Court Opinion

ID: 4590610
Source: CourtListenerOpinion
Date Created: 2020-11-20 19:03:58.749798+00
Date Added: 2024-06-11T07:50:30.344903
License: Public Domain

EARLE L. CROSSMAN, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.Crossman v. CommissionerDocket Nos. 7052, 19619.United States Board of Tax Appeals10 B.T.A. 248; 1928 BTA LEXIS 4158; January 26, 1928, Promulgated *4158  The petitioner, his wife, and a third person formed a business partnership in Michigan on September 30, 1920, each contributing property and services, in the profits and losses of which partnership they agreed to share in a certain ratio.  The income from the business credited to the wife under the agreement of partnership was taxed to the husband, the petitioner.  Held that such income was the property and income of the wife and should not have been included in petitioner's income.  P. H. Travis, Esq., and Frank E. Seidman, C.P.A., for the petitioner.  Alva C. Baird, Esq., for the respondent.  SIEFKIN*249  These are proceedings for the redetermination of deficiencies in income taxes for the calendar years 1920, 1921, and 1922 in the amounts of $82,132.44, $2,762.66, and $17,689.06, respectively.  The deficiencies asserted by the respondent (except for a mathematical error set out in respondent's deficiency latter as to 1922), result from a determination that a husband and wife can not be partners under the laws of the State of Michigan.  The result is that income received by a wife under a partnership agreement has been taxed as income*4159  of the husband.  The facts were admitted by the pleadings and the proceedings were consolidated for hearing and decision upon the question of law.  FINDINGS OF FACT.  On September 30, 1920, A. C. Wells, Gertrude I. Crossman - the wife of the petitioner, and the petitioner formed a partnership known as the Crossman Lumber Co., to continue the business of another partnership having the same name that had been formed between A. C. Wells and the petitioner on January 1, 1920.  The principal office of the new partnership was at all times located in Grand Rapids, Mich.  A. C. Wells contributed $10,000 as his capital investment in the new partnership.  Gertrude I. Crossman contributed $45,000 and the petitioner $45,000.  The profits and losses of the partnership were agreed to be shared or borne, as the case may be, as follows: For 1920, profits of the entire year were to be taken as a basis of distribution; of the first $125,000 of profits, $25,000 was to go to A. C. Wells and $100,000 to the petitioner.  The next $25,000 was to go to the petitioner as his salary.  The next $75,000 was to be divided equally between Gertrude I. Crossman and the petitioner.  The remainder of the 1920*4160  profits were to be shared in the ratio of 10 per cent to A. C. Wells, 45 per cent to Gertrude I. Crossman, and 45 per cent to the petitioner.  For the year 1921 it was agreed between the three partners that profits and losses were to be shared or borne, as the case might be, in the ratio of 10-45-45, respectively.  For the year 1922 it was agreed between the three partners that A. C. Wells was to be credited with a maximum profit of $1,000 and the remainder of the profits were to be divided equally between Gertrude I. Crossman and the petitioner.  The profits were actually divided among and credited to the three partners in accordance with the foregoing agreements.  The respondent added to the petitioner's distributable share of the partnership profits under the agreement above set forth, the amounts distributable under such agreement to Mrs. Gertrude I. Crossman the wife of the petitioner, such addition resulting in the deficiencies asserted here.  *250  OPINION.  SIEFKIN: The question involved in this case is one of law which has been determined adversely to the respondent's contention in *4161 . The complete and able brief filed in this proceeding by counsel for petitioner confirms our belief that our decision in the Sunlin case was correct.  It follows that the respondent's action was erroneous. Judgment will be entered on 15 days' notice, under Rule 50.