Lowry v. Commissioner of Internal Revenue, 9920.
| Decision Date | 03 April 1946 |
| Docket Number | No. 9920.,9920. |
| Citation | 154 F.2d 448 |
| Parties | LOWRY v. COMMISSIONER OF INTERNAL REVENUE. SLIGH v. SAME. |
| Court | U.S. Court of Appeals — Sixth Circuit |
Julius H. Amberg and Philip W. Buchen, both of Grand Rapids, Mich. (Morton Keeney, Philip W. Buchen, of Butterfield, Keeney & Amberg, all of Grand Rapids, Mich., on the brief), for petitioners.
S. Dee Hanson, of Washington, D. C. (Samuel O. Clark, Jr., Sewall Key, Helen R. Carloss, and Harold C. Wilkenfeld, all of Washington, D. C., on the brief), for respondent.
Before SIMONS, ALLEN, and MARTIN, Circuit Judges.
These consolidated cases present the not infrequent situation arising in tax cases out of a change from doing business under the corporate form to doing business under a partnership between husband and wife. Deficiencies determined by the Commissioner for the taxable years 1939 and 1940 against each taxpayer were upheld by the Tax Court.
The taxpayers, O. William Lowry and Charles R. Sligh, Jr., conducted business as a corporation, manufacturing furniture at Holland, Michigan, until 1938. After January, 1937, all of the stock was owned by the taxpayers in equal shares, certain stock then owned by a third party having been bought by them at that time. In connection with that purchase the taxpayers discussed the question of doing business in some manner other than under the corporate form. As testified by both Lowry and Sligh, the primary purpose in their minds was the reduction of taxes because they were considered to be a drain on the business. In this connection they consulted with their tax expert and their attorney as to whether they should form a partnership with their wives. In May, 1937, Lowry transferred half of his stock in the corporation to his wife and made the appropriate gift tax return. Dividends were paid and received by the wife in 1938. In the spring of the same year the question of forming a partnership was again seriously discussed by the taxpayers, their banker, their attorney, their tax expert and their insurance agent. The tax expert advised that the change be made but that the corporation be not dissolved until the Revenue Act of 1938, 26 U.S.C.A. Int.Rev.Acts, page 345, was enacted, and later advised that the change be made in December, 1938.
Accordingly a plan for liquidation of the corporation was adopted early in December, 1938, and a partnership agreement was executed. A few days before this Sligh transferred half of his stock in the corporation to his wife, and filed the appropriate gift tax return. The corporation was dissolved, and all of its assets were transferred to the stockholders. A limited partnership was formed in which the taxpayers were general partners and their wives limited partners. The corporation conveyed to Sligh and Lowry as general partners the land upon which the manufacturing plant was situated, together with all buildings and equipment, and also assigned to them two valuable leases. The five-year term of the partnership could be extended by agreement of the general partners, who were to conduct and manage the business and to be paid salaries such as they should mutually agree. While the profits were to be divided into equal parts for each partner, no profits could be distributed except upon the affirmative decision of the general partners, and undivided profits carried no interest. Upon dissolution, the limited partners had no right to receive any property other than cash, and they were prohibited from withdrawing their "contributions to the firm capital." Sligh and Lowry were given power and authority...
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...tax-wise. Another conditional, intrafamily transfer of stock was involved in Lowry v. Commissioner, 1944, 3 T.C. 730, affirmed 6 Cir., 1946, 154 F.2d 448, certiorari denied 1946, 329 U.S. 725, 67 S.Ct. 73, 91 L.Ed. 628. In that case two husbands made alleged gifts of stock to their wives pu......
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Lowry v. Kavanagh, 22.
...3 T.C. 730. On appeal, the circuit court of appeals of the sixth circuit affirmed the decision of the tax court. Lowry v. Commissioner of Internal Revenue, 6 Icr., 154 F. 2d 448. In reaching such conclusion the court followed the decision of the supreme court in Commissioner of Internal Rev......
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