Harris v. Commissioner of Internal Revenue, 101.

• Citation: 39 F.2d 546
• Decision Date: 03 March 1930
• Docket Number: No. 101.,101.
• Parties: HARRIS v. COMMISSIONER OF INTERNAL REVENUE.
• Court: United States Courts of Appeals. United States Court of Appeals (2nd Circuit)

39 F.2d 546 (1930)

HARRIS v. COMMISSIONER OF INTERNAL REVENUE.

No. 101.

Circuit Court of Appeals, Second Circuit.

March 3, 1930.

Arthur F. Driscoll and O'Brien, Malevinsky & Driscoll, all of New York City (Holmes, Brewster & Ivins, of Washington, D. C., of counsel; Frank B. Meseke, of New York City, on the brief), for petitioner.

G. A. Youngquist, Asst. Atty. Gen., and Sewall Key, Andrew J. Sharpe, and Randolph C. Shaw, Sp. Assts. Atty. Gen. (C. M. Charest, Gen. Counsel, and Allin H. Pierce, Sp. Atty., Bureau of Internal Revenue, both of Washington, D. C., of counsel), for respondent.

Before L. HAND, SWAN, and MACK, Circuit Judges.

L. HAND, Circuit Judge.

This is a companion case to Cohan v. Commissioner of Internal Revenue, 39 F.(2d) 540, decided herewith; it concerns the taxes of Harris, Cohan's partner, in part during the period of the partnership, and in part thereafter. It raises only two questions, the first of which is the computation of the tax for the first six months of 1921. The only difference in the facts from Cohan's Case is that here it does not appear when Harris asked and got leave to change his fiscal year. If this was after January 1, 1921, his position is weaker than Cohan's, and in any event we need add nothing to what we have already said. We pass therefore to the other question.

On July 2, 1919, Harris, being then Cohan's partner, executed a deed poll by which he assigned to his wife "a full and undivided interest in and to the following theatrical enterprises in which I am either the full or part owner." Then followed the names of seven plays in which Harris gave his wife one fourth of his own interest which varied from thirty-seven and a half to a hundred per cent. The assignment was to be "subject to the said Alice Harris being responsible for the same proportion of any losses that may be incurred by the undersigned in the operation of said theatrical enterprises," and she accepted the deed. Cohan and Harris were then producing five of these plays, among them that in which the deed recited Harris to be the full owner. The firm divided the profits equally, and Harris on his individual books kept an account in his wife's name, crediting her on June thirtieth, 1920, with her proper proportion of his half of the profits in six of the plays — the five that were being produced in June, 1919, and one other. She had a drawing account of three hundred dollars a week which was similarly charged against her, as well as any other sums which Harris paid her directly. In his return for the calendar year 1920, Harris deducted the amounts appearing on his books to his wife's credit; this the Board refused to allow, and the question is whether its action was right.

Despite the language of the deed, Harris does not assert that he conveyed any interest in the firm assets, however the phrase, "theatrical enterprises," should be construed. Assuming that a partner may do so, when the firm is solvent (Managh v. Whitwell, 52 N. Y. 146, 11 Am. Rep. 683) — though that is at least not wholly clear (Fourth Nat. Bank v. New Orleans & Carrollton R. R., 11 Wall. 624, 20 L. Ed. 82) — it is universally agreed that the result would be at once to disrupt the firm. Harris had no such purpose; he wanted only to give a present share to his wife of his interest in the firm profits, distributed and undistributed. But he had nothing to convey, except just that interest in the firm assets which he did not mean to affect. A partner at common law (and the same was true under the law in force in New York in July, 1919 Laws 1909, c. 44) is a joint owner of the firm assets; the civil law notion of the firm as an entity against which the partners individually have rights, analogous to choses in...