146 F. Supp. 249 | S.D.N.Y. | 1956
The defendant moves for summary judgments in these actions which have been consolidated for trial.
The plaintiffs are seeking to recover taxes paid pursuant to deficiency assessments levied in October, 1948 for the years 1944, 1945 and 1946. Claims for refund were disallowed. The complaints allege that the assessments were based on “the erroneous finding” that income from a family partnership organized in April, 1943, attributed on its books to relatives of the plaintiffs in each of the years in suit, was income taxable to the plaintiffs. The defendant in its answers pleads estoppel by a prior (1950) judgment
The essential facts as found by the Tax Court in the prior suit, are as follows. The plaintiffs, Irving and Abraham Slifka, are brothers who in April, 1943 had been engaged for more than twenty years as co-partners in the manufacture of leather goods. On April 19, 1943, upon their accountant’s advice, they formally terminated their old partnership and executed an agreement including as new partners, their wives and Irving’s two daughters and son. The assets and liabilities of the old partnership were transferred to the new one. The name of the old partnership, M. Slifka & Sons, was retained. Irving and Abraham each had a 37%% interest in the new partnership, while Abraham’s wife had a 12%% interest and Irving’s wife and three children each had a 3%.% interest. Although the business was not in need of new capital, the new partnership agreement provided that each of the wives and children was to contribute capital according to their respective interests. The partnership books reflect that Abraham’s wife contributed $50,-000, while Irving’s wife and three children each contributed $12,500. These contributions were made possible by gifts from Abraham and Irving, each of whom withdrew $50,000 from the partnership accounts, deposited that amount in his personal account and then executed his personal checks to those in his family who were to become new partners, in the precise amounts of their respective capital contributions. The new partners then endorsed the checks to the partnership. The assets, including cash in bank, and the liabilities of M. Slifka & Sons were no different after than before the formation of the new partnership. Undef the new agreement, general management of the business remained vested in Irving and Abraham and only they were authorized to draw checks and to execute commercial paper. There was no change in the manner of conducting the business, none of the new partners contributing any services except Irving’s son, Lewis.
Although the Tax Court made no such specific finding, it is conceded here and the plaintiffs’ accountant so testified before the Tax Court, that the partnership was liquidated on January 31, 1946. Moreover the parties have stipulated here that (a) from the inception of the partnership until its liquidation in January, 1946, there was no change in the business relationship of the partners to one another or to the partnership; (b) throughout that period the wives and daughters left in their capital accounts portions of the profits attributed to them on the partnership books; (c) such accumulations are shown in a schedule which was received in evidence as Exhibit 2 in the Tax Court proceeding.
I am unable to agree with the plaintiffs’ contention that the decision of the Supreme Court in Commissioner of Internal Revenue v. Culbertson
The facts in these cases seem to make application of the doctrine of collateral estoppel peculiarly appropriate. Accordingly the defendant’s motions for summary judgment will be granted.
Settle orders.
. Slifka v. Commissioner of Internal Revenue, 2 Cir., 182 F.2d 345.
. See appendix to petitioner’s brief in the above case.
. The allocation of profits as income to Lewis was not challenged by the Commissioner for 1943 or for any of the years involved in the instánt actions.
. 337 U.S. 733, 69 S.Ct. 1210, 93 L.Ed. 1659.
. Brownell v. Chase National Bank, 77
. 333 U.S. 591, 68 S.Ct. 715, 721, 92 U Ed. 898.
. 9 Cir., 221 F.2d 603-606.