Court Opinion

ID: 9442995
Source: CourtListenerOpinion
Date Created: 2023-08-03 19:06:27.941367+00
Date Added: 2024-06-11T17:29:19.163461
License: Public Domain

RUSSELL, Circuit Judge
(dissenting).
In this case we have, with no disagreement, reached two diametrically opposed conclusions. Upon our first consideration we determined and adjudged that Ateo Investment Company did not become a partner in the operating partnerships which earned the income sought to be taxed by the Government against the appellee. We then held that since the appellee remained a partner in the several partnerships in question he was legally subject to payment of taxes on his distributive share received from such partnership. We accordingly reversed the judgment of the trial court holding to the contrary. Upon consideration of a motion for rehearing filed by the taxpayer we did not disturb our finding as to who were the partners in the operating partnerships but, even so, reached a contrary conclusion on the liability of Mr. Atkins, Sr. for the payment of the taxes in question and affirmed the judgment of the trial court. Now, upo.n the Government’s petition for rehearing asserting that our last determination is legally incorrect, we each face the question of which of our former unanimous rulings are correct. My colleagues are of the opinion that our last ruling is correct and consequently they follow it. Considering the case in the light I now have, the matter appears differently than it did in the glimmer of my consideration of our second adjudication. I am convinced that our first determination was legally correct and I therefore return to it. I am of the opinion that we were in error in our last opinion, written on the taxpayer’s petition for a rehearing, in giving controlling effect to the validity of the Ateo Investment Company as a partnership. The principles of the Culbertson case, Culbertson v. C.I.R., 337 U.S. 733, 69 S.Ct. 1210 there relied upon are not properly involved in this case.
As we determined and declared in our first opinion [189 F.2d 414, 416], “The question of primary concern tq us is whether the taxpayer, when he contributed his partnership holdings in the Highland Oil Company, the Triangle Refineries, and the Petroleum Dehydrating Company, as capital to the Ateo Investment Company, in which he had joined with his son as a partner, thereby made the Ateo Investment Company a partner in the above named partnerships to replace himself. Stated another way, did the taxpayer remain a partner in the several partnerships in question, even though he contributed his equity in such partnerships as capital to a partnership formed between himself and his son ?
“We are of the opinion that the taxpayer remained a partner in the several partnerships in question, and should be taxed on his distributive share from such partnerships. The law is well settled that a partner remains taxable on his full share of in*954come from a partnership of which he is a member even though he assigns a part of his interest to another, unless such assignee actually becomes a partner in the original enterprise.1 1. Burnet v. Leininger, 285 U.S. 136, 52 S.Ct. 345, 76 L.Ed. 665; Morton v. Thomas 5 Cir., 158 F.2d 574.”
I think we should grant-the petition of the Government for a rehearing, set aside the judgment of affirmance which the majority now reaffirms, and reinstate -our former judgment of reversal. I therefore respectfully dissent from the denial of the petition for rehearing.