Helvering v. Seatree, 6130.

• Citation: 72 F.2d 67
• Decision Date: 04 June 1934
• Docket Number: No. 6130.,6130.
• Parties: HELVERING, Commissioner of Internal Revenue, v. SEATREE.
• Court: U.S. Court of Appeals — District of Columbia Circuit

72 F.2d 67 (1934)

HELVERING, Commissioner of Internal Revenue, v. SEATREE.

No. 6130.

United States Court of Appeals for the District of Columbia.

Argued April 6, 1934.

Decided June 4, 1934.

Sewall Key, J. Louis Monarch, E. Barrett Prettyman, Harold Allen, and Walter L. Barlow, all of Washington, D. C., for appellant.

Edward B. Burling and W. M. Parker, both of Washington, D. C., for appellee.

Before MARTIN, Chief Justice, and ROBB, VAN ORSDEL, HITZ, and GRONER, Associate Justices.

VAN ORSDEL, Associate Justice.

This is an appeal from decisions of the Board of Tax Appeals involving consolidated proceedings for the determination of deficiencies of income taxes in the sums of $9,207.60, $4,012.60, and $5,111.88 for the years 1922, 1923, and 1924, respectively.

It appears that for several years prior to 1920 appellee, Seatree, had been a member of the accounting firm of Price, Waterhouse & Co., of New York, consisting of nineteen partners. In addition to the cash capital contributed by the partners, there was recognized a valuable good will belonging to six senior members, of whom Seatree was one; the remaining thirteen partners having no interest therein.

On June 1, 1920, the partners entered into a new partnership agreement. Under that agreement Seatree was accorded a right to 16 shares of the profits while he remained a partner; a right to 7 per cent. on his capital invested in the firm until repaid to him; a right, in the event of his death or retirement, to have a return of his capital, with accrued interest; and, in the event of his death or retirement, to have certain payments made to him or his legal representatives during the three-year period following his death or retirement.

Section 2, article IV, of the agreement, making provision for the six senior partners in case of death or retirement, provided: "In consideration of the rearrangement and readjustment effected by this indenture and the capital and shares agreement, the parties of the first, second, third, fourth, fifth, and seventh parts, respectively, or their several respective legal representatives, as the case may be, shall be entitled, in each of the three years (commencing on July 1) next immediately following his death or retirement, to receive from the partnership, in addition to the other amounts which shall be payable to him as in this article provided, a portion of the profits of the partnership for each of such three years as if he were the owner of shares in the partnership, in addition to the shares of the continuing partners, as follows: In the case of said May, six shares; in the case of said Webster, four shares; in the case of said Seatree, four shares; in the case of said Sterrett, four shares; in the case of said Berger, two shares; in the case of said Brodie, two shares. Such payments shall be made to such retiring partner, or to his legal representatives as the case may be, at the same time that profits for each of such three years, when determined, shall be paid to the continuing partners."

Seatree retired from the firm on June 30, 1921, and received and returned as income for taxation sixteen shares of the profits up to that date, which included all business done up to that date, whether or not then paid for or billed. On June 29, 1922, Seatree executed and delivered a certain written instrument, under seal, by which he "granted, bargained, sold, aliened, remised, released, conveyed, assigned, transferred, and set over, * * *" to the Equitable Trust Company of New York, as trustee for the benefit of his daughters, "all my right, title, and interest in and to four undivided shares of the profits or income now due, or which may hereafter become due and payable to me for the three years ending June 30, 1924, under and by virtue of a certain partnership agreement." The instrument gave the trustee full power to manage the property and invest the funds for the benefit of the beneficiaries named therein. Seatree reserved the right to add to the principal, to...