Court Opinion

ID: 4613221
Source: CourtListenerOpinion
Date Created: 2020-11-20 19:52:56.002866+00
Date Added: 2024-06-11T07:59:41.666259
License: Public Domain

W. A. FELTON, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.Felton v. CommissionerDocket No. 21897.United States Board of Tax Appeals18 B.T.A. 63; 1929 BTA LEXIS 2125; November 9, 1929, Promulgated *2125  The petitioner, a furniture salesman on commission and on the road practically all the time, was constantly accompanied by his wife, who rendered some assistance to him in his business.  In 1921 they filed in Portland, Oreg., a partnership notice of their intention to conduct a wholesale furniture business, but there is no evidence that they did so.  In the same year they moved to California, but filed there no partnership notice.  He continued in 1922 and 1923, to conduct his business as formerly, receiving in his own name all commissions and depositing same to his individual account, though not testifying he and his wife were equal partners.  He so continued doing business until after the Government raised the point that they were not partners.  Held, evidence insufficient to prove partnership existed between them in 1922 and 1923, and no error was committed in taxing entire income of petitioner for such years to him.  Ralph W. Smith, Esq., and Claude I. Parker, Esq., for the petitioner.  C. H. Curl, Esq., for the respondent.  LITTLETON*63  The Commissioner determined deficiencies of $2,060.37 and $2,455.17, income taxes for 1922 and*2126  1923, respectively.  Petitioner and his wife, D. B. Felton, each filed individual returns and partnership returns were also filed for the taxable years in question, during which period of time petitioner claims that he and his wife were partners.  FINDINGS OF FACT.  Petitioner is now a resident of Los Angeles, Calif.  He is a furniture salesman, representing a number of manufacturers of furniture in eleven western States, selling on a commission.  His duties required *64  his presence on the road practically all the time.  His wife accompanied him on his business trips and rendered some assistance in securing customers.  While he called upon the trade, his wife would call upon the wives of customers and prospective customers in interest of petitioner's business.  About 1921 petitioner discussed with his wife the formation of a partnership between themselves.  In 1921 they called upon a lawyer in Portland, Oreg., and had him prepare a partnership notice which was filed under the Oregon Law.  The notice was as follows: STATE OF OREGONCOUNTY OF MULTNOMAHKNOW ALL MEN BY THESE PRESENTS: That W. A. Felton and D. B. Felton do hereby certify, declare and acknowledge*2127  that they intend to conduct a wholesale furniture business under a partnership, with its principal place of business at 797 Northrup Street in the City of Portland, Multnomah County, Oregon, under the designation, name and style of W. A. FELTON WHOLESALE FURNITURE, and that the true and real names of all the partners and persons conducting and intending to conduct said business and having an interest therein are, W. A. Felton, 797 Northrup Street, Portland, Oregon; D. B. Felton, 797 Northrup Street, Portland, Oregon.  (Signed) W. A. FELTON.  D. B. FELTON.  This instrument was acknowledged before a notary public on May 13, 1921.  The reasons given for desiring a partnership were that they had accumulated some property, bonds, etc., in which petitioner desired his wife to have a half interest and to have her so share in all future earnings.  Another reason was that he thought his wife would be better protected in case of his death, he being unable on account of his physical condition to secure life insurance.  There were, however, no written articles of partnership.  In the fall of 1921 they moved to California, but filed no notice of partnership there.  During 1921, 1922, and*2128  1923, while petitioner was so engaged in the sale of furniture, he transacted the business in his own name and all checks for his commissions during such years were drawn payable to him individually.  His bank account during such years was carried in his individual name.  He, however, as a matter of convenience, kept a considerable amount of money in his wife's account.  His safe-deposit box containing bonds, etc., was during the same years kept in his individual name.  He made no change in the way he conducted his business, carried his bank account, kept his safe-deposit box and the contents therein.  *65  He always received and deposited his commission checks until subsequent to the taxable years when the Government's investigation in this case was begun, when he made certain changes in the manner of handling his affairs.  OPINION.  LITTLETON: The evidence of a partnership existing between the petitioner and his wife in 1922 and 1923 is not satisfactory.  All we have is the testimony of petitioner that he considered himself and his wife partners.  This is not enough.  The partnership notice was executed and filed while petitioner and his wife were apparently residents*2129  of Oregon.  The notice filed in Oregon merely declares that they "intend to conduct a wholesale furniture business under a partnership, with its principal place of business at 797 Northrup Street, in the City of Portland, Multnomah County, Oregon, under the designation, name and style of W. A. FELTON WHOLESALE FURNITURE." The notice indicates only an intention, and there is no evidence that such intention was ever carried out.  There is nothing in the notice stating what the interest of each would be in the partnership, nor that she was required to be in any way active in the production of income or in the business.  The negotiations with the furniture manufacturers for whom sales were made appear to have been carried on in the name of the petitioner; the verbal agreements with them were made by him and the commission checks were issued in his individual name and were deposited in his name to his individual credit until the Government made the investigation which resulted in the sixty-day letter in this case.  The fact that petitioner's wife traveled with him on his business trips and rendered some service in connection with his work does not establish a partnership. *2130  The manner in which petitioner conducted his business indicates that the commissions earned in his name, paid in his name, deposited in his individual account and invested in his own name in securities, were his individual property, so recognized and treated by the concerns for which he sold furniture and by others with whom he dealt.  The petitioner relies on ; , and , in support of his contention.  These cases are not in point.  They involved assignments and not a partnership.  There was no valid assignment here that would give the wife any right to report as her income any of petitioner's earnings.  *66  The original declaration of intention on the part of petitioner and his wife while in Oregon to conduct a wholesale furniture business there did not of itself constitute them equal partners in the business he was then carrying on and continued to carry on in the same way in 1922 and 1923 in California, until the investigation and action of the Government relative to income taxes indicated*2131  that their method of doing business and keeping accounts was not consistent with their claim of a partnership between them.  There was no valid partnership agreement between petitioner and his wife, effective during the taxable years in question, which would render the income for such years taxable to him and his wife.  It is not enough for husband and wife to say between themselves, "We are partners." They must conduct themselves and the business in such a way as to constitute a partnership in fact and in law, to hold themselves out to the public and those with whom they deal so that a partnership liability may be fixed and established.  There is nothing in this record to show the legal liability of the purported partners, the circumstances under which they proposed to be partners, nor to establish the necessary elements of a valid partnership.  Judgment will be entered for the respondent.