Court Opinion

ID: 7815977
Source: CourtListenerOpinion
Date Created: 2022-09-07 17:36:18.370671+00
Date Added: 2024-06-11T16:30:36.201796
License: Public Domain

Jim Johnson, Associate Justice, dissenting. After carefully reviewing the entire record before us on trial de novo, my conscience will not permit me to agree with the majority opinion. Here we have a young divorcee who after working for appellant for some seven or eight months as a $125 per month bookkeeper married her wealthy boss. Soon after the marriage it was determined that appellant could save money on his exorbitant income taxes if he should file a partnership return rather than an individual return. This was done. Because of this one act, appellee now contends that she was a full partner in the business and therefore entitled not only to a full 1/2 of the fruits of appellant’s entire business efforts, but further contends that she is entitled to a 1/3 share of appellant’s remaining 1/2 interest. As early as 1840 this Court declared the rule from which it has not deviated that as between the parties themselves, the agreement or contract alone constitutes, them partners. Olmstead v. Hill, 2 Ark. 346. In the-instant ease there was absolutely no agreement or contract except the agreement to save money by taking advantage of the liberal partnership tax laws. The Uniform Partnership Act, Section 65-106 of the Arkansas Statutes, defines a partnership as: “(1) A partnership is an association of two (2) or more persons to carry on as co-owners of a business for profit. “(2) But any association formed under any other statute of this state, or any statute adopted by authority, other than the authority of this state, is not a partnership under this Act, unless such association would have been a partnership in this state prior to the adoption of this act . . .” Appellee relies almost solely upon the fact that the Income Tax Division of the Treasury Department of the United States and the Commissioner of Revenues of the State of Arkansas permitted the parties to file income tax returns as a partnership to establish conclusively that the Greater Little Rock Stock Yards was a partnership. Since the status of a partnership was given this company only by a division of the tax departments of the Federal and State Governments for income tax purposes, and since it has never been established as a partnership under the authority of the laws of this State governing partnerships, the question then arises — would such an association have been a partnership in this State prior to the adoption of the Uniform Partnership Act? It must be borne in mind that the income tax division of the Treasury Department of the United States and the Revenue Department of the State of Arkansas are only departments or agencies of their respective governments. There is no doubt in my mind but that all of the necessary elements of a partnership, either before or after the adoption of the Uniform Partnership Act, are sadly lacking in this case. Appellee stated: “I started as bookkeeper in June 1941 for the Greater Little Rock Stock Yards, Inc. It was a corporation then. I was paid $125.00 per month salary as bookkeeper. The Greater Little Rock Stock Yards was formed as a partnership on November 1, 1943, and I made the partnership tax returns for the two months in 1943 and every succeeding year including 1959.” As I view the matter, the only question before us is — did the filing of income tax returns as a partnership with the income tax division of the Federal Government and the State of Arkansas conclusively fix the status of the Greater Little Rock Stock Yards as a partnership? Appellant stated: “I found out I could save quite a bit of money by taking her in as a partnership. The Internal Revenue people challenged this and asked me why I took her in if it was not for tax purposes only. We went before the technical staff in Oklahoma City and I told them it was for tax purposes only. I also showed the Arkansas return that way. You don’t establish that and turn around and knock it in the head. It was saving me a lot of money by establishing it in 1943 and 1944. They knew Mrs. Hogan did not have any money in the business and had no knowledge of running it.” Even appellee did not dispute -that the Federal and State Income Tax Returns were filed as a partnership for the purpose of saving on their taxes. Mrs. Hogan was asked on Cross-Examination: ‘ ‘ Q. That partnership entered into in order to save money as far as the tax structure of the Federal Government was concerned? “A. That was one valid reason. ‘ ‘ Q- How much money did you put in the partnership? “A. At the time we opened the partnership I did not put any money in it.” <¡ Persons who are associated as principals in a common business and share both the profits and losses are < bnerally considered partners. “If they are not so associated, but the stipulation is p art of an arrangement to avoid competition, or to eo>n- ¿ let a litigation in the results of which they are severally i terested, or to secure a greater activity on* skill on the p irt of a servant or agent, or to accomplish some similar % irpose, the mere sharing of profits and losses will! not make them partners.” Outlines of Partnerships, Donald J. Kiser, L. L. D. (Emphasis supplied.) Following the rules as set out above, I cannot escape the conclusion that the filing of income tax returns for the sole purpose of reducing their tax burden did not make the business a partnership between the parties» Therefore, I respectfully dissent.