Court Opinion

ID: 9444113
Source: CourtListenerOpinion
Date Created: 2023-08-03 19:42:03.800292+00
Date Added: 2024-06-11T17:29:43.411316
License: Public Domain

CLARK, Circuit Judge
(dissenting).
Judge Van Fossan’s findings and conclusions, strongly buttressed by the evidence, in my view not only justify, but require, affirmance here. The scheme disclosed is in all salient essentials that of Burnet v. Leininger, 285 U.S. 136, 52 S.Ct. 345, 76 L.Ed. 665, and should receive the same treatment taxwise. I do not understand that case to have been overruled by C. I. R. v. Culbertson, 337 U.S. 733, 69 S.Ct. 1210, 93 L.Ed. 1659, nor do I see any close application of Culbertson principles required or appropriate here. The Supreme Court there, in stressing the necessity of determinations of fact as to the nature of the partnership before it, simply emphasized that an actual working partnership which carried on business to produce income was not to be denied the tax status of a partnership merely because the individual members were also members of a family. Here the wives are not even claimed to be members of the income-producing partnership. They received only assignments from partners ■ — usually their husbands, in one case a sister — of a percentage of potential profits under agreements of sub-“venture” of such formality that they did not even bother to read the solemnly prepared documents. To the actual partnership and to the production of its income, they contributed nothing — neither services, nor expertise or business know-how, nor capital. All this is of course conceded. But the contention for exemption of the assigned shares of partnership income from taxation to the partners is based upon assumption of some of the partners’ risks. Even as to this there is very little of actuality. Their named risk (up to $5,000) was small in terms of the total adventure; actual loss, as distinguished from merely diminished profits, was unlikely; and it does strain credulity to believe that the husbands, the benefactors of the wives initially, would have lacked like generosity had the time ever arisen for enforcement of the portentously stated, though limited, obligations. But be that as it may, I believe that on the basis of the fully conceded facts the partners who produced the income must pay the tax upon it before it passes to other hands. Burnet v. Leininger, supra; Lucas v. Earl, 281 U.S. 111, 50 S.Ct. 241, 74 L.Ed. 731; and the other Supreme Court cases cited in the opinion.
To appreciate how deeply we have become mired in semantic difficulties, one should consider the nature of the finding which the Tax Court is now called upon to make. Since the ladies had not even read their agreements and thus had no “faith” — either “good,” “bad,” or otherwise — as to them, I do not apprehend that Judge Van Fossan will encounter particular difficulty in finding the lack of good faith for which my brothers are looking. But I do dislike the dumping of this unanalyzed and potentially misleading concept on the judge’s desk without more attempt to disclose what it means. In the Culbertson context, as we have seen, the question whether the members of a family are actually acting in good faith in the partnership relation to produce the taxable income has meaning and significance. Here, whatever the concept may mean, it cannot, from the nature of things, have a like correspondence with business reality. We know the steps the parties took and what happened. So what can “good faith” mean more than that the parties knew and intended to do what they did ? That they may actually have known either less law or more law than appears on the surface surely cannot give them either greater or less tax immunity. Even the one matter of possible doubt indicated above — how far the ladies might really have to dig into their savings, or husbands’ benefactions, in the unlikely event of loss — sets no problem; for a commitment of this supplementary *508and limited character, undér the authorities cited, does not free partnership income from taxation to the partners, whatever the high-sounding titles of venture or subventure given to the situation. ’ Thus the stress in- all the opinions in the Culbertson case to discover whether there was a “real” or a “true” partnership, or a “genuine union for partnership business purposes,” or an arrangement putting all involved “in the same business boat” becomes quite meaningless when the attempt is made to transfer the search for actual intent to the present circumstances. Obviously these ladies were never in the same business boat with the actual partners, and no search for that kind of reality is necessary or even in point. There is no occasion to call these arrangements sham or unintended; they are just an inadequate basis for holding the production of income not taxable to those who produce it.
Thus, while .1 can see how the concept of “good faith” can be bandied back and forth on the conceded facts to support practically any result, I do not perceive how it is or can be anything more than a conclusory label indicating a decision otherwise made. But the holding herein, thus importing to the application of the label a truly .functional vitality, seems to me not only legally erroneous for the reasons stated, but practically unfortunate in the invitation and hope extended to beleaguered taxpayers. - One need not retreat into a “specialized talk-world” or “think-world” to ’realize that here is now expression of judicial'purpose to validate a simplej but extraordinarily streamlined, method of tax “reduction” or evasion, of infinite adjusta-bility and adaptability, operable by-' any taxpayer, be he partner or no,- and for the benefit of any of “his sisters and his cousins and his aunts,” not to speak of those closer, and with stated risk-limits well below the $5,000 here employed if such seem desirable. Reversal- here,however tied to some ritual of-'-fact-finding' unrelated' to business -realities, will inevitábly stimulate-that-'hope¡ '-Nor'do-I believe a reviewing court well-advised in upsetting a reasoned, reasonable, and straightforward decision of the tribunal charged with primary responsibility unless it can offer a more direct and understandable concept of the measure of a taxpayer’s obligation than is here proffered. I would affirm.