Doll v. Comm'r of Internal Revenue

• Citation: 2 T.C. 276
• Decision Date: 25 June 1943
• Docket Number: Docket No. 107866.
• Parties: FRANCIS DOLL, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.
• Court: United States Tax Court

2 T.C. 276

FRANCIS DOLL, PETITIONER,

v.COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

Docket No. 107866.

Tax Court of the United States.

Promulgated June 25, 1943.

1. Prior to December 15, 1932, the petitioner was engaged as a sole proprietor in the business of selling shoes on a commission basis. On December 15, 1932, the petitioner and his wife signed a writing wherein they purported to enter into a partnership for the conduct of the business, with the petitioner to have the management of the business to do as he should see fit. Thereafter the business was conducted in much the same manner as before, with the wife as a salaried employee and the petitioner reporting in his income tax returns the entire profit from the business. After the income for 1939 and prior years had been reported as his income and the tax thereon had been paid, petitioner filed amended returns for 1937, 1938, and 1939, claiming for the first time that the income from the shoe-selling business was partnership income only half of which was taxable to him. The amended returns were accompanied by claims for the refund of one-half of the tax theretofore paid for the said years. Held, that the respondent did not err in determining that all the income from the business during 1937 through 1939 was taxable to petitioner.

2. There was never any dispute or controversy between petitioner and his wife in respect of the shoe-selling business or the profits therefrom, but after the respondent's determination and the filing of the petition and answer in this proceeding, petitioner's wife filed a petition in a Missouri court naming petitioner as defendant, alleging the existence of a partnership under the writing of December 15, 1932, and asking for construction of the said writing. Petitioner filed an answer admitting all of the material allegations in his wife's petition. Held, that the findings and decree entered by the Missouri court as to the existence of a partnership are not controlling in the instant proceeding. Malcom I. Frank, Esq., for the petitioner.

Gene W. Reardon, Esq., for the respondent.

The respondent has determined deficiencies in income tax against the petitioner for the years 1937, 1938, and 1939 of $184.17, $153.07, and $170.97, respectively. The issue to be decided is whether the business of selling shoes on a commission was conducted by the petitioner as an individual enterprise or by a partnership consisting of the petitioner and his wife.

FINDINGS OF FACT.

The petitioner is an individual and resides at 21 Ridgetop Drive, Richmond Heights, St. Louis County, Missouri. He filed his income tax returns for the years 1937, 1938, and 1939 with the collector for the first collection district of Missouri.

Prior to 1932, the petitioner, then a Spanish citizen, resided in Cuba. He was engaged with his brothers, Ralph Doll and Antonio Doll, in the business of selling shoes through a partnership by the name of F. Doll & Co., of which the three brothers were the members. There was a political uprising in Cuba and the petitioner came to the United States, locating in St. Louis, Missouri. He had previously married Cornelia Mitchell, an American citizen, and has since become a citizen of the United States himself.

After leaving Cuba, the petitioner made several trips to Puerto Rico, having in mind the developing of a market there for the sale of shoes. At or about the same time he, with his brother-in-law, A. L. Mitchell, planned to develop a business of selling St. Louis beer in Puerto Rico. On January 29, 1932, he opened a checking account with the First National Bank in St. Louis under the name of St. Louis Trading Co. and both he and Mitchell were authorized to draw checks on the account. The beer-selling business did not materialize, however, and the arrangement between petitioner and Mitchell was terminated.

Petitioner's business is and has been that of selling shoes strictly on a commission basis, and after leaving Cuba and coming to St. Louis he developed a market in Puerto Rico and after the political situation quieted in Cuba resumed the sale of shoes there. He receives no advances from the shoes manufacturers and his commissions are computed from the invoices of goods sold. In connection with his shoe-selling operations in Puerto Rico, he engaged the services of a salesman located there, while with respect to his business in Cuba he engaged the services of his brother, Antonio Doll. He sells the products of in excess of 40 manufacturers, most or a goodly number of them being located in St. Louis. All contracts with manufacturers under which the petitioner sells and has sold shoes were entered into by him personally. In issuing commission checks and for various purposes, the manufacturers have variously used the names F. Doll, Francis Doll, and St. Louis Trading Co.

During a part of 1932 and up to and including the taxable years here in question, the petitioner had offices at 1515 Washington Avenue, St. Louis, Missouri, in an office building owned by Craddock-Terry Shoe Co., a shoe manufacturing concern located in Lynchburg, Virginia. In lieu of the payment of rent for the office or offices occupied, the petitioner acted as agent for the Craddock-Terry Shoe Co. in the management of the building. The offices were equipped with the usual office furniture and fixtures and with shelves for sample shoes. Petitioner also had some filing cabinets at his residence in which certain papers connected with his shoe-selling operations were filed from time to time.

Under date of December 15, 1932, the following paper was signed by the petitioner and his wife, Cornelia M. Doll:

M. Fernandez

Puerto Rico Division

F. Doll

Manager

Antonio Doll Cuba Division

SAINT LOUIS TRADING COMPANY

1515 WASHINGTON AVENUE

Saint Louis, Missouri

Dec. 15th, 1932

— PARTNERSHIP AGREEMENT—

Mr. Francis Doll, of 429 Edgewood Drive, Clayton, Mo., heretofore, sole owner of the Saint Louis Trading Company, with sales offices at the Paul Brown Building, St. Louis, Mo. agrees to take as partner in his business, his wife, Mrs. F. Doll, residing at the same address of the former owner and founder of the firm.

Mrs. Francis Doll, accepts to join the partnership of his (sic) husband in the Saint Louis Trading Company enterprise.

Nature of this business.

To sell on strictly commission basis, shoes made by American manufacturers for Export Trade. Profits, Losses, Assets and Liabilities.

That both interested parties are to participate equally, on the profits, losses assets and liabilities derived from this business.

Management.

That Mr. Francis Doll, will undertake the management of this business, to do as he sees fit, for the improvement of same, with full authority to appoint agents or representatives in foreign territories. In case of death, of Mr. Francis Doll, Mrs. F. Doll, (his wife) will then, undertake the same authority in regard to the management of the business, and it will be her privilege then, to make the necessary appointments to continue this business.

Income Tax

Federal and State Income Taxes, should be paid yearly to the Government on the Net Income and as per Inventory taken every year by the Saint Louis Trading Co, and as provided by the Law.

(Signed) FRANCIS DOLL (Signed) CORNELIA M. DOLL

At or about the time of the signing of the above mentioned paper, the petitioner listed the name of the St. Louis Trading Co. in the St. Louis telephone directory. At no time during the taxable years or prior thereto was there any display of a sign at the office indicating the conduct of a partnership business by petitioner and Mrs. Doll. Mrs. Doll contributed no capital to the shoe-selling business, she never contracted any debts in the name of the St. Louis Trading Co., nor did she ever in her own name or in the name of St. Louis Trading Co. enter into any contract to sell shoes on commission. No stock of shoes was kept on hand and there was no merchandise which might be inventoried. The books of account consisted of a cash book only, in which were recorded all commissions received by petitioner on the sales of shoes and all expenditures made in connection with that business, as well as personal expenditures of the petitioner. This cash book was kept in the name of St. Louis Trading Co., but no proprietorship or other account was set up showing the interest of any person in the business. There were no annual or other distributions or any setting aside between petitioner and Mrs. Doll of the income from the shoe-selling business or any crediting of such income to them on the cash book or elsewhere.

Mrs. Doll accompanied petitioner on one or more trips to Puerto Rico and Cuba. Up to the date of the hearing she had accompanied him on possibly four of his trips to Cuba. Petitioner made two or three such trips to Cuba and Puerto Rico a year. On the trips made by Mrs. Doll, she helped write orders and rendered other assistance. At other times, when she remained in St. Louis, she would do some work in the office or at her home. The work done by her did not require her presence at the office at all times and her attendance there was not regular. When the petitioner was in St. Louis and was crowded with work at the office, she would go to the office and help. She checked orders, kept such books of account as were kept, answered letters, and did the necessary filing. Some of the papers were filed in the cabinets at the residence and not at the office. At times buyers visited St. Louis and on such occasions they were entertained by petitioner and Mrs. Doll. If the petitioner was away on a selling trip, Mrs. Doll undertook the entertainment of the customers. At times when petitioner was absent from St. Louis and customers appeared, Mrs. Doll accompanied them to the selling offices of the various shoe manufacturers with which petitioner had a commission arrangement. At these offices, such selling as was done was done by salesmen of the manufacturers and not by Mrs. Doll. She...