Court Opinion

ID: 9442693
Source: CourtListenerOpinion
Date Created: 2023-08-03 18:56:07.661945+00
Date Added: 2024-06-11T17:29:11.469298
License: Public Domain

*320JOHNSEN, Circuit Judge
(dissenting).
I do not think it properly can be said that the Tax Court has failed to pass upon the necessary questions in the case, and so I feel obliged to dissent.
The Commissioner had assessed deficiencies against petitioners, on income from the Norfolk-Portsmouth project, for the year the cash payment was received, pn the ground that the partnership, under which petitioners carried on their general operations, was returning its income otherwise on a cash basis and so could not use an accrual basis for the Norfolk-Portsmouth project. Petitioners had contended that in the execution of the Norfolk-Portsmouth project they had made an arrangement with another engineer named Royer, which had given rise to a new partnership within the revenue statutes for that proj ect, distinct from the general partnership under which petitioners conducted their other operations and entitled as such to keep its records and return its income on an accrual basis, without regard to the fact that the general partnership was using a cash basis.
In seeking a redetermination by the Tax Court of the assessed deficiencies, petitioners of course had the burden of establishing that a separate entity, of a form recognized by the revenue statutes, had been created and existed in the execution of the Norfolk-Portsmouth project. Under the statute, such an entity was not limited to being a conventional general partnership, for section 3797(a)(2) of the Internal Revenue Code, 26 U.S.C.A. § 3797(a) (2), makes the concept of partnership, for income tax purposes, include “a syndicate, group, pool, joint venture, or other unincorporated organization, through or by means of which any business, financial operation, or venture is carried on, and which is not, within the meaning of this title, a trust or estate or a corporation; and the term ‘partner’ includes a member in such a syndicate, group, pool, joint venture, or organization.” Petitioners therefore would have been entitled to claim a partnership with Royer as to the Norfolk-Portsmouth project, for income tax purposes, on the basis of any of the designations or forms of organization enumerated in the statute which they could demonstrate had existed.
Their petition in the Tax Court claimed that the Norfolk-Portsmouth arrangement had created a “joint venture” and on this basis was within the concept of a “partnership” under the statute. Four times the petition uses the term “joint venture” in referring to the arrangement. No where is there any claim or suggestion of reliance upon any other form of “partnership” under the statute, such as a general one or “a syndicate, group, pool, * * * or other unincorporated organization”.
In this situation, I do not see how the Tax Court could do other than say, as it did — “The question to be decided in these proceedings is whether the Norfolk-Portsmouth project was a separate joint venture. If it was, the net income derived from this project could be reported on the partnership returns of Harland Bartholomew & Associates on the accrual basis as the books of the project were kept on that basis. If not, the net income from, the project must be reported on the partnership returns on its regular cash receipts and disbursements basis.”
When the Tax Court found that the arrangement which petitioners made with Royer had not given rise to a joint venture between them — which finding the majority opinion concedes “cannot be held to be erroneous” — petitioners’ claim of partnership on the basis of that concept (and the only basis which it had claimed) automatically fell, and the Tax Court’s statement, that “It follows from this finding that the respondent correctly determined that the income from the Norfolk-Portsmouth project should be reported on the (general) partnership return for 1944 on the cash receipts and disbursements basis of accounting used by the partnership,” left nothing else to be said.
I am unable therefore to see any ground or warrant for the statement in the majority opinion that the Tax Court’s finding, that no joint venture existed between peti*321tioners and Royer as to the Norfolk-Portsmouth project, is “not adequate to support the conclusion that the petitioners are necessarily liable for the deficiencies determined by the Commissioner” or for its mandating of “a rehearing and determination, upon the present record, of the question whether or not Royer was a ‘partner’ of petitioners with respect to the Norfolk-Portsmouth project.”
Why should the Tax Court be required to go back and negative the other possible bases of partnership under the statute— general partnership, syndicate, group, pool or other organization — when no issue or even contention was presented to it that any of these statuses or forms were present? It was up to petitioners to assert and establish the position -upon which they relied for having the Commissioner’s assessments overthrown.
Repeating — when petitioners filed their petition in the. Tax Court they made the claim that the Norfolk-Portsmouth project was a joint venture and that on this basis a partnership had existed within the statute. When the Tax Court held that no joint venture had existed, petitioners did not contend, by means of a petition for rehearing, that this finding did not enable the Tax Court to dispose of the case. Their contention simply was that the finding itself was erroneous on the evidence. And when they filed their petition for review in this Court, they set out as the point upon which they relied for reversal that “The court erred in holding that R. Stuart Royer was not a joint adventurer with petitioners in carrying out the Norfolk-Porstmouth Project.”
The suggestion that the Tax Court should have determined whether any other basis or form of partnership under the statute might have existed in the situation has come crawling into the case in the brief which petitioners have filed in this Court. It is an attempt to get a new trial by means of questions never urged or regarded as being involved before the Tax Court. Not only is the injection untimely but it rests on mere abstraction as well, for not even a pretense is made of demonstrating that the evidence would permit of a contention that some other concept or form of partnership' within the statute than a joint venture had been involved.
On all of this, the basis of the majority opinion and the requirement of its mandate seem to me unsound and anomalous as a review of a Tax Court decision.