United States v. Ross, Civ. No. 0283.

• Decision Date: 09 September 1959
• Docket Number: Civ. No. 0283.
• Citation: 176 F. Supp. 932
• Parties: UNITED STATES of America, Plaintiff, v. William G. ROSS, Defendant.
• Court: U.S. District Court — District of Nebraska

176 F. Supp. 932

UNITED STATES of America, Plaintiff, v.William G. ROSS, Defendant.

Civ. No. 0283.

United States District Court D. Nebraska.

September 9, 1959.

Thomas J. Skutt, Asst. U. S. Atty., Omaha, Neb., for plaintiff.

Milton R. Abrahams, Omaha, Neb., for defendant.

ROBINSON, Chief Judge.

This is an action by the United States, brought at the direction of the Commissioner of Internal Revenue, to recover the sum of $4,478.30 and interest, representing certain federal taxes assessed against defendant, William G. Ross, and Frank Kornfeind for the taxable periods during 1948.

The evidence shows that on January 16, 1948, Frank Kornfeind and the defendant formed a partnership known as the Chicago-Nebraska Motor Express.They were the sole members of the partnership and they engaged in the freight and trucking business until December 15, 1948.On that date the defendant entered into a written agreement with Frank Kornfeind whereby the defendant transferred and assigned his entire interest in the partnership to Kornfeind.Kornfeind became the sole owner and operator of the partnership business and the assets thereof, and he continued in that business for over two years.He then engaged in a new motor carrier operation.

By the terms of the dissolution agreement of December 15, 1948, Kornfeind assumed and agreed to pay all liabilities of the partnership.Subsequently the Commissioner of Internal Revenue made assessments for Social Security, Withholding, Excise and certain Unemployment taxes accruing while the partnership was in existence during 1948.Notice and demand were made upon the partnership and upon Kornfeind and the defendant individually for the assessed taxes.

On July 20, 1953 a federal tax lien was filed in Cook County, Illinois, against Kornfeind and defendant in the amount of $2,499.06, for certain of these taxes.On April 6, 1954, Kornfeind made offers totaling $2,300 in compromise of the assessment.He made payments on an installment basis until the amount of his compromise was paid.On March 28, 1958, he was discharged of all liability for the taxes, and the recorded tax lien was released as to him.It was alleged by the defendant and the evidence shows that Kornfeind acted independently and without the knowledge of the defendant in making the offer and subsequent compromise of the tax liability.The six offers which were submitted to the Internal Revenue listed W. G. Ross and Frank Kornfeind as the "taxpayer" and were signed by Frank Kornfeind as "proponent or agent".However, each of the offers contained a statement signed by Kornfeind, which read: "This offer is submitted in lieu of my liability to pay balance of said tax, penalty and interest, remaining after deducting from assessment the amount hereby tendered, collection of which balance shall not be enforced against me by suit or any other proceedings; it is being understood that this undertaking shall not release any other person from liability under said assessment".

On December 27, 1956, the United States filed this action against defendant to recover the balance of $4,478.30.

On January 30, 1957, defendant filed his motion for dismissal of the action, alleging that Kornfeind was not joined as a party thereto; or in the alternative for an order requiring Kornfeind to be added as a partydefendant.The motion set forth in detail the particulars of the dissolution agreement between the partners and included the fact that Kornfeind had assumed and agreed to pay the tax liabilities.That motion was overruled.However, from the motion, as well as from the offers submitted in compromise in 1954, and previous conversations between defendant and the Internal Revenue Service in Omaha, Nebraska, in 1949, the plaintiff had full knowledge of the dissolution of the partnership and of Kornfeind's assumption of the tax liabilities.

On the trial it was the position of the plaintiff that the offers in compromise made by Kornfeind and accepted by the United States did not release the defendant from liability on the taxes.The defendant contended that the acceptance of such offers in compromise by the United States, its failure to act or proceed against Kornfeind for the collection of the taxes, and the release of the federal tax lien, discharged the defendant from liability on the taxes.

The partnership involved herein came into being and operated under the laws of the State of Illinois.Under the Conflict of Laws doctrine this Court must look to the law of Illinois to determine the legal effect of the facts presented.Section 36 of The Uniform Partnership Act of Illinois,Chapter 106½, Section 36, Illinois Revised Statutes, 1953, provides as follows:

"(1) The dissolution of the partnership does not of itself

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