Before MARIS, KALODNER and HASTIE, Circuit Judges.
This is an appeal from the order of the United States District Court for the Western District of Pennsylvania in an action brought by Ralph B. McCord ("McCord") for a partial refund of income tax paid by him for the year 1946. The facts may be summarized as follows:
On March 14, 1947, McCord filed an income tax return for 1946 with the Collector of Internal Revenue at Pittsburgh, Pennsylvania, on Form 1040. The return was prepared for McCord by Root and Co., according to a statement made thereon. On the line provided for the listing of taxpayer's name there appeared only McCord's name. On this score it must be noted that the form provided "If this return is for a husband and wife use both first names". In the portion of the return captioned "Your Exemptions" the form stated "List your own name. If married and your wife (or husband) had no income, or if this is a joint return of husband and wife, list name of your wife (or husband)." In response to that provision McCord listed on one line his own name; on the line below "Elizabeth McCord, wife" and on the line below that "Eva Lyons, mother-in-law".
In another part of the return McCord claimed the then existing exemption of $500 each for himself, his wife and mother-in-law. In response to the printed question "Is your wife (or husband) making a separate return for 1946" the answer was "No". Immediately below, on the line provided for "Signature of taxpayer" McCord signed his name only. Again, on this score, it must be noted that immediately below the place provided for signature of taxpayer appears the printed statement: "If this is a joint return of husband and wife, it must be signed by both."
In a schedule attached to the return, under the heading "Schedule C - Profit or Loss from Business", there was included inter alia, the following items:
Sale of 21 lots $12,300.00
The dates of purchase and sale of the lots were not listed. McCord treated the gain from the sale of the lots as ordinary income.
On April 3, 1947, McCord filed an amended return and a claim for refund of overpayment of tax in the amount of $1,907.93, in which he asserted that only one-half of the proceeds from the sale of the lots was income taxable to him and the other one-half was income taxable to his wife, since the lots were owned by them as "tenants by the entireties." In this amended return McCord again did not list the dates of purchase and sale of the lots and treated the gain in their sale as ordinary income and not as a capital gain.
On the same day and at the same time that McCord filed his amended return his wife filed with the Collector of Internal Revenue in Pittsburgh an income tax return for 1946. In that return she reported as ordinary income 50% of the gain from the sale of the 21 lots. The Collector and subsequently the Commissioner, accepted her return.
On May 21, 1947, McCord and his wife separately filed further amended returns and claims for refund in which they asserted that capital gain rather than ordinary income was realized from the sale of the lots. In this amended return McCord for the first time listed the sale of the lots as a long-term capital gain on Schedule D (Schedule ...