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May 26, 1965

Mae ETHENGAIN, Plaintiff,
Kenneth O. HOOK, District Director, Internal Revenue Service, Defendant. Mae ETHENGAIN, Plaintiff, v. UNITED STATES of America, Defendant

The opinion of the court was delivered by: GRIM


1. These are suits for recovery of wagering excise taxes for the periods May, 1959 through May, 1961 and special wagering stamp taxes for the periods May 18, 1959 through June 30, 1961.

 2. These cases involve the same issue and have been consolidated for trial and decision by the court as stipulated by the parties.

 3. The plaintiff is an individual residing at 6252 Spruce Street, Philadelphia, Pennsylvania.

 4. On May 18, 1961, officers of the Philadelphia Police entered and searched the plaintiff's home pursuant to a search warrant. Plaintiff was present during this search. During the course of the search special agents of the Internal Revenue Service were called in to assist the police.

 5. In the middle upstairs room of plaintiff's home the police and special agents found and seized various notebooks, pads, and papers, an adding machine, $ 16,626.42 in cash, over $ 800 in checks, a telephone, bank money wrappers totaling several thousands of dollars, some used and some unused, and other items. Approximately seventeen of the notebooks or pads seized and several of the loose sheets of paper contained numbers plays showing the amounts bet and in some cases a name and date. In addition, at least 5 of the notebooks contained daily and weekly tabulations of amounts of money received. The notebooks were of the type used by numbers bankers and the tabulations were made in the manner customary to numbers bankers. Totals appearing in the banker's tabulations could be correlated to amounts appearing in the pads containing numbers bets.

 6. At least two of the loose sheets of paper contained lists of numbers plays in the plaintiff's handwriting. One of the sheets contained the name 'ollie', also written by the plaintiff; the other contained the name 'King', written by her. Both of these names also appeared in several places in the banker's notebooks and numbers pads.

 7. The income of the plaintiff and her husband, other than income from the numbers or lottery business was derived principally from the following sources during the period of approximately twenty years preceding the date of the police raid on their home, May 18, 1961:

 (a) Plaintiff's husband's salary as a railroad worker, and, at times, a longshoreman. This usually averaged from $ 4,000 to $ 5,000 per year.

 (b) Plaintiff's earnings as a part-time employee. These totaled less than $ 3,000 for the entire period.

 (c) Rentals from four small buildings purchased during this period. The net income from this source, after expenses and depreciation, was generally less than $ 1,000 per year.

 The plaintiff and her husband did not have any other substantial sources of income. They had six children. At times they may have received some board money from some of them, however, as late as 1959 four of the children were claimed as tax exemptions by the plaintiff's husband on his income tax returns.

 8. At the time of the police raid, May 18, 1961, the plaintiff and her husband had bank accounts which totaled in excess of $ 25,000 in five banks in the Philadelphia area. They also owned on that date, in some instances subject to mortgages or other outstanding obligations, four pieces of rental property, a one family home, an automobile, miscellaneous household appliances and furniture. The above-listed property and money was in addition to the $ 16,626.42 in cash and over $ 800 in checks found in their home. The income of plaintiff and her husband, other than income from the numbers or lottery business, was insufficient to account for the accumulation of money and property owned by them on May 18, 1961.

 9. On May 18, 1961, after the police raid the plaintiff was questioned by special agents of the Internal Revenue Service. She stated that she had been in the numbers business for two years, that she had heard of the special wagering tax stamp but had not purchased one nor paid any taxes on the wagers received by her and that the evidence found in her home spoke for itself.

 10. The plaintiff, during the two year period preceding the police raid of May 18, 1961, was engaged in the operation of a numbers or lottery business. The plaintiff willfully failed to obtain wagering tax stamps for the period from May 18, 1959 through June 30, 1961, and willfully failed to file federal wagering excise tax returns and to pay the taxes due on wagers received in this business for the periods from May, 1959 through May, 1961. 11. On May 19, 1961, the District Director of Internal Revenue made the following assessments against plaintiff: Wagering excise taxes (5-18-59 -- 5-18-61) $ 12,560.00 Penalty 5,870.00 Interest 611.46 /-- $ 19,041.46 Special Wagering Stamp taxes (5-18-59 -- 5-18-61) $ 108.34 Penalty 54.17 Interest 9.32 /-- $ 171.83 July 10, 1961 $ 7,765.18 April 10, 1963 12,784.49 /-- $ 20,549.67


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