Heiner v. Mellon, 6151

Decision Date15 March 1937
Docket NumberNo. 6151,6152.,6151
Citation89 F.2d 141
PartiesHEINER, Former Collector of Internal Revenue, v. MELLON et al. SAME v. MELLON.
CourtU.S. Court of Appeals — Third Circuit

Robert H. Jackson, Asst. Atty. Gen., J. Louis Monarch, M. H. Eustace, and George H. Zeutzius, Sp. Assts. to the Atty. Gen., and Charles F. Uhl, U. S. Atty., and Orris Bennett, Sp. Asst. to the U. S. Atty., both of Pittsburgh, Pa., for appellant.

John G. Frazer and William Wallace Booth, both of Pittsburgh, Pa., and Donald D. Shepard, of Washington, D. C. (Reed, Smith, Shaw & McClay, of Pittsburgh, Pa., of counsel), for appellees.

Before BUFFINGTON, DAVIS, and THOMPSON, Circuit Judges.

THOMPSON, Circuit Judge.

These are appeals from judgments of the District Court for the Western District of Pennsylvania. The cases were tried by stipulation without a jury. The facts are as follows:

In 1918 R. B. Mellon, A. W. Mellon, and H. C. Frick entered into partnership agreements to do business under the names of A. Overholt & Co. and West Overton Distilling Company for the purpose of liquidating two whisky distilling corporations of the same names. No new stock was to be manufactured or purchased, the sole purpose of the partnership being to liquidate the assets of the former concerns. In 1919 Mr. Frick died. No new partnership agreements were entered into by the two surviving partners, R. B. Mellon and A. W. Mellon. In 1921 the surviving partners appointed the Union Trust Company of Pittsburgh trustee and liquidating agent. The two partnerships were finally liquidated and distribution made to the surviving partners and to the estate of the deceased partner in 1925. In 1921 separate income tax returns were filed in the names of the partnerships on official partnership forms. R. B. Mellon signed the returns "Richard B. MellonMember of Partnership" setting forth as the other members of the partnership, A. W. Mellon and the estate of H. C. Frick. The Commissioner increased the net income of each of the partnerships so as to include profits realized from sales of whisky in 1920. The distributive shares of R. B. Mellon and A. W. Mellon, as members of this partnership, were similarly increased. Deficiencies in the individual income tax returns of R. B. Mellon and A. W. Mellon were assessed and collected by the Commissioner in 1927. Claims for refund were filed with the Commissioner in 1929 and were rejected by him in 1934. R. B. Mellon and A. W. Mellon thereupon brought actions at law for the recovery of the income taxes alleged to have been erroneously collected by the Commissioner.

The District Court found that the partnerships were dissolved by the death of Frick in 1919 and that the assets of the partnerships thereupon changed character from stock in trade to capital assets. It concluded that the surviving partners did not realize any taxable income from the sale of the whisky until the amount actually received from the partnerships equalled and exceeded the cost value and interests of the surviving partners in the partnerships as of the date of the death of the deceased partner. It held that R. B. Mellon and A. W. Mellon were therefore entitled to the claimed refunds.

The question is whether the profits derived from the sale of whisky in 1920 were taxable in that year. Article 1570 of Regulations 45 promulgated under the Revenue Act of 1918 reads: "When a partner retires from a partnership, or it is...

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3 cases
  • Heiner v. Mellon
    • United States
    • U.S. Supreme Court
    • 16 d1 Maio d1 1938
    ...interest (14 F.Supp. 424); in No. 145 for $187,787.17 with interest. These judgments were affirmed by the Circuit Court of Appeals, 3 Cir., 89 F.2d 141. Certiorari was granted because of alleged conflict as to applicable rules of law important in the administration of the revenue laws. 302 ......
  • United States v. Williams
    • United States
    • U.S. District Court — Northern District of Georgia
    • 31 d3 Dezembro d3 1969
  • Mellon v. Heiner, 6980
    • United States
    • U.S. District Court — Western District of Pennsylvania
    • 10 d1 Abril d1 1939
    ...Supreme Court. The decision of this court was in favor of plaintiffs. This decision was affirmed in the Circuit Court of Appeals, 3 Cir., 89 F.2d 141, but was reversed in the Supreme Court. 304 U.S. 271, 58 S.Ct. 926, 82 L.Ed. In taxing the costs the Clerk of this court sustained the except......

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