212 F.2d 878 (5th Cir. 1954), 14596, Lunsford v. C.I.R.

Docket Nº:14596.
Citation:212 F.2d 878
Case Date:May 14, 1954
Court:United States Courts of Appeals, Court of Appeals for the Fifth Circuit

Page 878

212 F.2d 878 (5th Cir. 1954)




No. 14596.

United States Court of Appeals, Fifth Circuit.

May 14, 1954

Page 879

Wentworth T. Durant, Dallas, Tex., Robert A. Wilson, Dallas, Tex., of counsel, for petitioner.

H. Brian Holland, Asst. Atty. Gen., and Ellis N. Slack, Special Asst. Atty. Gen., Dept. of Justice, Charles W. Davis, Chief Counsel, and John M. Morawski, Special Atty., Bureau of Internal Revenue, William L. Norton, Jr., Special Asst. Atty. Gen., Melva M. Graney, Washington, D.C., for respondent.

Before BORAH and RUSSELL, Circuit Judges, and DAWKINS, District Judge.

RUSSELL, Circuit Judge.

The additional assessments of income tax proposed by the Commissioner of Internal Revenue against Marvin Lunsford for the fiscal years ended July 31, 1946 and 1947, and against his wife, Jetta Fern, for the calendar years 1946 and 1947 were based in part upon the disallowance of a so-called family partnership, in part upon the alleged receipt of taxable 'benefits' from Marvin's, Inc., and in part upon transactions which are not pertinent to these petitions for review. The taxpayers filed separate petitions for redetermination of their respective tax liability with the Tax Court, each alleging the validity of the partnership, denying the receipt of the taxable benefits and claiming credit for an operating loss carry-back incurred in a subsequent year. Among other things, the Tax Court affirmed the determination of the Commissioner that no valid partnership existed for tax purposes among Lunsford, his brother, sister and father during the fiscal year ended July 31, 1946; sustained the Commissioner's finding that Lunsford received certain taxable income from the corporation in 1947, and disallowed for failure of proof the claimed operating loss carry-back. By these petitions for review the taxpayers seek a reversal of the decision of the Tax Court with reference to those three items.

This court has recently had occasion to rule on the validity of the identical partnership here at issue in Scott v. Gearner, 197 F.2d 93. By reference to that case it is disclosed that the Commissioner disallowed

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the partnership for tax purposes for the years 1944 and 1945, the taxable years immediately preceding those now under review, and by reason thereof assessed additional income tax against Lunsford. To secure the payment of the tax thus assessed, Lunsford and his wife executed a deed of trust covering certain real property located in Dallas County, Texas, to Neal T. Scott, as trustee. Thereafter, under threat of the property being sold in satisfaction of the indebtedness, the remaining partners and representatives of a deceased partner instituted an action against Lunsford, his wife and Scott to enjoin the proposed sale of the property, claiming that it was purchased by Lunsford with partnership funds and asserting their interest therein. The suit was removed to the United States District Court for the Northern District of Texas where the United States, appearing by intervention, asserted the validity of the assessment and sought to recover the taxes claimed and to foreclose the lien of the deed of trust. After trial of the issues thus raised, the district court found on conflicting evidence that a partnership did exist for tax purposes during the taxable years involved, denied the relief sought by the United States and permanently enjoined the defendants from selling or attempting to sell the property by virtue of the deed of trust. Upon appeal to this court, Scott v. Gearner, supra, the judgment of the trial court, insofar as it recognized the validity of the partnership and enjoined the sale of the plaintiffs' interest in the property, was affirmed. However, it was reformed to limit the absolute restraint to the interests of the plaintiffs and to permit foreclosure of the lien against Lunsford's interest for such taxes as were actually due by him.

The complaint in the Scott case was filed July 12, 1950, exactly one month after the petition in the present proceeding was served. The hearing...

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