This аppeal is concerned with the taxation of income attributable to a partnership interest which, although standing in the plaintiff taxpayer’s name, was found by the District Court to have been the sole asset of a joint venture in which the taxpayer and his wife were the participants. On this finding, the court decided that only one-half the income was taxable to plaintiff and, accоrdingly, entered judgment that the collector refund to him, $19,207.32, representing the overpayment made by him in 1941, in which year he had paid taxes on all the income emanating from the partnership interest. On аppeal the collector contends that the trial court erred in finding that plaintiff and his wife were engaged in a joint venture, but argues that, even if they were, plaintiff was nevertheless taxablе on the entire income.
In August, 1941, plaintiff was consulted by certain persons interested in establishing a dried egg business, concerning the adaptability of a plant in Wisconsin for that purpose. At plaintiff’s suggеstion, a sixty-day purchase option was secured, for which he paid $500, and the plant was operated during that period on an experimental basis. The experiments resulting satisfactorily, the interested parties decided to form a partnership, to be known as the Wisconsin Dried Egg Company, to acquire the plant and engage in production. It was agreed that $7000 would be contributed by each of the three partners, plaintiff, A. Sturm & Sons, and Frank Stone. Plaintiff, however, had neither $6500 (he had already contributed $500 for the option), nor the credit with which to obtain it. The bank from which he sought tо borrow the money advised him that it would require his wife to deposit collateral adequate to safeguard the *825 loan. Plaintiff testified that, after discussing the matter with his wife, it was agreed that she would supply the capital to finance the one-third interest in the partnership; that plaintiff would contribute his services, and that the profits and losses arising from the partnership interest would be shared equally between them. Mr. Sturm testified that plaintiff disclosed the existence of the arrangement between himself and his wife to the other members of the proposed partnership, and that they informed him thаt they had no objection to his having a partner but, as far as they were concerned, they wanted to deal only with him. Defendant contends, however, that the fact that the proceeds оf the loan were credited directly to plaintiff’s account and that the interest was paid by him rather than his wife, at least through 1942, indicate that no joint venture actually existed, but shows that the wife aсted simply as an accommodation party in order to enable her husband to procure the loan. At any rate, the loan was obtained, the note signed by both plaintiff and his wife and securеd by a pledge of the latter’s individual property, and the pro- < eeds were paid to the partnership.
Shortly after commercial operation be-fan, a formal partnership agreement was executed by Frank Stone, A. Sturm & Sоns, and plaintiff, in which the latter’s wife was not mentioned. All income attributable to the one-third interest in the partnership was paid to plaintiff, who, in his personal income tax return for 1941, included it in his gross income. His claim for refund of the tax paid on one-half the income from the partnership was denied and this suit was then instituted.
Defendant, in contending that the District Court’s finding that plaintiff and his wife were members of а joint venture was erroneous, admits that “the findings are supported by some evidence,” but argues that “a reading of the record as a whole leads to the conclusion that they are clеarly erroneous.” The record, however, fails to disclose any testimony contradicting that of plaintiff to the effect that an agreement was entered into between him and his wife, or that оf Sturm that notice of the contract was immediately communicated to the other members of the partnership. What defendant asks, then, is that this court infer, from the conduct of the parties, that no such agreement existed.
It is provided by Rule 52(a) of the Federal Rules of Civil Procedure, 28 U.S.C.A., that “findings of fact shall not be set aside unless clearly erroneous, and due regard shall be given to the оpportunity of the trial court to judge of the credibility of the witnesses.” To grant defendant’s request and set aside the finding would be to disregard the language of the rule and the prior decisions of this cоurt, for it is clear that the finding was supported by adequate evidence in the testimony of witnesses whose credibility could best be determined by the trial judge; consequently, the finding that taxpayer and his wife were members of a joint venture is not clearly erroneous and, therefore, can not be set aside by this court. Fox v. Harrison, 7 Cir.,
Our principal question is presented by defendant’s contention that plaintiff’s liability for taxes on his distributive share of the partnership income was not affected by the agreement between him and his wife. The District Court took the contrary view, holding that, although the wife was not a member of the partnership, the income from the partnership interest, which stood in plaintiff’s name, was taxable one-half tо him and one-half to his wife because they were engaged in a joint venture, the sole asset of which was the partnership interest. Defendant argues that, in view of the Supreme Court’s decision in Burnеt v. Leininger,
The applicable provisions of the Internal Revenue Code are Section 182, 26 U.S.C.A. § 182, which provides that, “In comрuting the net income of each partner, he shall include, whether or not distribution is made to him * * * (c) His distributive share *826 of the ordinary net income or the ordinary net loss of the partnership * * * ”, and Section 3797, 26 U.S.C.A. § 3797, which provides that the term “partnership,” when used in the Act, includes a “joint venture.” Applying Section 182 to the joint venture in which plaintiff and his wife were engaged, it would appear that, regardless of whether any distribution was made, each of them was taxable on one-half the ordinary net income of the venture. But, applying the same statutory provision to the partnership interest, which wаs the sole asset of the joint venture, defendant urges that, because the partnership interest stood in his name, plaintiff is taxable on all the income attributable to that interest. If defendant’s contention is correct, the anomalous result is that plaintiff is taxable on all the income attributable to the partnership interest and his wife on one-half of that very same income. Defеndant admitted in.oral argument, that if plaintiff had actually paid to his wife one-half the income received by him from the partnership, each would have been taxed on only one-half that inсome, but Section 182 supports no such distinction; by its terms, “whether or not distribution is made”, the wife was taxable on one-half the income of the joint venture. This being true, it does not seem to us that defendant’s рosition is tenable.
Though defendant insists, however, that Burnet v. Leininger,
Of other cases relied on by defendant, Larsen v. Burnet,
As the District Court aptly stated [
The judgment is affirmed.