Hanson v. Birmingham

• Decision Date: 29 July 1950
• Docket Number: Civ. No. 604.
• Citation: 92 F. Supp. 33
• Parties: HANSON v. BIRMINGHAM, Collector of Internal Revenue for District of Iowa.
• Court: U.S. District Court — Northern District of Iowa

92 F. Supp. 33

HANSON v. BIRMINGHAM, Collector of Internal Revenue for District of Iowa.

Civ. No. 604.

United States District Court N. D. Iowa W. D.

July 29, 1950.

COPYRIGHT MATERIAL OMITTED

O. L. Dykstra, Des Moines, Iowa, for plaintiff.

T. E. Diamond, U. S. District Atty., Sioux City, Iowa, William B. Danforth, Asst. U. S. Dist. Atty., Sioux City, Iowa, Ruppert Bingham, Special Asst. to Atty. Gen., for defendant.

GRAVEN, District Judge.

A partnership income tax case in which the plaintiff seeks refund of federal income taxes for the calendar years 1943, 1944, and 1945 in the respective amounts of $17,854.36, $11,877.85, and $13,607.63. The plaintiff made timely request for a jury trial as to those issues properly triable to a jury. The parties stipulated that there were certain issues having to do with the relation of a trust to the partnership in question and the matter of consent to the admission of a claimed partner, which should be determined by the Court in advance of the trial of any issues to a jury. The parties stipulated to the facts that they deemed relevant to the issues involved.

For several years prior to January 1, 1920, one S. Hanson, of Boone, Iowa, had been engaged as sole owner in the wholesale and retail lumber business in the City of Boone and in a number of other cities and towns in the State of Iowa under the name of S. Hanson Lumber Company.

On January 1, 1920, S. Hanson transferred a ¼ interest in that business to his wife, Emma Hanson; a ¼ interest to his son, R. M. Hanson, and a ¼ interest to his daughter, Elsie Hanson. He retained a ¼ interest for himself. A partnership was then formed composed of S. Hanson, Emma Hanson, R. M. Hanson and Elsie Hanson. Elsie Hanson subsequently married one William L. Olson. That partnership with those partners carried on the business of the partnership under the name of S. Hanson Lumber Company until February 23, 1923. The partnership agreement provided for an equal sharing in the profits and losses; that the active management of the business should be by S. Hanson and R. M. Hanson and that it should continue until dissolved by the mutual agreement of the parties. On February 23, 1923, S. Hanson died testate a resident of the State of Iowa. In his will he devised and bequeathed the property belonging to him as follows:

To Emma Hanson, his wife, an undivided ¼;

To R. M. Hanson, his son, a life estate in an undivided ¼ with remainder over;

To Elsie Hanson Olson, his daughter, a life estate in an undivided ¼ with remainder over;

To Emma Hanson and R. M. Hanson, as Trustees, an undivided ¼ to be held by them in trust for the benefit of Sigrid Hanson, a mentally incompetent daughter, during her lifetime with remainder over.

In his will S. Hanson referred to his ¼ interest in the partnership and expressed the will and desire that the business of the partnership be continued in the same manner as theretofore and that his ¼ interest which he had devised and bequeathed, as set out above, should remain in the business.

The will of S. Hanson was duly admitted to probate. Following the probate thereof, the interests in the partnership assets of S. Hanson Lumber Company were as follows:

Emma Hanson, an undivided 5/16 interest;

R. M. Hanson, an undivided 5/16 interest (1/16 as life tenant);

Elsie Hanson Olson, an undivided 5/16 interest (1/16 as life tenant);

R. M. Hanson and Emma Hanson, as Trustees for Sigrid Hanson, an undivided 1/16 interest therein.

The business of the partnership was carried on following the death of S. Hanson in the same manner as theretofore. In 1927 Emma Hanson and R. M. Hanson, executors of the estate of S. Hanson, made application to the District Court of Iowa in connection with the estate. The applicants, after stating that the business of the partnership had been carried on as desired by the testator in his will, indicated that questions had been raised by proposed purchasers of real estate from the partnership as to who might make proper conveyance thereof. On April 17, 1927, that Court entered an order declaring that the surviving partners of the S. Hanson Lumber Company and the legatees under his will who were then in esse had the right to convey and execute proper conveyances of any of the real estate owned by the S. Hanson Lumber Company.

Sometime following April 13, 1927, Emma Hanson died testate. Her will was duly admitted to probate. She willed and devised all her property to her son, R. M. Hanson, and her daughter, Elsie Hanson Olson, share and share alike. Thereupon the interests in the partnership assets of the S. Hanson Lumber Company were as follows:

R. M. Hanson, an undivided 15/32 interest (2/32 as life tenant);

Elsie Hanson Olson, an undivided 15/32 interest (2/32 as life tenant);

R. M. Hanson, as Trustee for Sigrid Hanson, an undivided 1/16 or 2/32 interest.

On December 30, 1941, R. M. Hanson executed the following Indenture of Trust:

"INDENTURE OF TRUST

"KNOW ALL MEN BY THESE PRESENTS:

"That I, Reinhold M. Hanson (sometimes known as R. M. Hanson), of Boone County, State of Iowa, in order to provide for the security and general welfare of my two children, do hereby give, convey, transfer, assign and set over unto R. M. Hanson, Stella C. Hanson and F. L. Mackey of Boone County, State of Iowa, as Trustees, for benefit of my son Reinhold Melvin Hanson and daughter Joreen Ann Hanson, an undivided THIRTEEN-SIXTY-FOURTHS (13/64) interest in and to the partnership of S. Hanson Lumber Company; said property to be held by said Trustees and managed, controlled, used and disposed of in accordance with the following provisions made for their government:

"First. That the said Trustees shall hold all of the property (hereinafter called the Trust Fund) conveyed to them by this instrument, in trust for the purposes, with the powers and subject to the limitations hereinafter declared, for the benefit of my son Reinhold Melvin Hanson and my daughter Joreen Ann Hanson, and it is expressly declared that, as between the Trustees and beneficiaries herein, a trust, and not a partnership, is hereby created and neither the Trustees nor Reinhold Melvin Hanson and Joreen Ann Hanson shall ever be personally liable hereunder as partners of the S. Hanson Lumber Company, all such personal liability being retained and assumed by the Grantor herein and as an individual only.

"Second. The title of this trust shall be `R. M. Hanson Trust' and the term `Trustees' shall be deemed to include the original and all successor trustees.

"Third. The Trustees, shall, during the period of this trust, pay to, or for the benefit of, each of the beneficiaries thereof, such portion of the income therefrom as they shall deem necessary and proper for the support, education and maintenance of each of the beneficiaries in the comforts and sphere of life which is rightfully theirs. And in so doing, the Trustees shall have wide discretionary powers.

"Fourth. When Reinhold Melvin Hanson shall arrive at the age of Thirty years, the Trustees herein shall assign, transfer, and set over unto him one-half of the then Trust Fund and this trust, as to said Reinhold Melvin Hanson, shall cease and terminate.

"When Joreen Ann Hanson shall arrive at the age of Thirty years, the Trustees herein shall assign, transfer and set over unto her the remaining one-half of said Trust Fund and the trust, as to said Joreen Ann Hanson, shall cease and terminate.

"Should either Reinhold Melvin Hanson or Joreen Ann Hanson die before reaching the age of Thirty years, leaving no child or children surviving, then and in that event, the share of the one so dying shall go to the survivor of them, but if a child or children survive the one so dying, the otherwise share of the one so dying shall go to the child or children surviving, in equal shares, with right of survivorship, and this trust shall terminate when said child, or the youngest of them, if more than one, reaches the age of Thirty years, or, at the death of such a child, or the survivor of them if more than one, prior to attaining the age of Thirty years, in which case the administrators or executors of the deceased one shall be entitled to receive, forthwith, that portion of the Trust fund that would have gone to such a one had he or she lived to attain said age of Thirty years.

"Fifth. The Trustees herein shall have as full power and discretion, as if absolute owners, to invest and re-invest the Trust Fund, or any part thereof, including income therefrom, in real estate or personal property, including bonds and notes or obligations secured upon real estate; said Trustees shall also have full power and discretion to sell, transfer and convey, from time to time, any part or all of said Trust Fund, upon such terms and conditions as they see fit; said Trustees shall also have power, should the occasion arise, to borrow money, for such time and upon such conditions as they see fit and give security therefor. In general, said Trustees shall have full power to do all acts and things, which in their judgment, are necessary, proper, advantageous or expedient to promote the complete and successful execution of this trust and the interest of the beneficiaries thereunder; the Trustees having for all of the aforesaid purposes and for all purposes of sale, lease, mortgage, exchange, investment and reinvestment and any and all arrangements, contracts and dispositions of the trust property, or any part thereof, all and as full and discretionary powers and authority as if they were themselves the sole and absolute beneficial owners thereof in fee simple. The naming of any specific duties and powers herein shall not, however, be construed as limiting in any way the general powers of the Trustees.

"Sixth. The execution of all contracts, conveyances, transfers and all other instruments relating to the Trust Fund, or any part thereof, shall be made by all of the Trustees herein.

"Seventh. No purchaser from, or lender to...