal on appeal by the Fourth Circuit. Fairfax Auto Parts of Northern Virginia v. C.I.R., 548 F.2d 501 (4th C.A. 1977). Based thereon, it appears that the Respondent correctly determined that the Petitioner and Florida Chrysler-Plymouth, Inc., were members of the same controlled group of corporations as provided in Section 1563 of the Internal Revenue Code and therefore properly determined that Petitioner was not entitled to a separate exemption. Based on the legislature's specific rejection of the allocation concept and assuming arguendo, that Florida recognized allocation income for the sales of intangibles, it appears that based on the facts herein, Petitioner is commercially domiciled in Florida. Examination of the tax return submitted to the undersigned revealed that the Petitioner has no property or payroll outside the state of Florida. Accordingly, it is hereby recommended that the proposed deficiencies as established by the Respondent, Department of Revenue, be upheld in its entirety. RECOMMENDED this 7th day of July, 1977, in Tallahassee, Florida. JAMES E. BRADWELL Hearing Officer Division of Administrative Hearings 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 David S. Meisel, Esquire 400 Royal Palm Way Palm Beach, Florida 33480 Thomas M. Mettler, Esquire 340 Royal Poinciana Plaza Palm Beach, Florida 33480
