168 F.2d 979 (5th Cir. 1948), 12232, Culbertson v. C.I.R.

Docket Nº12232.
Citation168 F.2d 979
Party NameCULBERTSON et al. v. COMMISSIONER OF INTERNAL REVENUE.
Case DateJune 30, 1948
CourtUnited States Courts of Appeals, Court of Appeals for the Fifth Circuit

Page 979

168 F.2d 979 (5th Cir. 1948)

CULBERTSON et al.

v.

COMMISSIONER OF INTERNAL REVENUE.

No. 12232.

United States Court of Appeals, Fifth Circuit.

June 30, 1948

Page 980

Benjamin L. Bird, of Fort Worth, Tex., for petitioners.

Homer R. Miller, Robert N. Anderson and Harry Baum, Special Assts. to the Atty. Gen., Theron L. Caudle, Asst. Atty. Gen., and Charles Oliphant, Chief Counsel, Bureau of Internal Revenue, and John W. Smith, Sp. Atty., Bureau of Internal Revenue, all of Washington, D.C., for respondent.

Before HUTCHESON, McCORD, and WALLER, Circuit Judges.

WALLER, Circuit Judge.

For nearly a quarter of a century William O. Culbertson and R. S. Coon were partners in the cattle-raising business near Dalhart, Texas. Coon raised many cattle but had no children. Culbertson raised both. He had four sons, a daughter, and a one-half interest in approximately fourteen hundred head of cattle at the time of the transaction around which this case centers. Coon furnished the finances; Culbertson looked after the cattle. About the time the Culbertson boys reached the age of twelve, each, like most ranch-reared boys, began to work on the ranch at various and sundry jobs.

In 1939, due to the age and health of Mr. Coon, it was determined to liquidate the herd and dissolve the partnership. To that end the partnership sold some three hundred and fifty head of Braford cattle to the four boys, but before the transaction was fully completed, a friend of the parties sought to buy these cattle from the partnership. At the suggestion of Mr. Coon, the friend bought them from the boys, paying a profit of $5.00 per head. 1

By October, 1939, the heard had been reduced to approximately fourteen or fifteen hundred registered cattle. Thereupon Culbertson offered to purchase the remainder of the heard at a price around $65.00 per head. Four persons were present in the office of Coon & Culbertson in Dalhart on the night the proposition of the sale of Coon's interest in the partnership cattle to Culbertson- or to Culbertson for his four sons-

Page 981

was tentatively agreed upon. The witnesses all recount Coon's long-standing avocation and hobby of breeding Hereford cattle and his interest in seeing that the strain thus developed should continue. The witnesses all agreed: that Coon stated that he would accept Culbertson's proposition to buy his interest in the cattle provided that Culbertson would, in turn, sell same to the latter's four sons, who had worked on the ranch and who would be able to carry the herd into the future; that Culbertson desired to talk to his sons first; that he did talk to them, and that the offer was accepted and the trade was consummated by a bill of sale from Coon & Culbertson to Culbertson, and another bill of sale from Culbertson to his four sons. All witnesses agreed as to the fine quality of registered Hereford cattle that had been bred through the years, Coon's interest in its continuation, as well as his interest in, and friendship for, the Culbertson boys- for the education of two of whom he had provided in his lifetime and for the other two he had provided in his will.

There was no mention of income tax or tax consequences in the discussions leading up to, and consummating, the deal. All witnesses were agreed that the idea uppermost was the continuation of the cattle-breeding business of Coon & Culbertson through the instrumentality of Culbertson and the sons of Culbertson, who since childhood had worked on the ranch with the cattle and one of whom was then foreman, and later manager, of the ranch. There is not the slightest proof in the evidence but that the four Culbertson boys each acquired a one-fourth interest in the one-half interest of Coon in the cattle in question. The partnership of Coon & Culbertson, as well as Culbertson and his sons, owned no land but utilized grazing leases.

It is conceded that the father put up the money for the purchase of the cattle from Coon and that he in turn sold that half interest to his sons and took their note therefor; that in addition to the note being given by the boys for the amount necessary to purchase Coon's cattle, they also gave their note for the purchase of one-half interest in other miscellaneous properties which had theretofore been used at the ranch. Neither is it disputed that a considerable portion of the purchase price was returned to the elder Culbertson by the sale, in due course, of partnership cattle, and that the balance then remaining unpaid on the notes was canceled as a gift. It is also undisputed that thereafter Culbertson gave a one-eighth interest in his own cattle to his daughter, but since it was not contemplated that the daughter would perform services or contribute capital to the partnership, no effort is made here to have her considered, or included, as a partner for tax purposes.

The plan whereby all four of the boys would work on the ranch when they were not in school was disrupted by the War. All were put into the military service. The education of the younger ones was delayed, and at the time of the hearing two of the boys were still in school. Upon his release from the service, the oldest son resumed his job as foreman or manager of the ranch and the second had also done some work there after his return from the War and from college.

The Dalhart newspaper, quoting Mr. Culbertson, announced in December, 1939, the fact of the dissolution of the Coon & Culbertson, partnership, and that in the future the business would be operated by the Culbertson boys under the name of Culbertson and Sons. A bank account was opened in the name of W. O. Culbertson and Sons, upon which the father and either of his four sons could check. The membership of Coon & Culbertson in the American Hereford Association at Kansas City, the place where Hereford cattle are registered, was changed to W. O. Culbertson and Sons, to whom an appropriate certificate was issued.

Mr. W. H. Coon, the nephew of the elder Coon, wrote to Mr. Wright, the manager of the National Finance Credit Corporation, on November 23, 1939, stating that: 'Mr. W. O. Culbertson and Sons will take over the Coon & Culbertson herd November 1st, 1939. Mr. R. S. Coon is selling his interest in the cattle to this new firm- W. O. Culbertson and Sons.' Concededly, W. O. Culbertson and Sons was not a corporation or mere...

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21 practice notes
  • Federal Court Review of Courts-nlartial Proceedings: A Delicate Balance of Individual Rights and Military Responsibilities
    • United States
    • Military Law Review Nbr. 54, October 1971
    • October 1, 1971
    ...0e7t. den'd, 389 U.S. 986 (1850). 15 A.L.R.2d 381 (1951): Bigrow Y. Hiatt, 70 F. Supp. 826 828-880 (h1.D. Pa. 1847), o g d per curiam, 168 F.2d 982 (3d Cir. 1848) Ex'parte Diekey, 204 Fed. 322, 325 (D. Maine 1818); nee in m Yamashiti 327 U.S. 1, 17 (1946) investigation u-a~inadequately perf......
  • 196 F.2d 322 (5th Cir. 1952), 13677, Seabrook v. C.I.R.
    • United States
    • Federal Cases United States Courts of Appeals Court of Appeals for the Fifth Circuit
    • April 18, 1952
    ...who has been a bona fide partner does not lose that status when he is called into military service. Commissioner v. Culbertson, 5 Cir., 168 F.2d 979, 983. Also, the fact that the daughter gave birth to a baby in October, 1942, does not invalidate the partnership. Singletary v. Commissioner,......
  • 170 F.2d 535 (8th Cir. 1948), 13700, Walsh v. C.I.R.
    • United States
    • Federal Cases United States Courts of Appeals Court of Appeals for the Eighth Circuit
    • November 12, 1948
    ...for tax purposes and reversing the Tax Court, see Kent v. Commissioner, 6 Cir., 170 F.2d 131; Culbertson v. Commissioner, 5 Cir., 168 F.2d 979; Canfield v. Commissioner, 6 Cir., 168 F.2d 907; Woosley v. Commissioner, 6 Cir., 168 F.2d 330; Weizer v. Commissioner, 6 Cir., 164 F.2d 772; Lawton......
  • 182 F.2d 547 (10th Cir. 1950), 3991, Eckhard v. C.I.R.
    • United States
    • Federal Cases United States Courts of Appeals Court of Appeals for the Tenth Circuit
    • May 15, 1950
    ...the winter and worked on the ranch in the summer. The Tax Court held the entire income taxable to the father. The Fifth Circuit reversed 168 F.2d 979, holding the partnership 'actual, real' and 'bona fide'. The Supreme Court, emphasizing the 'obvious importance' of active participation in t......
  • Request a trial to view additional results
19 cases
  • 196 F.2d 322 (5th Cir. 1952), 13677, Seabrook v. C.I.R.
    • United States
    • Federal Cases United States Courts of Appeals Court of Appeals for the Fifth Circuit
    • April 18, 1952
    ...who has been a bona fide partner does not lose that status when he is called into military service. Commissioner v. Culbertson, 5 Cir., 168 F.2d 979, 983. Also, the fact that the daughter gave birth to a baby in October, 1942, does not invalidate the partnership. Singletary v. Commissioner,......
  • 170 F.2d 535 (8th Cir. 1948), 13700, Walsh v. C.I.R.
    • United States
    • Federal Cases United States Courts of Appeals Court of Appeals for the Eighth Circuit
    • November 12, 1948
    ...for tax purposes and reversing the Tax Court, see Kent v. Commissioner, 6 Cir., 170 F.2d 131; Culbertson v. Commissioner, 5 Cir., 168 F.2d 979; Canfield v. Commissioner, 6 Cir., 168 F.2d 907; Woosley v. Commissioner, 6 Cir., 168 F.2d 330; Weizer v. Commissioner, 6 Cir., 164 F.2d 772; Lawton......
  • 182 F.2d 547 (10th Cir. 1950), 3991, Eckhard v. C.I.R.
    • United States
    • Federal Cases United States Courts of Appeals Court of Appeals for the Tenth Circuit
    • May 15, 1950
    ...the winter and worked on the ranch in the summer. The Tax Court held the entire income taxable to the father. The Fifth Circuit reversed 168 F.2d 979, holding the partnership 'actual, real' and 'bona fide'. The Supreme Court, emphasizing the 'obvious importance' of active participation in t......
  • Tomlinson v. C.I.R., 011249 FEDTAX, 10449
    • United States
    • Federal Cases United States Tax Court
    • January 12, 1949
    ...72,330] (CCA-6, January, 1948); Woosley v. Commissioner, 168 F.2d 330 [1948 P-H ¶ 72,510] (CCA-6, June, 1948); Culbertson v. Commissioner, 168 F.2d 979 [1948 P-H ¶ 72,535] (CCA-5, June, 1948), certiorari granted December 6, 1948; Canfield v. Commissioner, 168 F.2d 907 [1948 P-H ¶ 72,560] (C......
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1 firm's commentaries
  • The Distinction Between Partnership Debt and Partnership Equity
    • United States
    • JD Supra United States
    • August 9, 2017
    ...an earlier opinion in which it had upheld the entire partnership. Culbertson, 194 F.2d 581, 581 (5th Cir. 1952) (citing Culbertson, 168 F.2d 979 (5th Cir. Stanchfield, 24 T.C.M. (CCH) 1681. For more Tax Notes content, please visit www.taxnotes.com. (C) Tax Analysts 2017. All rights reserved......
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