199 F.2d 392 (8th Cir. 1952), 14646, Meier v. C.I.R.

Docket Nº:14646, 14647.
Citation:199 F.2d 392
Party Name:MEIER v. COMMISSIONER of INTERNAL REVENUE (two cases).
Case Date:October 31, 1952
Court:United States Courts of Appeals, Court of Appeals for the Eighth Circuit
 
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Page 392

199 F.2d 392 (8th Cir. 1952)

MEIER

v.

COMMISSIONER of INTERNAL REVENUE (two cases).

Nos. 14646, 14647.

United States Court of Appeals, Eighth Circuit.

October 31, 1952

William R. MacGreevy, Chicago, Ill. (H. M. Stolar and Lowenhaupt, Waite, Chasnoff & Stolar, St. Louis, Mo., on the brief), for petitioners.

Harry Marselli, Sp. Asst. to Atty. Gen (Ellis N. Slack, Acting Asst. Atty. Gen., and Louise Foster, Special Asst. to Atty. Gen., on the brief), for respondent.

Before SANBORN, RIDDICK, and COLLET, Circuit Judges.

SANBORN, Circuit Judge.

The respondent on May 24, 1950, determined deficiencies in the income taxes of each of the petitioners for the years 1944 and 1945. The asserted deficiencies were based principally upon a ruling that the earnings of a partnership known as the Milcrest Company (hereinafter referred to as Milcrest) were the earnings of petitioners for the purposes of taxation. The petitioners applied to the Tax Court for a redetermination of the alleged deficiencies. The petitions were consolidated for hearing. The Tax Court filed findings of fact, conclusions of law, and an opinion covering both cases. Its conclusions were the same as those of the respondent. The Court filed separate orders of redetermination. Each of the petitioners has, by a petition to review, challenged the validity of the Tax Court's decision relative to his tax liability for the years in suit.

Page 393

The Tax Court found that 'The business which was conducted under the name of Milcrest Company was a partnership, the petitioners, Arthur and Milton Meier, being the real partners and their wives being nominal partners.' The Tax Court concluded that the income of the partnership was taxable to the petitioners.

It was the contention of the petitioners that they were not members of the partnership; that their wives organized it; that it was their enterprise and not that of the petitioners; and that its income was the income of their wives and could not lawfully be taxed to the petitioners.

The first question for decision is whether there was an adequate evidentiary basis for the finding of the Tax Court above quoted.

There is comparatively little dispute as to the evidentiary facts. The petitioners, Arthur J. Meier and Milton H. Meier, are brothers. During the years in suit they were directors and officers of the Meier-Pohlmann Furniture Company, of St. Louis, Missouri, (hereinafter referred to as Meier-Pohlmann) a family corporation, which manufactured furniture. Petitioners together owned only 5 2/3 shares of the 400 shares of common stock of this corporation. Dorothea Meier, wife of Arthur J. Meier, owned 18 shares. Clara Meier, wife of Milton H. Meier, owned none.

The petitioners were employed by Meier-Pohlmann on a year to year basis. The amount of their compensation depended upon the net earnings of the business. They were desirous of obtaining additional shares of stock, but were not able to procure them. There was friction between petitioners, on the one hand, and other directors and stockholders. The petitioners wished to secure long-term contracts of employment. They eventually obtained such contracts, but not until 1945.

Early in June, 1943, the petitioners conceived the idea that the formation of another enterprise might be an 'out' for them if they should leave Meier-Pohlmann. Sometime during that month a meeting was held at the home of one of the petitioners. They and their wives were present, together with Walter O. Heckmann, the accountant and auditor for Meier-Pohlmann. Heckmann had aided in preparing the income tax returns of the petitioners and of Dorothea Meier. The formation of a jobbing business was discussed. Heckmann recommended that a partnership be formed.

Another meeting was held several weeks later...

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