Brawner v. Burnet
| Citation | 63 F.2d 129,61 App. DC 352 |
| Decision Date | 09 January 1933 |
| Docket Number | No. 5583.,5583. |
| Parties | BRAWNER v. BURNET, Com'r of Internal Revenue. |
| Court | United States Courts of Appeals. United States Court of Appeals (District of Columbia) |
Roger J. Whiteford and Robert P. Smith, both of Washington, D. C., for appellant.
C. M. Charest, of Washington, D. C., G. A. Youngquist, Asst. Atty. Gen., and Sewall Key, F. M. Thompson, and Francis H. Horan, all of Washington, D. C., for appellee.
Before MARTIN, Chief Justice, and ROBB, VAN ORSDEL, HITZ, and GRONER, Associate Justices.
The question presented by this case is whether certain sums paid by a surviving partner in settlement of a suit brought by the wife of his deceased partner, asserting a claim to the assets of the partnership, and for attorney's fees in connection therewith, may be deducted from gross income as ordinary and necessary expenses incurred in carrying on a trade or business, within the meaning of section 214 (a) of the Revenue Act of 1921 (42 Stat. 239).
It appears that prior to the year 1921 George M. Oyster, Jr., was engaged in the dairy business in the District of Columbia and neighboring territory, under the tradename of "Chestnut Farms Dairy." On January 15, 1921, Oyster was married to Cecile R. Oyster. On March 17 of the same year appellant became a partner with Oyster in the dairy business, and on April 24, following, Oyster departed this life testate and without issue.
By the terms of the partnership agreement entered into by Oyster and appellant, Oyster sold to appellant a 45 per cent. undivided interest in the business including all of its assets both real and personal, while Oyster retained the ownership of the remaining 55 per cent. It was stipulated in the contract that upon the death of either of the partners the surviving partner should have the right to purchase the interest of the deceased partner in the partnership including its good will by paying to the representatives of the deceased partner's estate the value thereof as fixed by the last inventory of the partnership assets prior to the death of the deceased partner. On August 3, 1921, appellant as surviving partner elected to purchase the interest of the deceased partner in the business as permitted by the contract. He then paid to the executor the aggregate sum of $113,178.75 as the consideration computed according to the terms of the contract.
On December 8, 1921, the widow, Cecile R. Oyster, filed a bill of complaint in the Supreme Court of the District of Columbia against appellant and Oyster's executor alleging that at the time of the execution of the partnership agreement Oyster was in failing health and lacked mental capacity; that the agreement was executed under undue influence and coercion by appellant to deprive her of her property rights as Oyster's widow; that appellant did not pay full value for the 45 per cent. interest in the business which he purchased from Oyster; that the inventory taken by the executor did not disclose all of the assets and undervalued the estate; that she had refused to accept the provisions made for her in the will of her deceased husband, and sued to enforce her rights under the law. The prayers were that the articles of partnership be declared null and void; that the sale of the partnership business by the executor be set aside; that a temporary restraining order and injunction be granted preventing appellant from disposing of any of the assets of the estate of the decedent; that a receiver be appointed to operate the dairy business; that a general accounting be had; and that plaintiff be granted her lawful share of the real and personal estate of decedent.
Appellant answered denying the charges of undue influence, lack of mental capacity, and insufficiency of consideration in respect to the contract. Appellant, however, feared that a receiver might be appointed in the case and that such appointment, if made, would alarm the creditors of the business, and prevent appellant from obtaining new capital for needed machinery;...
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