1933 BTA LEXIS 1144 | B.T.A. | 1933
Lead Opinion
1. The first issue has been settled by the parties. The Commissioner had allowed the petitioner a deduction of $10,000 for salary, which petitioner claimed was inadequate and should be increased to $25,000. This the Commissioner now concedes, and thus removes the issue from consideration.
2. The petitioner contends that during all of the period in question the income from the oil and refining business inured to a partnership which existed by agreement between him and his wife. The respondent denies the partnership. In our opinion, the evidence fails to establish that such a partnership existed.
It has been held that in tax cases a claim of partnership between husband and wife must be carefully scrutinized, and is not to be lightly allowed. James L. Robertson, 20 B.T.A. 112; W. M. Buchanan, 20 B.T.A. 210; J. Howard Coombs, 20 B.T.A. 1021; cf. Bur-net v. Leininger, 285 U.S. 136; Leonard M. Gunderson, 23 B.T.A. 45; D. Morton Rose, Administrator, 22 B.T.A. 1334; (65 Fed. (2d) 616); Elizabeth M. Coombs, 25 B.T.A. 1320; J. W. Brack-man, 24 B.T.A. 259. While, in Oklahoma it may be, as the petitioner contends, that a husband and wife may properly form a partnership, and that such state law would be controlling (but see Burk-Waggoner Oil Assn. v. Hopkins, 269 U.S. 110; Bur-net v. Leininger, supra), the question here is whether the evidence is sufficient to establish such a partnership in fact. We are unable to find that it does. The wife merely contributed some of her own funds to the petitioner to be used in the acquisition and operation of the lease, being at the same time aware that the venture might prove unsuccessful and that her contribution might thus be lost. Nothing more was understood as to a partnership relation, either
3. The petitioner contends that for 1920 the Commissioner erroneously charged him with gain resulting from the exchange by him of the assets of his business, including the Beggs lease, for shares of the newly organized Champlin Befining Co. He contends that the transaction was within section 202 (b), Bevenue Act of 1918,
The parties have stipulated that, except for the effect of the litigation upon the petitioner’s rights under the Beggs lease, the lease
The corporation which the petitioner organized accounted for the leasehold at a total depleted value of $1,147,500. The respondent, having agreed with the petitioner that the sound, unclouded title to the lease was worth $1,530,000, recognized that the pendency of the title litigation served to diminish such market value and he determined the value thus diminished to be 25 percent less, or $1,147,500, which is the same figure appearing as the opening-entry upon the corporation’s books. We are unable, after a full consideration of the evidence, to say that this determination overstates the fair market value of the lease or that the fair market value of the corporation’s shares was less than the Commissioner’s figure, which reflected the inclusion among the corporation’s assets of the Beggs lease at $1,147,500.
4. The respondent raises an alternative issue as to the depletion allowance if his valuation be overruled. Since the valuation is sustained, there is no occasion to consider this alternative issue, there being no claim for an increase in the deficiency.
Reviewed by the Board.
Judgment will be entered under Rule 50.
Sec. 202. (b) When property is exchanged for other property, the property received in exchange shall for the purpose of determining gain or loss be treated as the equivalent of cash to the amount of its fair market value, if any; but when in connection with the reorganization, merger, or consolidation of a corporation a person receives in place of stock or securities owned by him new stock or securities of no greater aggregate par or face value, no gain or loss shall be deemed to occur from the exchange, and the new stock or securities received shall be treated as taking the place of the stock, securities, or property exchanged.
When in the case of any such reorganization, merger or consolidation the aggregate par or face value of the new stock or securities received is in excess of the aggregate par or face value of the stock or securities exchanged, a like amount in par or face value of the new stock or securities received shall be treated as taking the place of the stock or securities exchanged, and the amount of the excess in par or face value shall be treated as a gain to the extent that the fair market value of the new stock or securities is greater than the cost (or if acquired prior to March 1, 1913, the fair market value as of that date) of the stock or securities exchanged.