Court Opinion

ID: 9650488
Source: CourtListenerOpinion
Date Created: 2023-08-23 15:39:41.941956+00
Date Added: 2024-06-11T18:12:22.262991
License: Public Domain

ANDERSON, Circuit Judge
(dissenting).
My dissent in Hill v. Commissioner, 38 F.(2d) 165, covers the substance of my views in this case. The fatal fallacy of my associates and of the majority of the Board of Tax Appeals in both eases is that all “the profits of a partnership belong to the partners.” This ignores the well-settled doctrine that in a partnership there may be profit sharers that are not partners. Robinson v. Simmons, 146 Mass. 167, 175, 15 N. E. 558, 4 Am. St. Rep. 299; Rutan v. Coolidge, 241 Mass. 584, 598, 136 N. E. 257; London Assur. Corp. v. Drennen, 116 U. S. 461, 472, 6 S. Ct. 442„ 29 L. Ed. 688. Compare Thompson v. Commissioner (C. C. A.) 28 F.(2d) 247; Brown v. Commissioner, 10 B. T. A. 1036.
Neither Pope (the only surviving general partner), nor the new partnership with three new members, purchased a capital asset from profits belonging beneficially and in a taxable sense to them or any of them. The rights of the estates of the deceased partners in 22% per cent, of the profits of the succeeding partnership were enforceable in equity as a charge on the profits in specie. They belonged to no living person whatever.
Assuming the general, underlying theory, adopted by my associates and by a bare majority of the Board of Tax Appeals (that the surviving partner took all of the profits), Pope alone was taxable for the entire sum of $100,278.52 paid the estates of Gilmore and Ulman for the four years, 1917-1920, inclusive. The majority of the Board of Tax Appeals are logical in this application of their erroneous theory. I can see no reason whatever for loading down the three new partners with parts of the taxes on the shares of profits of their dead predecessors —as my associates do.
But there is a curious failure of the majority of the Board of Tax Appeals to' apply consistently the real test of taxability —beneficial interest — in the holding that the petitioner is taxable only for the portions of his profits not paid to his mother or brother, because he took his membership in trust from his father, Arthur W. Pope. Here is a sound recognition that a taxpayer is taxable only on what he has a right to keep for his own use.
Without more, I agree with the able dissent of Mr. Trussell, concurred in by Mr. Siefkin. Compare United States v. Robbins, 269 U. S. 315, 46 S. Ct. 148, 70 L. Ed. 285; O’Malley-Keyes v. Eaton (D. C.) 24 F.(2d) 436; and Young v. Gnichtel (D. C.) 28 F.(2d) 789.