1949 - Internal Revenue Service

56 REPORT OF COMMISSIONER OF INTERNAL REVENUE
closed during the year involved claims of $7,393,940, of which the
amount of $2,173,361 was collected.
The Compromise Section is charged with the prosecution of claims
filed by collectors against the estates of deceased taxpayers, against
insolvent banks, and in liquidation proceedings, including assignments
for the benefit of creditors. At the request of the Department
of Justice, the section assists in trials involving the afore-mentioned
types of claims. The 1,732 cases closed during the year involved
claims in the amount of $30,682,662, of which $6,425,150 was collected.
INTERPRETATIVE DIVISION.—The functions of this division consist
of the preparation of letters and memoranda, for the signature of the
head of the division, the Chief Counsel, the Commissioner, or the
Secretary, interpreting the internal revenue statutes (except such as
relate to taxes on alcoholic beverages), the Federal Insurance Contributions
Act, the Federal Unemployment Tax Act, and the Railroad
Retirement Tax Act; the review of all correspondence, for the signature
of the Commissioner or of the Secretary or of an official of his
office, containing a ruling or opinion of the Bureau and routed through
the Chief Counsel's office for approval; assisting in the preparation
and review of briefs to be filed with The Tax Court of the United
States in key cases; reviewing actions on decisions in special cases;
reviewing closing agreements covering proposed transactions; assisting
in the preparation of income tax and other forms; editing the
material submitted for publication in the Internal Revenue Bulletin;
and the preparation of opinions and rulings in special cases assigned
by the Chief Counsel. Members of this division hold conferences
with taxpayers and also participate in conferences when so requested
by the administrative branches and units of the Bureau of Internal
Revenue or by other divisions of the Chief Counsel's office.
Included in this division is the Digest Section, the functions of
which are to preserve, digest, and make readily available to the
. members of the Chief Counsel's staff all opinions, rulings, and other
documents which have been prepared or reviewed by the Chief
Counsel's office.
This division began the year with 348 cases on hand, received 1,793,
and disposed of 1,841, leaving 300 on hand at the close of the year.
In addition to the formal consideration and action in the cases
above noted a vast amount of special and miscellaneous work was
performed of such nature that a statistical summary thereof is not
possible.
LEGISLATION AND REGULATIONS DIVISION. —The regulations issued
under the internal revenue laws, and tax conventions with foreign
countries, and the reports on legislation introduced in the Congress
affecting the internal revenue, except such as relate to taxes on alcoholic
beverages, are prepared or reviewed in this division. The division
also considers suggestions for amendments of and additions to the
various internal revenue laws, and prepares reports thereon for the
consideration of the Commissioner and the General Counsel. It
participates in the preparation of income tax and other forms and m
the drafting of internal revenue laws and tax conventions.
PENAL DIVISION.—The work of the Penal Division, including. the
offices of the regional counsel, deals with practically all classes of
.4 REPORT OF COMMISSIONER OF INTERNAL REVENUE 57
internal revenue taxes where criminal liability is involved, comprising
among others, income and profits tax cases, miscellaneous tax cases,
and employment tax cases. When it is decided that criminal proceedings
should be instituted, law and fact letters or criminal reference
reports are prepared transmitting such cases to the Department of
Justice for criminal prosecution. This division also considers offers
in compromise of liability where criminal proceedings have been
instituted or recommendations for prosecution have been made to
the Bureau or by the Bureau to the Department of Justice; prepares
opinions construing the criminal and percentage penalty
statutes, and handles miscellaneous law questions involving criminal
cases. It also prepares opinions as to whether cases closed by agreement
under section 606 of the Revenue Act of 1928, and similar provisions
of other Revenue Acts and the Internal Revenue Code, should
be reopened because of "fraud or malfeasance, or misrepresentation
of a material fact." Whenever requested by the Department of
Justice or the United States attorney, an attorney from this division
assists in the preparation and trial of criminal tax cases.
At the beginning of the year, 2,119 cases were pending in the Penal
Division. New cases totaling 1,240, involving 4,310 tax years and over
$111,928,045 in tax liability, including penalties, were received, and
1,135 cases were closed, leaving 2,224 cases pending on June 30, 1949,
a net increase of 105. Of the total number of cases received, 1,088
were income tax cases, both corporate and individual, 53 were miscellaneous
tax cases, 12 were of a mixed nature, and 87 involved
miscellaneous law questions. The penal work has been performed in
close cooperation with the Department of Justice. During the year,
819 cases, involving 907 defendants, were transmitted to the Department
of Justice. Of this number, prosecution was recommended in
751 cases, and in 68 prosecution was not recommended. The Department
of Justice referred 576 cases, involving 675 defendants, to various
United States attorneys with authorization to institute criminal proceedings
as to certain defendants, while 191 cases were returned without
prosecution. Indictments were returned involving 424 defendants
and grand juries refused to indict 2 defendants. Of the number
reaching the trial stage for the entire year, 45 defendants were convicted,
and 315 defendants, involving 285 cases, entered pleas of
guilty or nolo contendere; indictments involving 18 defendants and
11 cases were dismissed or nol pressed for various reasons, and there
were 12 defendants, involving 12 cases, acquitted. In addition to
the cases referred to the Department of Justice for criminal prosecution,
the Penal Division, upon review of the facts, law, and circumstances
involved, concluded against recommending prosecution in 407
cases. Miscellaneous law questions,numbering 89,were also disposed of.
The Division is also charged with the consideration of claims for
reward under section 3463 of the Revised Statutes and section 3792
of the Internal Revenue Code. Jurisdiction of the reward claims
work and personnel was transferred from the Chief Counsel's Committee
to the Penal Division during the year.
Claims for reward for information supplied the Bureau relative to
violations of the internal revenue laws were filed and disposed of
during the year as follows: As of July 1, 1948, 1,975 claims were pend-