Court Opinion

ID: 9444962
Source: CourtListenerOpinion
Date Created: 2023-08-03 21:16:56.585787+00
Date Added: 2024-06-11T17:30:04.824676
License: Public Domain

RIVES, Circuit Judge
(dissenting).
The Tax Court pointed out that in his letter to his brother and sisters proposing the transfer of the assets of the business to his wife, petitioner had said,
“ * * * frankly, the business is not worth much without me to run it. It is only my expert knowledge of the blow pipe business that has enabled this business to survive when every other sheet metal shop in Jacksonville is in such bad financial condition that they have no credit standing with any of the supply houses * *
Further, that,
“The petitioner testified that the assets of the business were worth very little without the benefit of his expert advice, knowledge and skill on blow pipe installations. He said he would not have given his services to anybody else for as little as 50 percent of the profits.”
Still further, the Tax Court found that, “The success and earnings of the business before and after October 14, 1940 and during the taxable years were due primarily to the knowledge, ability and efforts of the petitioner. Capital and assets were not material income producing factors.” Even the two dissenting judges of the Tax Court conceded that, “* * * it is true that the success of the business to a considerable extent was attributable to the technical knowledge and skill of the petitioner and that capital was a secondary attribute * *
The following further parts of the Tax Court’s opinion are amply supported by the evidence:
“Irene testified, T do not operate the business at all. I’m not an engineer and I don’t have anything to do with the actual running of it.’ She had no office, rarely went to the place of business, and had no experience in managing any business. She mentioned ‘decisions about policy’ but gave no instance in which she had made any such decision and was extremely vague on the subject. Some effort was made to show that Irene’s elderly father took over some executive authority and duties on her behalf after October 14, 1940. The record as a whole shows, however, that he did not. He had been employed in the business only a few years at that time and described his duties as ‘largely keeping the books. He received $50 per week and continued to keep the books and receive that same wage after October 14, 1940. He had no experience or ability to qualify him as an executive in the business, restricting the scope of the petitioner’s freedom of control, and he never restricted that control in any important way, so far as the record shows.
“It is not clear from the record that Irene ever withdrew earnings of the business for her personal use or benefit.”
In brief, this record, to my mind, reveals a transfer of a business from the petitioner to his wife not only in fraud of his creditors, but never meant to make any material difference in economic control or right of control as between the parties, a mere pretense and sham. I am in full agreement with the findings of fact and opinion of the Tax Court.
Still further, the burden was on the petitioner not only to prove that his wife owned the assets of the business, but also to prove that capital was a material income-producing factor. Even if the wife were treated as the owner of the business properties, the half and half income allocation agreed upon with her husband was patently disproportionate to their respective contributions. If we consider that capital played some material part, the petitioner’s skill, ability and efforts were primarily responsible. If the wife be treated as the owner of the assets, I would still think that the peti*479tioner has not carried his burden to sustain a fifty percent division of the profits. Weiss v. Johnson, 2 Cir., 206 F.2d 350. I, therefore, respectfully dissent.