Ramos v. United States

• Decision Date: 22 June 1966
• Docket Number: Civ. A. No. 40033,40202.
• Citation: 260 F. Supp. 479
• Parties: Joe R. RAMOS and Mary Ramos, Plaintiffs, v. UNITED STATES of America, Defendant.
• Court: U.S. District Court — Northern District of California

260 F. Supp. 479

Joe R. RAMOS and Mary Ramos, Plaintiffs, v. UNITED STATES of America, Defendant.

Civ. A. Nos. 40033, 40202.

United States District Court N. D. California, S. D.

June 22, 1966.

Jasper C. DeDobbeleer, Jerome A. Duffy, San Rafael, Cal., for plaintiffs.

Cecil F. Poole, U. S. Atty., Richard L. Carico, Asst. U. S. Atty., San Francisco, Cal., for defendant.

MEMORANDUM OPINION AND ORDER

ZIRPOLI, District Judge.

The instant cases were brought by the plaintiffs, Joe R. and Mary Ramos, under Section 1346(a) (1) of Title 28, United States Code, to obtain refunds of federal income tax and interest which they allegedly overpaid. In Civil Action No. 40202, the plaintiffs seek to recover tax and interest totaling $66,797.77, paid for the calendar year 1956, plus interest allowed thereon by law. In Civil Action No. 40033, they seek to recover tax and interest totaling $55,182.04, paid for the calendar year 1957, plus interest allowed thereon by law. These cases were consolidated for trial and tried to the Court sitting without a jury.

The issues of fact and of law as framed by the pretrial order of these consolidated cases and as approved by plaintiffs and defendant are as follows:

A. ULTIMATE ISSUES OF FACT:

(1) Whether or not a valid family partnership composed of the plaintiffs and their children, Dolores Donaldson and Joe S. Ramos, was in existence and conducted and operated during the calendar year 1956 in connection with orchard and farming activities on the "Ramos Home Ranch."

(2) Whether or not a valid family partnership composed of Joe R. Ramos and his children, Dolores Donaldson and Joe S. Ramos, was in existence and conducted and operated during the calendar year 1957 in connection with orchard and farming activities on the "Ramos Home Ranch".

B. ISSUES OF LAW:

(1) If the Court finds that a valid family partnership was in existence during the calendar year 1956, was the sum of $70,640.48 received in that year from crops sold during the calendar year 1955 (at a time when there was no partnership) taxable to the members of the 1956 partnership or to the plaintiffs.

(2) If the Court finds that a valid family partnership was in existence during the calendar year 1957, was the sum of $157,088.71 received in that year from crops sold during the calendar year 1956 taxable to the members of the 1957 partnership or to the members of the 1956 partnership (assuming that the Court finds that a valid family partnership was in existence for the calendar year 1956) or the plaintiffs (assuming that the Court finds that no valid family partnership was in existence for the calendar year 1956).

Additional questions which must be resolved as they relate to the amount of refund to which plaintiffs may be entitled are:

(1) If a partnership is found for 1956, must the corrected income thereof be adjusted to provide for the elimination of deductions for depreciation and property taxes.

(2) If a partnership is found for 1956, must the corrected income thereof be reallocated to credit plaintiffs with a reasonable salary for services rendered by plaintiff Joe R. Ramos.

(3) If a partnership is found for 1956, must the corrected income thereof be reallocated to credit plaintiffs with the reasonable rental value of the land, trees and equipment used in the production and harvesting of their crops during this year.¹

(4) Did the absence of Joe S. Ramos in 1956 and for nine months of 1957 due to military service² affect the distributive share of the partnership income to which he would have been entitled but for such absence.

(5) If a partnership is found for 1957, must the corrected income thereof be reallocated to credit plaintiffs with a reasonable salary for services rendered by the plaintiff Joe R. Ramos.

Plaintiffs were credited with the reasonable rental value of the land, trees and equipment for 1957 (25% of the crop income), hence, subject to such adjustment as must be and will be hereinafter made because the partnership operated on a cash basis, no problem of reallocation of this item for this year arises.

The Court's answers to the issues of fact and law framed by the pre-trial order and the above additional questions, for the reasons hereinafter stated, are:

(1) A valid family partnership composed of plaintiffs, Joe R. and Mary Ramos, and their children, Dolores Donaldson and Joe S. Ramos, was in existence and conducted and operated during the calendar year 1956 in connection with almond orchard and farming activities on the "Ramos Home Ranch".

(2) A valid family partnership composed of Joe R. Ramos and his children, Dolores Donaldson and Joe S. Ramos, was in existence and conducted and operated during the calendar year 1957 in connection with almond orchard and farming activities on the "Ramos Home Ranch".

(3) The sum of $70,640.48 received in the year 1956 from crops sold during the calendar year 1955³ was taxable to the plaintiffs.

(4) The sum of $157,088.71 received in 1957 from crops sold during the calendar year 1956 was taxable to each of the members of the 1956 partnership in equal shares.

(5) The corrected income of the partnership for 1956 must be adjusted to provide for the elimination of deductions for depreciation and property taxes in the sum of $9,623.68 (depreciation $7,596.88 and taxes $2,026.80).

(6) The corrected income of the partnership for 1956 must be reallocated to credit plaintiffs with a reasonable salary for services rendered by plaintiff, Joe R. Ramos, which the Court finds to be and fixes in the sum of $4,200.00 ($350.00 times twelve months).

(7) The corrected income of the partnership for 1956 must be reallocated to credit plaintiffs with the reasonable rental value of the land, trees and equipment used in the production and harvesting of their crops during this year, which the Court finds to be and fixes in the sum of $55,160.12 (25% of the crop income of $220,640.48).

(8) The absence of Joe S. Ramos in 1956 and for nine months in 1957 due to military service did not in any way affect the distributive share of the partnership income to which he would have been entitled but for such absence.

(9) The corrected income of the partnership for 1957 must be reallocated to credit plaintiffs with a reasonable salary for services rendered by the plaintiff, Joe R. Ramos, which the Court finds to be and fixes in the sum of $3,150.00 ($350.00 times nine months).

A further adjustment must be made on the rental value of the land, trees and equipment for 1957. Such adjustment, based upon the fact that the partnership operated on a cash basis and based upon the books of the corporation, reflects the need to correct the partnership income for 1957 by a deduction in rental of $11,240.67. (This deducted amount of rental was actually paid in 1958 and not 1957.)

The foregoing answers and the adjustment of rental for 1957 are amply supported by the record.

The documentary evidence offered and received in evidence, the testimony adduced and the stipulations entered into show no substantial factual conflict. The record in these cases presents matters of law arising from what is in practical effect an agreed statement of facts (Tr. 215). All of the evidence in the case, oral and documentary, save and except Government's Exhibit "A" was presented by plaintiffs. At the Government's request, all witnesses were excluded from the courtroom during the taking of testimony. At the conclusion of plaintiffs' case, the Government rested and did not offer any evidence either by way of oral or further documentary evidence. In this connection it should be noted that the farming and business activities of the partnership, as well as the acts and conduct, both business and personal, of the individuals involved, had been under close scrutiny and continuous investigation of government tax agents and investigators since December 1958 (Pltfs! Ex. 50). Also of significance is the government's frank and open concession that the testimony of the four witnesses, Ruben Lopez (Tr. 367-373), Charles Huff (Tr. 373-379), Frank Molina (Tr. 379-383) and Sam Silva (Tr. 383-390) as to their knowledge of the formation, conduct and existence of the 1956 family partnership "is fairly truthful" (Tr. 390a). The weight to be accorded such a record is well expressed in Nicholas v. Davis, 10 Cir., 204 F.2d 200, 202 (a tax refund case), wherein, in connection with a similar record, the Court said:

When controlling, positive, and uncontradicted evidence is introduced, and when it is unimpeached by cross-examination or otherwise, is not inherently improper, and no circumstance reflected on the record casts doubt on its verity, then under the principles laid down in Chesapeake & Ohio Ry. Co. v. Martin, 283 U.S. 209, 215-220, 51 S.Ct. 453, 75 L.Ed. 983, it may not be disregarded even though adduced from interested witnesses, and no question of credibility or issue of fact is presented for determination by the jury.

See also: Alabama Title & Trust Co. v. Millsap, 5 Cir., 71 F.2d 518, 520; S. F. Ass'n for Blind v. Industrial Aid, etc., 8 Cir., 152 F.2d 532, 536.

The Partnership Background.

Joe R. Ramos was born in Spain and came to the United States just before his sixteenth birthday in 1925. He was not a man of formal education. His total schooling in Spain was five months and in the United States it consisted of about one month's study in preparation of his application for citizenship, which was granted to him in 1950 or 1951. In 1931 he married the plaintiff Mary Ramos at Auburn, California. Both of their children were born in Loomis, California; their daughter, Dolores Donaldson, on November 15, 1931, and their son, Joe S. Ramos, on September 17, 1934.

Joe R. Ramos had farmed on his own account in California since 1932, and prior thereto had worked as a ranch hand for others. In 1943 he purchased a 219 acre almond ranch at Winters, California, where he established the family at what became known as the "Ramos Home Ranch"...