(September 30, 1930)
Sir:
The following statement is made without prejudice to the rights of the above-mentioned taxpayer in any proceedings that may be instituted against him. The facts stated are upon information and belief only.
The taxpayer is now 31 years old, and has continuously lived with his wife since his marriage in 1917. He has one child, a son, now nearly 12 years old. Since 1922 he has been the principal support of his widowed mother and his sister and brother, now 19 and 21 years of age, respectively.
Prior to the latter part of the year 1926 he was employed at a salary which at no time exceeded $75 per week. During the years 1926 to 1929, inclusive, he was the recipient of considerable sums of money, title to which vested in him by right of possession only.
Taxpayer became active as a principal with three associates at about the end of the year 1926. Because of the fact that he had no capital to invest in their various undertakings, his participation during the entire year 1926 and the greater part of 1927 was limited. During the years 1928 and 1929 the profits of the organization of which he was a member were divided as follows: one-third to a group of regular employees and one-sixth each to the taxpayer and three associates.
The, taxpayer was at no time the banker for the organization, nor did he, ever actively participate in the conduct of its individual enterprises.
The only attorneys employed by the taxpayer personally during this period were Nash & Ahern, Ben Epstein and Capt. Billy Waugh, all of Chicago, Ill. The so-called bodyguards with which he is reputed to surround himself on the occasion of infrequent appearances in public, were not, as a general rule, his personal employees, but were, in fact, employees of the organization which participated in its profits. Several of these employees stopped at the same hotel with the ,taxpayer while he was in Chicago.
That a large force of bodyguards did not continually surround him is established by the fact that on the occasion of his arrest at Philadelphia in 1929 only one companion was with him.
The furniture in the home occupied by the taxpayer while he was in Florida was acquired at a cost not in excess of $20,000. The house and grounds have been thoroughly appraised and the appraisal has been heretofore submitted to you.
There is a mortgage against the house and grounds of $30,000. His indebtedness to his associates has rarely ever been less than $75,000 since 1927. It has frequently been much more.
Notwithstanding that two of the taxpayer's associates from whom,I have sought information with respect to the taxpayer's income insist that his yearly income never exceeded $50,000 in anyone year, I am of the opinion that his taxable income for the years 1925 and 1926 might fairly be fixed at not to exceed $26,000 and $40,000 respectively and for the years 1928 and 1929 not to exceed $100,000 per year.
LAWRENCE P. MATTINGLY