Guinness v. United States, 43726.
| Decision Date | 07 July 1947 |
| Docket Number | No. 43726.,43726. |
| Citation | 73 F. Supp. 119 |
| Parties | GUINNESS v. UNITED STATES. |
| Court | U.S. Claims Court |
Thomas E. Harris, of Washington, D. C. (Ellsworth C. Alvord, Floyd F. Toomey and William H. Quealy, all of Washington, D. C., on the brief), for plaintiff.
J. W. Hussey, of Washington, D. C., and Sewall Key, Acting Asst. Atty. Gen. (Helen R. Carloss and Andrew D. Sharpe, both of Washington, D. C., on the brief), for defendant.
Before MADDEN, JONES, WHITAKER and LITTLETON, Judges.
The facts necessary to a decision of the case are set out in the opinion; they are set out more in detail in the following
1. Plaintiff at all times material herein was an individual subject of Great Britain residing in France. During the calendar year 1929 and prior thereto at least from July 1, 1925 he was a partner of Ladenburg, Thalmann & Company, a partnership, hereinafter sometimes referred to as the "partnership", with its principal office at 25 Broad Street, New York City.
2. December 8, 1929, plaintiff served written notice upon the other partners of his election to terminate his relationship as a member of the partnership as of December 31, 1929. Although this notice was not in strict compliance with the partnership agreement, it was ultimately accepted by the other partners of the firm. The other partners thereupon elected to continue the business of the partnership. Plaintiff's interest in the assets of the partnership was determined pursuant to negotiation in accordance with "Clause Twelfth" of the partnership agreement which provided as follows:
Clause Twelfth: At the termination of the copartnership period, in the event that the partners owning a majority of the capital of the copartnership shall desire to continue the firm, and a new or continued firm shall be so formed, then the interest of the retiring on non-continuing partner or of the estate of any retiring or non-continuing partner, in the assets of the firm, shall be fixed and determined by exact and true statement and balance sheet of all the assets and also of all the liabilities of the copartnership.
Such statement shall be made under the supervision of the partners, including therein each retiring or non-continuing partner or partners, and the representatives of a deceased partner, and shall be signed by them respectively.
Such final statement and balance sheet shall be conclusive and shall be binding upon the partners in the new firm (or the continued firm), and the estate of any deceased partner, and upon any retiring or non-continuing partner, as the case may be, and upon all parties claiming by, through or under them respectively, and also shall operate as a final adjustment and settlement of the interest of such retiring or non-continuing partner in the assets of the firm, and neither a retiring or non-continuing partner nor the representatives of a deceased partner shall be entitled to demand any liquidation or to take any proceedings for the purpose of establishing the shares of the partners therein, except as herein provided, and no claim shall be made by the retiring partner or the executors of a deceased partner, in respect to the firm name, the use thereof, or the good-will of the business.
In the event that in the preparation of such statement an agreement shall not be reached between the retiring partner and the continuing partners with respect to the value of one or more of the assets constituting part of the partnership estate, then the partners continuing the business shall be entitled at their option to apportion such assets in kind between the new firm or the continued firm, and the retiring or non-continuing partner or partners, according to their respective interests therein. Each such asset so apportioned shall remain in the custody of the firm, which shall have the right to use that asset freely in its business, until the proportionate share thereof apportioned to the retiring or non-continuing partner shall be delivered to such partner, his executors, administrators or assigns, in accordance with the provisions hereof, and in fixing the capital account of the several partners, the assets so apportioned shall be taken at the value respectively fixed for the same in the last preceding annual balance sheet.
The new firm, or the continued firm, as the case may be, forthwith shall place to the credit of such retiring partner, as of the date of his retirement, his share in capital account as so determined, including in said capital account the one-half of the profits for the current year provided to be carried thereto by the provisions of Clause Seventh hereof, and as between the continuing partners and the retiring partner, the retiring partner shall be treated as a creditor of the new firm or the continued firm for the amount so placed to his credit as of the date of the credit. And the continuing partners will hold the retiring partner exonerated from any further liability with respect to any of the liabilities of the firm, and such retiring partner, or non-continuing partner, his executors and administrators, shall execute all instruments requisite and necessary to vest in the new firm, or the continued firm, all the right, title and interest of the retiring or non-continuing partner in the assets of the new firm.
The amount so placed to the credit of the retiring partner shall be payable to him, his executors, administrators and assigns, in three equal installments, payable respectively in one, two and three years from the date of his retirement. The continuing partners or continued firm, as the case may be, may anticipate in whole or in part any such payment. In any such distribution the continuing partners or continued firm may deliver to a retiring or non-continuing partner, his executors, administrators or assigns, in lieu of an equivalent amount of cash, the proportionate part of any asset apportioned in kind, the value fixed as aforesaid. And on the 31st day of December in each year interest shall be allowed at the rate of five per cent per annum, and the interest for any year shall be payable on the 31st day of December of that year.
The share in the profits enjoyed by a withdrawing partner or partners shall be applied by the continued firm in the first instance to furnishing the quota of profits of the new partners, if any,
The words "retiring partner" and "non-continuing partner" as used in this paragraph respectively shall include the executors and administrators of a deceased partner who shall not become members of the continued firm. The words "continuing partner" shall include the executors and administrators of a party to these presents who may on behalf of the estate of a deceased partner become partners in the continued firm.
Following the notice of his withdrawal and until April 22, 1930, plaintiff and the continuing partners were engaged in negotiations for a settlement of plaintiff's interest in the partnership. These negotiations culminated in an agreement dated April 22, 1930, for a settlement of plaintiff's interest in the assets of the continuing partnership pursuant to "Clause Twelfth", set out above, of the partnership agreement.
3. August 6, 1931, plaintiff filed his Federal income tax return for the calendar year 1930 which disclosed ordinary net income in the amount of $4,263,853.94, a capital net loss of $17,615.77, and a tax liability of $842,160.20. That amount together with interest of $1,765.08 on the first installment was paid as follows:
August 6, 1931 ............... $212,305.13
October 3, 1931 .............. 210,540.05
December 16, 1931 ............ 210,540.05
March 16, 1932 ............... 210,540.05
There was included in that return as dividends received by plaintiff an amount of $4,746,441.57. This amount represented the correct value of plaintiff's interest in a distribution made January 7, 1930, being 21.345 per cent of such total distribution. The facts under which the transactions originated and finally culminated in the distribution appear in the findings set out below.
4. June 19, 1925, the partnership held 71,925 shares of Pittsburgh Utilities Corporation ration which the partnership had acquired at a cost of $959,311.75. July 1, 1925, the partnership organized the Criterion Corporation and exchanged the 71,925 shares of Pittsburgh Utilities Corporation stock for the entire capital stock of the Criterion Corporation. On the same day, the partnership also organized the Standard Utilities Corporation and exchanged all the stock of the Criterion Corporation for all the stock of the Standard Utilities Corporation.
July 8, 1925, the partnership organized the Universal Utilities Corporation and subscribed for its entire capital stock for $400,000 in cash. Likewise on July 8, 1925, the Standard Utilities Corporation transferred the entire capital stock of the Criterion Corporation to Universal Utilities Corporation for $400,000 in cash and $4,700,000 in notes of the Universal Utilities Corporation; and on the same day, the Universal Utilities Corporation liquidated the Criterion Corporation, thereby receiving the 71,925 shares of Pittsburgh Utilities Corporation stock. From July 1, 1925, and at all times herein, the partnership owned all the stock of Standard Utilities Corporation.
5. July 8, 1925, Standard Utilities Corporation bought 15,000 shares of common stock of Standard Power & Light Corporation for $15,000 cash. July 9, 1925, Universal Utilities Corporation sold the 71,925 shares of Pittsburgh Utilities Corporation stock for $2,094,087.28 in cash and 150,000 shares of common stock of Standard Power & Light Corporation of a fair market value of $3,010,000. On July 9, 1925, Universal Utilities Corporation paid its notes to Standard Utilities Corporation in the amount of $4,700,000, with $1,690,000 in cash and the 150,000 shares of Standard Power & Light Corporation stock. While the 15,000 shares of Standard Power & Light Corporation stock and the...
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