Harry Gordon and Geraldine Gordon, Petitioners-Appellants-Cross-Appellees v. Commissioner of Internal Revenue, Respondent-Appellee-Cross-Appellant

concurring in part and dissenting in part:

I concur in the majority’s opinion except insofar as it states that the wagering excise tax on the receipts in question did not constitute an accrued liability. As to that holding, I respectfully dissent.

The cases cited by the majority, United States v. Consolidated Edison Co., 366 U.S. 380 , 81 S.Ct. 1326 , 6 L.Ed.2d 356 (1961), and Security Mills Co. v. Commissioner, 321 U.S. 281 , 64 S.Ct. 596 , 88 L.Ed. 725 (1944), are inapposite to the problem presented here. The Consolidated Edison case addressed the question whether a property tax liability was properly accrued as a deduction in computing federal tax, even though the taxpayer was contesting the property tax in a separate state proceeding. The Security Mills case considered whether the taxpayer could deduct as an accrued liability an agricultural processing tax, notwithstanding that it was contesting the constitutionality of that tax in court proceedings.

In the case before us, the taxpayer has not contested his liability for the excise tax, except in the general sense that he asserts that he is not liable for the income tax. He does so by denying that certain transactions…

572 F.2d 193 77-2 USTC P 9747 Harry GORDON and Geraldine Gordon, Petitioners-Appellants-Cross-Appellees, v. COMMISSIONER OF INTERNAL REVENUE, Respondent-Appellee-Cross-Appellant. Nos. 75-2567, 75-2960. United States Court of Appeals, Ninth Circuit. Aug. 26, 1977. Bruce I. Hochman, Harvey D. Tack, Los Angeles, Cal., argued, for appellants. M. Carr Ferguson, Asst. Atty. Gen., James E. Crowe, Jr., Atty., Tax Div., U. S. Dept. of Justice, Washington, D. C., argued, for appellees. On Appeals from the Decision of the United States Tax Court. Before CUMMINGS, * HUFSTEDLER and KENNEDY, Circuit Judges. PER CURIAM: 1 The petitioners reside in Las Vegas, Nevada, and timely filed their 1967 federal income tax joint return with the district director of Internal Revenue at Reno, Nevada. In this opinion, we refer only to petitioner Harry Gordon because his wife Geraldine is involved only to the extent of the joint return. 2 The Commissioner of Internal Revenue determined a $177,472.60 deficiency plus a $88,736.70 civil fraud penalty as to petitioner's 1967 income tax return. However, the tax court reduced the deficiency to $38,577.60 and refused to approve a fraud penalty. Turning aside asserted…

The petitioners reside in Las Vegas, Nevada, and timely filed their 1967 federal income tax joint return with the district director of Internal Revenue at Reno, Nevada. In this opinion, we refer only to petitioner Harry Gordon because his wife Geraldine is involved only to the extent of the joint return.

The Commissioner of Internal Revenue determined a $177,472.60 deficiency plus a $88,736.70 civil fraud penalty as to petitioner’s 1967 income tax return. However, the tax court reduced the deficiency to $38,-577.60 and refused to approve a fraud penalty. Turning aside asserted Fourth and Fifth Amendment claims, the court also *195 refused to suppress evidence seized pursuant to a search warrant during a raid by the Internal Revenue agents on the Derby Turf Club, a licensed horse-race and sports bookmaking establishment in which petitioner was an 80 per cent partner. With modifications accepted by the Commissioner, the tax court approved his determination of the Derby’s unreported net income derived from projections based on wagering tickets seized in the raid. The court applied the profit percentages of the Derby on reported wagers to the amounts of gross wagers, determined by…